Asia’s economic climb presents scant threat to Caribbean tourism

A tender ferries passengers to a cruise ship in George Town harbor. Plans for a cruise berthing dock in Grand Cayman mean tenders would no longer be required. – PHOTO: CHRIS COURT

Frank Bentayou

“Concern in Caribbean is unfounded.”

That’s the pithy first line of an email Stewart Chiron sent during a mid-trip pause in Dallas last week on his way home to Miami from San Francisco.

Chiron is the internationally known travel maven who characterizes himself – complete with his own copyright – as “The Cruise Guy.”

Many newspaper and magazine readers as well as broadcast and cable TV watchers throughout the English-speaking world know him as among the most knowledgeable sources of consumer advice and cruise industry intelligence around.

The “concern” he mentioned so prominently in his recent fly-by missive is a topic many people who live near tropical and subtropical shores from Bahamas to Trinidad, Guadeloupe to Yucatan – and the Cayman Islands – have hotly debated for about two years now.

It’s this: Does the now suddenly fast-growing Chinese cruise market, with millions of potential passengers eager to see the world, threaten the established and highly lucrative cruise business Caribbean ports have benefited from for years?

Some cruise ship companies have already moved a few ships from service between the U.S. and the islands, assigning them new Chinese ports and routes in Asian waters. Will the expanding middle class in China, eager to spend their money and see the world, suck up such a share of the cruise industry’s interest that this region will suffer cutbacks, fewer or less attractive ships sailing these warm seas?

Such a shift would affect Caribbean nations dramatically, since the global cruise-ship business is so central to the region’s economy.

'The People’s Republic of Cruiseland,' says a Bloomberg headline. Cruising is beginning to catch on in China. - Photo: Bloomberg
‘The People’s Republic of Cruiseland,’ says a Bloomberg headline. Cruising is beginning to catch on in China. – Photo: Bloomberg

Issues loom large

And who can deny the importance of tourism to the region? By any measure, it’s enormous. A major 2014 study by the World Travel and Tourism Council entitled “Travel & Tourism, Economic Impact 2014, Caribbean” made a case for considering the region’s economy as the most tourism-dependent in the world.

Some 25 million visitors – most from North America but secondarily from the U.K. and Western Europe – spent almost $50 billion in the islands, accounting for 14 percent of their GDP. A large proportion of these visitors arrive on cruise ships.

That was $50 billion-worth of tropical souvenirs, hotel and condo rentals, grilled red snapper entrees and rum drinks with umbrellas, but such a sum also pays for a lot of dependable jobs in the region and shapes a big part of the business infrastructure of places like Grand Cayman and other cruise destinations in the region.

Does an expanding and travel-eager population of wealthier Chinese put at risk the Caribbean’s hard-won stature as a destination? Many fear that any big changes in the cruise business could tip the balance toward diminished interest, older, smaller and less-glitzy vessels, and less pizzazz.

There are others, though, including Chiron, who predict much brighter economic consequences from the flood of tourists that Asian countries’ new wealth is creating.

“I can say it flatly: The Chinese are not going to pull the cruise industry away from the best market it has in the world. Industry leaders have invested billions in the cruise infrastructure in the Caribbean, and they make more here than anywhere else,” Chiron said. In fact, he suggests that perhaps over time, Chinese cruise passengers will find their way to the Caribbean and spread their wealth in this region too.

Stewart Chiron
Stewart Chiron

How did Asia get the attention of the cruise industry?

How the issue of a big, untapped market across the globe came up is an interesting story in itself.

A potentially ominous sign surfaced in 2014, when Royal Caribbean Corp. decided to move one of its newer and fancier vessels, the 4,200-passenger Quantum of the Seas, from its maiden-year deployment sailing between the East Coast of the United States and this region, to Shanghai, China.

Previously, cruise lines had sent only smaller, less glamorous vessels to serve Asian routes, so Royal Caribbean’s move struck some as a first sign that the market-savvy industry might be more interested in investing in opportunities halfway around the world than in the tried-and-true territory where the industry has long dominated tourism.

