(11:10 a.m. EDT) -- Royal Caribbean's decision to move its much-ballyhooed new build, Quantum of the Seas, to Shanghai in 2015 might have come as a disappointing surprise to American cruisers who couldn't wait to see the company's hottest ship in the Northeast.
But for those in the industry, who have seen Asian countries emerge as a fast-growing cruise market, the choice isn't so confounding. Here are some reasons experts believe the move to Asia could pay off for Royal Caribbean:
Middle Class Growth. There's no getting around it: The sheer size of China's population and a fast-growing middle class that has yet to discover cruising makes it a tempting target for companies who want to corner the market early.
A 2013 report released by the Asian Cruise Association estimated the Asian market could grow from 1.3 million passengers in 2012 to 3.8 million in 2020, with a full 1.6 million of those people coming from China. To carry the full number of projected Asian cruisers, the report said, 15 ships the size of 3,114-passenger Voyager of the Sea would have to be deployed year-round on short cruises.
In an interview with Forbes, Royal Caribbean Cruises President and COO Adam Goldstein said China was already the company's third-largest market, behind the U.S. and U.K. Currently, Voyager of the Seas and Mariner of the Seas, both with 3,114 passengers, make regular sailings from Shanghai; Quantum of the Seas will hold 4,180 passengers, vastly increasing the company's capacity by 66 percent.
“The number of Asians cruising today is very similar to the number of Americans who were cruising in 1980s,” Goldstein said. “No other market has comparable growth potential.”
New Ship Shininess. What tourists who haven't been to Asia don't understand is that the region's cities -- from Hong Kong to Singapore, Tokyo to Bangkok -- have some of the newest and most luxurious hotels in the world. It stands to reason, experts say, that they want the same thing in their cruise ships.
“For years, people in Asia have been saying ‘Don't bring the old ships,'” said Teijo Niemela, publisher of Cruise Business Review. “People understand quality. Now finally there is a cruise line that is bringing the most up-to-date hardware.”
In the Forbes interview, Goldstein underscored this point: “Consumers in China have grown to expect the best the world has to offer, and Quantum of the Seas meets that standard like no other ship. The Chinese like better hardware, (and) the bigger the more beautiful. They like something grand.”
Cold Weather Capability. When Quantum was originally bound for New Jersey, the ship seemed custom-made for cold-weather sailing, with expansive indoor areas such as Seaplex, the largest sports and entertainment complex at sea, and an indoor pool with a retractable roof.
Much like the Northeast, Shanghai also experiences temperature fluctuations, particularly in the winter when the weather cools to 40 degrees Fahrenheit. Even better for Quantum's design: The Chinese, as a rule, are not a nation of sun-worshippers, Niemela said. “The hardware works well with people who don't want to be in the sunshine,” he said.
Dining Dynamics. Just a month before Royal changed Quantum's homeport, the line had announced a radical overhaul of its onboard dining, essentially ditching set dining times and main dining rooms for more restaurants and flexible a la carte options. How will this concept play in Asia?
Very well, Niemela said -- as Asia's dominant cruise line, Star Cruises, pioneered the “freestyle” concept (Star is owned by Genting Hong Kong, which has a large stake in Norwegian Cruise Line). In general, he says, main dining rooms where you are seated with strangers, regardless of status, are not as popular in Asia as they are in North America.
“In the U.S., you can put a truck driver and a CEO at the same table,” Niemela said. “You can't do that in Asia.”
Homeport Advantage. The largest city in China, Shanghai has poured serious investment into its cruising infrastructure. The Wusongkou International Cruise Terminal, also known as Baoshan, opened in 2011 and can handle the world's biggest ships. (The smaller Shanghai International Cruise Terminal has three docks.)
In the Forbes interview, Goldstein cited the modernity of the port -- as well as Shanghai's popularity -- as one reason for the move. “Shanghai brings an increased volume of guests for sailings and has become a major hub for foreign tourists,” he said. Shanghai also offers us the infrastructure we require to service Voyager and Quantum-class ships.”
Risky Business. All this being said, Royal is taking a risk, one the industry will monitor closely.
“Cruise lines do not typically move their newest ship to an emerging market,” UBS analyst Robin Farley wrote when the news was announced. In a subsequent report, she noted it's more expensive to operate in China than the Caribbean but that RCL was already profitable in China due to higher ticket prices. The company expects its percentage of yields -- the amount of money it makes per cabin -- there to be up double digits in 2014, she said, with more Chinese typically spending more on retail and gaming than other markets.
To get there, Royal has adjusted (and will continue to adjust) its cruising style to the Asian market. It's already been announced Quantum will offer shorter itineraries that appeal to the Chinese, who typically travel the most during “golden week” periods, two week-long national holidays pegged to Chinese Lunar New Year and one in October. Shopping and the casino also will be expanded. Whether additional changes will have to be made has yet to be seen.
Other challenges for Royal will be the shorter booking window that typically occurs in Asia and managing the sometimes-frosty relations between China and neighboring countries, particularly Japan, Niemela said.
“You never know in 2015 what the relationship will be between those countries,” he said. “That is one of the risks.”
--By Chris Gray Faust, Destinations Editor