Genting bets big on lucrative China cruise business

The Genting Dream cruise liner is set to make its maiden voyage on Nov 13 from its home port of Guangzhou, marking the beginning of a bet on China worth at least US$5 billion (S$7 billion).
The Genting Dream cruise liner is set to make its maiden voyage on Nov 13 from its home port of Guangzhou, marking the beginning of a bet on China worth at least US$5 billion (S$7 billion).PHOTO: GENTING HONG KONG

Casino player to expand in 'virgin market' with Genting Dream liner, building own ships

With 120 million Chinese going abroad last year and spending US$215 billion (S$299 billion) in the process, it is a wonder that only a million of these travellers boarded cruise ships.

But the cruise industry has finally set the course for China's lucrative yet barely tapped leisure market, a decade after the major players began docking along the Asian giant's Pacific coast. This year, port calls in China by cruise liners will nearly triple, a move that has already begun to depress initially giddy prices.

So when the Genting Dream cruise ship makes its maiden voyage on Nov 13 from its home port of Guangzhou, it will mark the beginning of Genting's bet on China worth at least US$5 billion.

The Malaysian conglomerate is better known for its global casino business that includes Resorts World Sentosa.

"My bankers are all very nervous at the moment," said Genting chairman Lim Kok Thay in an interview just before his cruise arm, Genting Hong Kong (GHK), officially took delivery of the 151,300-tonGenting Dream earlier this month.

"It's practically a virgin market. Our competitors are seeing a five-million (passenger) market just out of China," he said.

The 3,400-passenger cruise liner is the maiden vessel for GHK's new China-based Dream Cruises, with sister ship World Dream due next year. Both are being built by German shipbuilder Meyer Werft for about US$1 billion each.

GHK's existing Star Cruises brand will also expand its China footprint by adding at least two Global Class ships - 201,000-ton behemoths with room for 5,000 passengers - to two existing mid-sized liners.

 
  • GENTING DREAM

  • 3,400 Number of passengers the cruise liner can take.

    S$1.4b Cost of the ship.

  • Changing to cater to different tastes

  • • More affluent Chinese are becoming increasingly Westernised, so options for activities on Genting Dream - from gambling and sports to food - will have to feature a mix of East and West.

    • There are both Western and Chinese spas, providing different schools of relaxation.

    • There will be 35 restaurants and bars across the 19-deck mega ship.

    • Casinos will continue to have a major presence on Genting's Asian ships. The Genting Dream will feature private gaming rooms.

    • Asian passengers are getting younger and wilder, so the Genting Dream will feature an on-board Zouk, the premier Singapore nightspot bought last year by Genting Hong Kong.

    • Although cruising has traditionally tried to be as all-inclusive as possible, Genting's "total freedom" concept wants to offer as much flexibility as possible to broadening Asian tastes. Plans are under way to move from all-you-can- eat/drink/do packages to offer credits that can be used to prioritise premium activities of choice.

    • The Dream ships have two submersibles that will offer a rare glimpse of marine life.

    • Family-themed cabins will have connecting doors, so parents can keep an eye on the children. There will be a playroom to drop them off while parents enjoy some quality time.

    • There is also a sports complex, gym, many pools with an array of water slides on the sun deck and even a mini-golf course.

For now, GHK is the world's third-largest cruise-liner group, behind Carnival and Royal Caribbean.

Collectively, they control about three-quarters of the global cruise business. But with GHK's rivals snapping up new ships to increase their presence in China - Carnival will double its capacity there between 2015 and 2017 - order books are filling up at the few shipyards capable of building modern cruise liners.

This led GHK to become its own shipmaker, by buying four German yards in the space of six months up to March. An outlay of €260 million (S$398 million) will double once investments to modernise the yards, renamed MV Werften, are completed, allowing the group to produce two 200,000-ton mega ships and a mid-sized 60,000-tonliner annually by 2023.

"Nobody can operate a business with no ability to command the supply side of the equation. MV Werften will have only one customer and that's the Genting cruise group," said Tan Sri Lim.

GHK chief executive and founding president Colin Au said a cruise liner at a top yard could be delivered only in 10 years due to skyrocketing demand for new ships, which has also increased prices.

Star Cruises' larger Global Class ships are being built "in-house" and will cost about US$1 billion each.

The first two, pencilled in for delivery by 2019 at the earliest, are already earmarked for China, with another two of the floating hotels due by 2023 but yet to be assigned.

By then, the market could be overrun by competitors, with the recent surge bringing prices down from highs of US$1,000 per night, according to Mr Lim, who sees basic rates normalising at one-tenth of that.

China package sales - for board and lodging not including on-board spending on premium items, including gaming - are expected to hit US$10 billion in 2018, and the Genting boss believes total revenue will be worth US$50 billion.

But GHK is hoping its first-mover advantage from over 20 years in East Asia will help keep it in the game. GHK planted the seeds for an Asian cruise market almost single-handedly when it launched Star Cruises in 1993. Mr Lim believes its market knowledge and customer database will allow GHK to provide a better product fit.

The Genting Dream is the only ship in the world that has Chinese and Western spas, reflecting the new taste of Asian customers where "absolutely, there is no gaming dollar" earned. Mr Lim added: "We are pushing for a more lifestyle product. If you don't want to spend a single dollar (on board), you can.

"The player that gets it right will enjoy the biggest margin."

A version of this article appeared in the print edition of The Sunday Times on October 30, 2016, with the headline 'Genting bets big on lucrative China cruise business'. Print Edition | Subscribe