Royal Caribbean Cruises Ltd. (RCL) recently formed a strategic alliance with the Xiamen municipal government and China World Cruises (“CWC”). Under the agreement, CWC will charter Royal Caribbean’s cruise Legend of the Seas for a total of four months in 2012. CWC is a wholly owned subsidiary of Beijing-based property and theme park developer Shan-Hai-Shu.
During the four months, 21 Royal Caribbean sailings will cater to Chinese cities like Shanghai, Tianjin, Hong Kong and Xiamen, to turn these into world class cruise destinations. The duration of the sailings will range from three to eight nights and will serve ports in Taiwan, Vietnam, Japan and Korea. Legend of the Seas accommodates 1,804 guests and has been operating in Asia, out of Singapore since 2008 and out of Shanghai since 2010.
China became the core zone of Royal Caribbean’s international development. Miami-based Royal Caribbean plans to offer innovative ships and customized services to tap the market, which will attract not only domestic vacationers but also guests across the globe to cruise around Asia. Gauging huge opportunities in the China market, Royal Caribbean is looking forward to work with the Chinese ports and travel partners to drive its international growth ahead.
Through this Xiamen agreement, Royal Caribbean has become the first cruise brand to work in support of the government and a local private industry in a single venture. In the same undertaking, Xiamen-based CWC aims to invest around $5 billion in the Xiamen waterfront and harbor area to develop a ‘Cruise Homeport City’ marked with several other amenities. Xiamen is one of the most important and fastest growing ports along the Chinese coast.
Apart from Legend of the Seas, the company will launch Voyager of the Seas in June 2012, in China. Voyager of the Seas will be double the size of any cruise ship operating in China or in the Asia-Pacific region.
Royal Caribbean, which competes with Carnival Corp. (CCL), is already recognized as the leading international brand in the emerging China market. In fact, the association with Xiamen’s public-private partners and deployment of Voyager of the Seas to Shanghai in 2012 are part of Royal Caribbean’s strategy for global diversification and growth. According to management, the two ships will include more Chinese attributes in their services that will appeal to guests from the region.
Royal Caribbean currently retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating. We are also maintaining our long-term Underperform recommendation on the stock.