More recently, Carnival Corp. announced the move of a pair of signature ships from its Princess Cruise operation and others from Costa cruises, from Caribbean to Asian routes, sailing them from Chinese ports. A new vessel now under construction for Princess Cruises also will set sail for Shanghai following its 2017 launch.

Other cruise companies, including Norwegian Cruise Line and MSC Cruises, likewise have plans go stock up their Asian franchises with more and newer vessels.

Historically, big new vessels have served what the cruise companies have seen as the most lucrative established markets – where North Americans take their U.S. and Canadian dollars to the Caribbean and the North Atlantic and Mediterranean ports of call.

After all, cruise company accountants know which customers they can depend on and which sea routes yield the most revenue. Of the millions who have board cruised ships in recent years around the world, more than half the passengers are from the United States – followed distantly by Germany, U.K., Ireland, Australia and a few other nations.

Still, for anyone watching the industry, according to Leonard Nguyen, a U.S. West Coast cruise analyst, “There’s no way on earth these giant global companies would not expand into Asia. That’s where a lot of the growth is.”

The Cruise Lines International Association, the industry’s principal trade organization, in Washington, D.C., issued a report on the Asian cruise market that shows cruise tourism growing there at double-digit rates “across all metrics.”

From 2013 to 2015:

  • Number of vessels deployed in Asia grew 10 percent a year
  • Cruise volume increased 11 percent
  • Days o f operation expanded 16 percent
  • Passenger capacity grew 20 percent

In addition, China, the largest player in the market by a hefty margin, claims to have expanded its passenger volume from 775,000 in 2012 to 1.4 million in 2014. The government and cruise interests in China say more growth is ahead.

Other studies have shown that while cruise voyagers from the U.S. average 49 years of age, the affluent Chinese travelers are largely under 40, a demographic reality that points toward a brighter future. It’s younger Chinese who are more drawn to Western-style travel and have the means to engage in it.

But there is some dispute about some of the information China and part of the cruise industry have been supporting. Chiron is one non-believer.

“Just look at the claims China has made, more than a million cruise passengers,” he said. “But also look at the number of ships deployed in that market. I can tell you there’s nowhere near enough ships to carry all those passengers. It’s out of the question.”

In other words, Chiron thinks the reports of passenger numbers and China’s projections of their growth are inflated far beyond what the Asian cruise fleet could actually carry. “It’s a growing market, but it can’t grow beyond what the vessels can hold. And there’s no way the companies are going to take ships away from its best revenue source, the Caribbean, in big numbers in order to grow this new market in Asia. It wouldn’t make sense.”

Where will Chinese tourists find their thrills?

There are some reliable details about how the business functions in China, though. A CLIA study showed that 91 percent of Chinese cruise passengers focus on shorter Asian routes, but such provincial tastes certainly could change in the coming years as more passengers seek visits to Hawaii, the U.S. and Mexico and, in time, the Caribbean.

When Asian travelers begin booking such voyages in large numbers, “That’s when the Caribbean destinations will have to step up their game to satisfy these new visitors,” according to Richard Sasso, president and CEO of MSC Cruises USA.

Chiron agrees, noting that the “Caribbean is the world’s number one destination” and that the cruise lines are working hard to make the experience here “fresh, exciting and relevant.”

But that comes with a warning, too. “Ports need to do more,” Chiron said, including the one in Grand Cayman, which “must get the pier built soon, as it’s lost billions to other Caribbean ports with piers.”

Even Cuba, a late-comer to the benefits of the cruise industry’s patronage, must step up. Along with a new and promising relationship with the U.S. now taking shape, the nearby island nation also is planning substantial investments in its ports in order to accommodate cruise visitors willing to spend money in the once-remote country. Perhaps not coincidentally, China has agreed to help finance some of the tourism infrastructure improvements there.

