This article was first published in the Autumn/Winter 2015 issue of International Cruise & Ferry Review.
It’s never easy being a pioneer in new markets but to hear Alan Buckelew tell it, his relocation to China in October 2014 was largely uneventful and he has settled in well at his new home base. “Shanghai is a very cosmopolitan city, which helps with the transition,” he says. “I can walk to work and it’s expat-friendly. It’s been a relatively easy transition.”
His daily routines have not changed dramatically since his move from the US, although he does admit it can be a challenge to accommodate the different time zones. “All the team is still in Miami and I’m 12 hours ahead of them, so if I want to talk to my staff or my boss it’s either 5am or midnight here. I try not to have late night and early morning calls back to back!”
During the first months in his new environment, he has focused on developing the landmark agreements reached with Chinese partners for joint ventures in the region over the last year. “The first priority is to convert the Memorandum of Understanding on the joint ventures and we are making great progress on that,” he says. “Most of my energies have been focused on developing the contractual agreements for the joint ventures.”
This process is all going even better than expected so far. Although the original timeline included in guidance from the company’s lawyers suggested that it would take up to 18 months, he says: “We are looking at finalising all of it in 12 months.”
Buckelew is complimentary about his negotiating counterparts in China. “They are solid, engaged partners, ready to move forward. As we get closer to agreement, we can now begin to look at organisational matters: what kind of footprint does Carnival Corporation want in the region? How can we be as efficient as possible in the new market starting from scratch? We have the opportunity to rethink our business model as we haven’t leveraged our scale like this before.”
The demands of doing so are significant as Carnival Corporation sets about creating both a cruise shipbuilding company and a cruise brand for a region that is waking up to the potential of both. “Generally in Asia, there is a growing interest in the possibilities cruising provides,” he says. “We are in very early discussions in Korea about potential business arrangements (not full joint ventures). A number of ports in China, Korea and Japan are keen to discuss the future of cruising and to develop infrastructure to get a share of the business. We are also continuing our conversations with the Chinese Government, which is keen to support cruising.”
In late July, the company announced that it will add two ships to its China fleet in 2016, a capacity increase in that country of 58%. It will also become the first global cruise company with six ships based in China. The China fleet will include one additional ship each for Costa Cruises and Princess Cruises. Between them, these brands will have three year-round ships and three seasonal ships in the region.
The prospect of having Princess’s newest vessel based in China is a particular source of pride for Buckelew. “Part of our China strategy has always been to introduce a new vessel,” he says. “China is a vital part of our corporate strategy for Princess. It’s a very clear indication that Princess wants to expand.
“Princess is a long-term player in the market so it’s a very symbolic gesture. We are confident that the move will strengthen its reputation in China and cement it as the premier brand in the Chinese market.”
In an approach tailored to the demands of this market, the company is highlighting its long-term plans to a degree not usually seen elsewhere in the world. “The Chinese have very long planning horizons and it is very important to communicate to the market, the Government and consumers that we are here for the long haul,” explains Buckelew. “In our conversations with joint venture partners in Western Europe or the US, we might be dealing with a two- or five-year remit. In China, it’s 25 years. This is a very different perspective on business planning and relationships.”
Consumer purchasing of cruise vacations, in contrast, is much more near-term than in the traditional cruise source markets in the US and Europe. “The Chinese are where the West was years ago. They have short vacations and make decisions closer to the date they leave. We offer short cruises (four to five nights is typical). Some brands have tried longer cruises but have not had much success.”
Buckelew sees enormous potential for the development of new cruise products for Chinese guests and those from neighbouring countries. Future itineraries he has in mind include more adventurous exploration of the wider region: “From Shanghai we have the flexibility to visit Korea and Japan. In the longer term we will sail more out of Hong Kong and Shenzhen.
“Hopefully over time we will more consistently cruise out of southern China, which is very important to us because of the weather: what we call the ‘Miami opportunity’ of the region. With ships moving into China, the appetite in other parts of Asia such as Taiwan and Japan is growing each year. The Korean government has an interest in developing the cruise market for Koreans. I wouldn’t be surprised to see growth due to domestic incentives.”
Buckelew’s assessment of the potential indicates that there may be some big power plays in the region in the coming years as new players jostle for position. “Asia is clearly the growth engine for the industry for the next decade. We are seeing a lot of commitment from the brands to get a foothold. China will have the lion’s share but there are also opportunities for the rest of Northern Asia. Japan and Korea together have populations equivalent to the upper middle class in China. There is a huge potential market that is untapped. And in Southeast Asia, there is lots of opportunity year-round.”
A dampener on enthusiasm for Asia tourism has been the emergence of the MERS virus, which came to public attention initially in Korea. The impact of this new disease has been felt in China, where Buckelew says there has inevitably been more news coverage than in the west regarding the risks of infection. However, he adds: “Most infections have been in hospitals and have affected the old and already ill. It’s difficult to predict the impact but it appears the situation in South Korea is under control.”
In addition to his complex workload in China, Buckelew is also still in charge of many aspects of strategy for Carnival Corporation’s brands around the world. At the time of going to press, he was looking forward to two big events: the opening of the company’s new port of Amber Cove in the Dominican Republic in October (with Carnival Victory the first ship to visit) and, the following day, the launch of a new pier in Cozumel, Mexico.
Among the first of the corporation’s brands to use Amber Cove will be the newly created product for ‘social impact cruising’, Fathom, on its inaugural cruise in April 2016. In addition to its commitment to strategic partners in the Dominican Republic, Fathom has also successfully passed the first bureaucratic hurdles that will allow it to take itineraries to Cuba from May 2016.
“I’m very excited about the new brand, which brings a new dimension to the cruise industry,” says Buckelew. Although Fathom will initially focus on North American guests, he sees potential for global expansion eventually. “The biggest challenge will be getting the message out to people who might be interested to know that there is an alternative. It is never going to be a huge brand but there is opportunity to grow.”
He has been closely involved with helping Fathom president Tara Russell and her team in finding appropriate activities and shore excursions for guests of the socially conscious brand, which is starting out with just one ship, ex-P&O Cruises’ Adonia. “Getting experiences ashore has involved a lot of legwork but if the concept really clicks with people, we will begin to expand,” he says.
Buckelew is also watching over the construction in the Netherlands of Carnival’s new corporate training facility, which will open in June 2016. The centre will have an annual capacity to train 6,500 participants on weekly courses. It will reach full capacity in 2017 after CSMART has installed and tested some of the new simulators.
“We are raising the bar on the facility itself, building a hotel so that we can have a self-enclosed campus,” says Buckelew. “Rather than having to schlepp back and forth, everyone will be on campus.” Employees from the entire fleet across all 10 brands will use the centre. It’s half a world away from Buckelew’s China base but will provide a much-needed place for the global corporation’s increasingly dispersed staff to meet and learn together.