Travel In China: Carnival in Talks With China Merchants on Cruise Ports, Ships

(WSJ) Carnival Corp. is in talks with state-owned China Merchants Group to form two joint ventures in China that will build cruising ports and ships and expand the nascent industry in a booming tourism market.

The two companies plan to form separate ventures, one focusing on shipbuilding and the other on developing new ports and destinations in and around China, Carnival said in a statement Tuesday.

The companies will launch China's first domestic cruise brand targeting the Chinese market, owning and operating their own cruise ships, the statement said. It added that the ship venture would explore sourcing new ships made in China.

The two expect to strike the deal in the next few months, Carnival said.

Talks come as the cruise industry is heating up in China, where the travel industry is booming and cruise companies are looking to build a strong new market outside the U.S. and Europe.

Rivals like Royal Caribbean Cruises Ltd. are also gearing up for expansion. Royal Caribbean said last year that it would bring its newest ship to China. Executives said in a recent interview that they are overhauling ship entertainment and boosting marketing to attract Chinese guests.

Carnival says it hopes to gain strength by joining with China Merchants, which is a major conglomerate with businesses in transportation, financial investments and property development.

Carnival says it already has a 55% to 60% share of the tiny but fast-growing Chinese market, and executives expect it to grow to about half the size of the U.S. market—the industry's largest—by 2020. About 700,000 Chinese took cruises last year, compared with more than 10 million in the U.S., according to Carnival.

The company signed last year a memorandum of understanding with China State Shipbuilding Corp. to convert one of its yards to build cruise ships in partnership with Italy's Fincantieri SpA, one of the world's biggest cruise-ship builders.

In 2011, Carnival was operating a single cruise ship in China, but it is about to add a fourth cruiser to its China fleet, which operates through its Costa Cruises and Princess Cruises lines. Those ships—which once plied the U.S. West Coast, the Caribbean and Northern Europe—now sail mostly between Shanghai and ports in Japan and South Korea.

Source: Wall Street Journal by Laurie Burkitt

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