Certainly, the cruise lines operating between the U.S. and the Caribbean will be competing fiercely to get solid shares of what is expected to become a lively route from Miami, Port Canaveral, Florida, and others, including Tampa and New Orleans to Cuba. But such new routes also could subtly redistribute where American and Canadians go for their island experience.

The big cruise companies also have invested hundreds of millions of dollars in creating new venues for visitors to the Caribbean. Their aim, Chiron says, “is to give passengers the best experience they can provide. In this way, they assured that for North American customers, cruises will continue to be such a great vacation buy. The market in the U.S. and its closest destination is still growing. It’s not a static market by any means.”

Still, there are studies by the cruise industry and others suggesting that by as soon as 2017, China could become the second-largest source of cruise passengers in the world, with fewer than only the United States. But some insiders insist that the Chinese government and business leaders are overstating the case. China wants to be considered the second-largest source of cruise passengers, but it cannot control the realities of the marketplace.
“You can do the numbers yourself,” Chiron says. “The ships are not there for China to get to that point, No. 2 in the cruise industry.”

Meanwhile, the state already has planted its flag in a couple of Caribbean venues. Aside from its aid to Cuba to modernize ports there, China also put national resources into a $3.5 billion Bahamas gambling resort, the Baha Mar Casino.

Handled sloppily, perhaps, the sprawling New Providence development, near Nassau, has not fared as well as expected. It has missed numerous grand opening dates and courted bankruptcy.

Still, the Bahamas mega-resort has shown that China likes the idea of a vacation spot inviting to its own citizens in the warm waters near the U.S. and the Caribbean. And it could still come back, drawing thousands of wealthy Chinese nationals to a welcoming tropical site.

Cruise Lines unlikely to abandon Caribbean

Back to Chiron’s early observation, he used the word “unfounded” to characterize the Caribbean market’s “concern.” That’s because he doesn’t think the cruise lines’ demobilization of a few vessels in one part of the world and their appearance in another is good enough reason to fear abandonment.

Besides, he said, for the most part, it’s older ships that are sailing away from routes between Miami and Grand Cayman and other regional ports, and they’re destined to be replaced with newer craft.

The really important concern for Caribbean ports that want to benefit from the lucrative cruise phenomenon, he said, is that they provide both attractive and inviting communities for passengers who disembark, but also convenient ways to get ashore. The tender experience of getting cruise customers ashore simply won’t work for the latest wave of really large ships – it just takes too long to move all the passengers – and encumbers passengers even from smaller vessels with time-consuming delays. Experts, including Chiron, say places like Grand Cayman are wonderful to visit but desperately need to update their port facilities to make it easier for passengers. “They’re going to have to get their dock built, or they’ll lose out,” according to Chiron.

Half a world away, in a once rigidly committed Marxist nation, provincialism is giving way to Western ways, including extreme indulgence among an affluent class. A population of 1.3 billion, about half of that of Asia, has borne travel restrictions for nearly seven decades. Now rich beyond their parents’ imaginations, many younger Chinese of means yearn for the same adventure – and pampering – as their Western counterparts. And that includes exotic travel amid deluxe accommodations.

The many studies of global trends and the cruise industry executives who pour over them probably have it right. It would be crazy to ignore so vast a growing market in Asia these days. And it would be foolish to turn away from the biggest, most lucrative tourism market in the world.

The industry has proved itself big enough for both.

Global scope of the tourism economy

“In 2013, Travel & Tourism’s total contribution to the global economy rose to 9.5 percent of global GDP (US$7 trillion), not only outpacing the wider economy, but also growing faster than other significant sectors such as financial and business services, transport and manufacturing. In total, nearly 266 million jobs were supported by Travel & Tourism in 2013 – 1 in 11 of all jobs in the world. The sustained demand for Travel & Tourism, together with its ability to generate high levels of employment continues to prove the importance and value of the sector as a tool for economic development and job creation.”

Source: World Travel and Tourism Council study, “Travel & Tourism, Economic Impact 2014, Caribbean”