From The Motley Fool

The domestic cruise market in China is thriving, and Royal Caribbean hopes that will translate into more Chinese travelers cruising abroad.

With all the focus on Chinese in-country cruising, outbound cruise development there has received little media attention. True, the Chinese domestic cruise market is the fastest growing in the world right now, but growth in Chinese cruising abroad may be just over the horizon. The Chinese cruise market grew 79% from 2012 to 2014, according to the Cruise Line Industry Association, or CLIA, with nearly 700,000 mainlanders setting sail last year. In dollar values, the domestic cruise market is expected to grow from $6.8 billion in 2013 to $11.5 billion in 2018.

Right now, 91% of the cruises Chinese travelers book are for itineraries within Asia, primarily to South Korea, Malaysia, and Japan. But there is potential for growth outside that region in the coming decade. Cruising is still a relatively new vacation option in the country, but outbound travel by air is already extremely popular, with China being the fastest-growing source of travelers to the U.S., among other countries.

In a recent interview with The Motley Fool, Royal Caribbean Cruises(NYSE:RCL) President and COO Adam Goldstein, who is also the current CLIA chairman, talked about how Royal Caribbean is laying the groundwork for more Chinese travelers to cruise abroad.

“We’ve very interested in the outbound 100 million Chinese travelers who left the country last year for business or leisure,” Goldstein said. “That’s an incredible number. Even if the bulk of that travel is in Asia, I’m very optimistic as the next five to 10 years unfold, Asian travelers will go further afield. We want to be well positioned to serve them wherever they go.”

Increased language support for domestic and international travelers
To support growing domestic demand, Royal Caribbean Cruises and competitor Carnival are moving ships to Chinese ports, and both companies are developing partnerships with in-country businesses and the Chinese government to build ships, repair them, and source supplies. For example, Royal Caribbean has an arrangement with Tianjin Maritime College, or TMC, to train crew and staff who speak Mandarin and English to work on China-based ships, such as the new Ovation of the Seas, which will homeport in Tianjin next year.

The training program at TMC also provides a source of bilingual employees to work on ships outside Asia. “Of course, we want our guests to have elements of the Western vacation experience, but they have to have an experience that’s comfortable for them,” Goldstein said of the training program. “We need excellent Chinese crew who speak English and Mandarin.”

So far, some 3,000 students have completed the program, and Goldstein says the company hopes to increase that number “to attract cruisers in China and to attract them to other ships in our fleet around the world.”

Chinese tourists offer more than sheer numbers
It is worth noting that right now, the absolute number of Chinese who cruise outside Asia is small, just 9% of the 700,000 Chinese cruise-goers in 2014, or about 63,000 people. But their spending habits make them a particularly desirable demographic, while their youth means that if courted properly, they could be repeat customers for decades to come.

The 100 million Chinese travelers who went abroad in 2014 took their credit cards along with them, spending a record-breaking $164.8 billion while they were out of the country. In the U.S., Chinese visitors outspend other international visitors by about 20%, dropping an average of $5,400 per person during their visits on such luxuries as fine dining and fashion.

The Chinese are big spenders at sea, too. In a previous interview with The Motley Fool, Royal Caribbean CFO Jason Liberty noted that Chinese cruisers spend American-style, paying premium rates for fares and also spending heavily onboard, whereas some other demographics save on fares to spend onboard or vice versa. Those free-spending habits could pay off for cruise lines that get Chinese travelers, who typically take shorter domestic cruises, to take longer cruises overseas and couple those with land-based trips as well.

Another desirable trait is youth. Chinese travelers generally have more years of travel spending ahead of them. CLIA cites World Tourism Cities Federation data, which shows that the majority of outbound trips from China are taken by people 35 and younger. If these young travelers try a domestic cruise and like it, odds are good they will cruise again. According to the Florida-Caribbean Cruise Association, more than 60% of U.S. cruisers surveyed for 2013 have taken more than one cruise, and repeat cruisers tend to book pricier luxury and premium sailings.

Scanning the horizon for outbound cruise growth
Chinese vacationers who take a cruise or two to Japan or Malaysia may decide they want to travel farther afield, and Royal Caribbean plans to be ready with bilingual staff and crew members to accommodate them. “It won’t be huge in the near term, but the potential is there,” Goldstein said, pointing out that the growth of China’s domestic market has happened quickly. “Ten years ago, the numbers for Chinese cruises in Asia were small, so it seems well worth the undertaking to encourage Chinese travelers to cruise wherever we sail.”

If Chinese cruisers set sail for destinations outside Asia, the cruise lines that can make them feel most welcome stand the best chance of earning their business.

IMAGE: MEYER WERFT OF GERMANY IS BUILDING OVATION OF THE SEAS, WHICH WILL HOMEPORT IN TIANJIN IN APRIL 2016. SOURCE: ROYAL CARIBBEAN

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