China growth benefits U.S. agents, says Carnival Corp. CEO

FORT LAUDERDALE — The cruise
industry’s headlong growth in China is benefiting North American travel agents
by diverting ships that would otherwise drag down prices, Carnival Corp. CEO
Arnold Donald said during the kickoff general session of CruiseWorld
here. 

To grow, Carnival Corp. has to add
capacity. By adding it in China, that capacity doesn’t come into the U.S.
market.

“It absorbs capacity, and it
introduces one billion-plus people to cruising,” Donald said at CruiseWorld, a
Travel Weekly event for agents held annually at the Fort Lauderdale Convention
Center. 

That, in turn, brings higher prices
and commissions for U.S. agents.

Donald said he recently returned
from Shanghai; Carnival has announced that two ships from its Carnival Cruise
Line brand will join ships from Costa Cruises and Princess Cruises in China starting
in 2017.

Carnival Corp. is also pursuing a
joint venture with China State Shipbuilding Corp. to build vessels in Asia to
meet demand. 

Donald said the growth of the cruise
industry is constrained to 5% to 6% a year by the limited number of shipyards
that build cruise ships. He said it is unlikely that more shipbuilding
companies will enter the business, because returns on invested capital are so
low.

“Hardly any of the shipyards make
money building cruise ships,” he said. 

Although Carnival Corp. is jumping
into China in a big way, Donald pointed out that none of the four new ships
that will be delivered to Carnival next year are being placed into China
service. Those ships are the Carnival Vista, Holland America Line’s Koningsdam,
the Seabourn Encore and a vessel for Carnival Corp.’s German-centric Aida
brand.

On another topic, Donald said the
recent drop in the number of cruises that travel agents have to sell to reach
higher commission levels at Carnival Cruise Line was  made by brand
president Christine Duffy.

“It was the right thing to do in
terms of motivating travel agents. I hope the travel agents feel that way,”
Donald said to applause.

Donald also said that a
variety of problems are suppressing demand in the Eastern Mediterranean. “The
refugee situation is huge for people that live in that part of the world,” he
said.

But from the cruise industry’s
perspective, there’s always unrest somewhere globally, he said.

“These are headwinds. Despite those
headwinds, people continue to live.”

Donald was the first of three CEOs
to address the conference. Attendees will also hear from Royal Caribbean
Cruises Ltd. Chairman and CEO Richard Fain and Norwegian Cruise Line Holdings
President and CEO Frank Del Rio.