Economic woes hit Yangtze River cruise industry

Xinhua, September 17, 2012

The Yangtze River Gold 1 cruise ship takes in the sights on the Yangtze River in Southwest China's Chongqing municipality on May 7, 2011. [Photo/China Daily]

A pedestrian street lined with luxury shops, a cinema, a circuit racetrack and even a rooftop golf court and helipad. No, it's not a pocket of one of the world's top cities, but facilities found aboard four of the world's largest river cruise ships, Yangtze Gold 2 and Yangtze Gold 3 and their sister ships, Gold 5 and Gold 6, which were put into service on the Yangtze River in May and June.

The four luxury cruise ships, along with another ship also put into service in June, has added another 3,000 seats to the Yangtze River cruise market and represents part of a plan by the Chongqing municipal government to boost tourism on the Three Gorges.

But the launch of the luxury ships has not delivered the promised boom to tourism.

The slowdown of economic growth nationwide and globally has resulted in river cruise companies experiencing a fall in customers.

These two factors have forced some old river cruise ships to slash the price of a cruise from 2,500 yuan ($393) to 1,500 to 2,000 yuan.

In an effort to boost the market, the tourism authority has organized a month-long promotional activity in August and river cruise companies have offered promotions on family trips and discounted tickets.

Two companies, Century Cruises and the Yangtze Gold Cruises, have decided to delay the date of the maiden voyage of their cruise ships, in a move aimed at buffering market pressure.

Both companies have ships that were due to be unveiled in October. Now both have decided to delay the maiden voyage to the end of this year.

The lacklustre state of the industry has raised questions on whether the rapid of the river cruise industry went too far.

"So far (the sudden increase in number of luxury ships) has given the market an unprecedented strike," said Li Qing, a market manager at Century Cruises, which has five five-star river cruise ships on the Yangtze River.

"We need to follow the patterns of development of the market," Li said, adding that it might take another two or three years for the river cruise market to mature.

Coping with the gloomy economic environment

According to statistics provided by Chongqing's tourism authority, the city recorded a total of 1.1 million passengers taking the river cruise to visit the Three Gorges area in 2011, a 60 percent increase from 2010.

However, in the first half the number of tourists taking river cruises was only 446,000, a 6 percent decrease year on year, according to the maritime safety administration of Chongqing.

Despite the sudden increase in the number of luxury ships, the total passenger volume of luxury ships decreased by 2.1 percent.

"Data from travel agencies and scenic spots are showing that there is a palpable decrease in the number of tourists," said Li Qing.

Zhou Ling, who works at the reception desk for Century Cruises, said her ship is registering 50 or 60 less tourists than before. The cruise ship she works on has a total capacity of 300 passengers.

"In larger ships there were larger vacancies. Some even have less than 100 passengers," she said.

Data from Yangtze River Gold say the company's ships were only about 85 percent full, according to Jiang Zongyu, the market manager at the State-run Chongqing Tourism Investment Group.

Another river cruise company, DaMei Three Gorges Cruises, were also only able to fill 70 to 80 percent of seats on the cruise ships, according to Dai Guoqun, manager of the company.

Slashing cruise ticket prices seems an inevitable decision.

Data provided by the Chongqing office of China International Travel Service suggests almost all river cruise companies have slashed the ticket price of cruise ships.

"The price of luxury ships were cut by a larger degree compared with the old cruise ships, as the latter has less profit margin," said an employee at the agency who gave only her surname, Liu.

River cruise companies are also keen to attract customers with more diverse packages, such as organizing summer camps for children or promotions on Qixi, the traditional Chinese day of romance, which fell on Aug 23 this year.

On Aug 5, a wedding was held on the Yangtze Gold 5, as part of efforts by the company to diversity its river cruise business. She Yangyi, a manager at Yangtze Gold Cruises, told Chongqing Economic Times that the company is planning to further diversify its business by renting its cruise ships to individuals or companies.

For many Chinese, the ticket price remains the defining factor in choosing the kind of river cruise they take.

Luo Menglin, a bank clerk, said even after the river cruise companies cut their prices, it still seems too expensive to him.

Luo took a cruise to the Three Gorges scenic area years ago on a small cruise ship and it was not a very pleasant holiday in a third class cabin.

"For me a luxury cruise ship is way too expensive. I wish they could focus on upgrading the smaller river cruises and make sure they cater to a variety of income groups," he said.

Moving five-star hotels

"It feels like working at a moving five-star hotel," said Xiao Yongyan, who works at souvenir shop aboard Yangtze Gold Two.

Xiao has worked on the cruise ship since it was put into operation and loves the atmosphere on board.

The design of the Yangtze Gold cruise ships seems to be trying to deliberately defy the traditional concept of river cruise ships. It has a gymnasium, swimming pool, three panoramic lifts and bars and a cigar lounge.

The spacious inner room and the decorative roof lighting are reminiscent of a hotel environment.

The six-deck ships, all the same size, have a maximum passenger volume of 570 people and 200 crew.

The ships are 150 meters long and 25 meters wide, significantly smaller than ocean cruise liners, which can carry more than 6,000 passengers.

But they could easily dwarf any inland river cruise ships in the world.

"The ships were the largest size we could get considering the voyage conditions of Yangtze River," said Jiang.

Over the past two years, 14 more five-star river cruise ships were put into operation to ply the tourism waterway to the Three Gorges scenic area, increasing the total number of river cruises from 12 to 26.

In 2010, the municipal government listed the development of tourism to the Three Gorges scenic areas as the priority in its work plan and the development of luxury river cruise ships is regarded as a key part of that plan.

Meanwhile, the building of the Three Gorges Dam has greatly refined the voyage conditions of the waterway of the Yangtze River, making it possible for the building of large river cruises.

"Previously the river section in Chongqing was filled with dangerous shoals and the depth of water is far below the standard of luxury ships," said Qin Zhongfan, a staff worker from the Yangtze Gold Cruises, a subsidiary company of the Chongqing Tourism Investment group.

Meanwhile, the Yangtze Gold Cruises is planning to build another seven luxury river cruise ships starting at the end of this year.

However, Zhang Lingyun, vice-dean of the tourism institute of Beijing Union University, has cautioned that a further increase in the number of cruise ships could result in fierce price wars between cruise ship companies.

"The number of cruise ships that are put into operation should be based on adequate market research," Zhang said, adding that the lure of the Three Gorges scenic area has decreased since Three Gorges Dam was put into service.

Zhang said one of the major problems of the Yangtze River cruise is the homogeneous service offered on the ships. He said river cruise companies should focus on improving services on board rather than price wars.

"River cruise ships cannot compete with ocean cruise liners in terms of luxury," he said.

Zhang believes Yangtze River cruise companies could try to diversity their service, including organizing conferences or other similar services.