It seems that Carnival Corporation CCL is betting big on China. The Florida-based cruise company announced its plans to expand in China with the addition of two brands — Carnival and the Aida cruise line — in 2017.
These will join the Princess and Costa brands currently operating in the country. In July, the company announced that a new ship will be added to each of its currently sailing brands in China in 2016, bringing the fleet to a total of six ships.
Further, with the latest announcement, four of its brands will have at least one home-ported cruise ship in China, further strengthening the company's presence in one of the leading cruise markets worldwide.
Carnival has been exploring potential joint ventures with China State Shipbuilding Corporation (“CSSC”) and China Merchants Group (“CMG”) for certain strategic initiatives to grow the cruise industry in the region. These include the possibility of launching a domestic cruise brand, building new ships in China, and supporting port and infrastructure development. (Read: Carnival Inks MOU with Fincantieri to Tap the Chinese Market)
The Chinese cruise industry has recently witnessed rapid growth and a huge number of cruise companies like Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH have been deploying ships to China. In fact, the Chinese market for cruise travel could nearly double to $11.5 billion in sales by 2018, compared with $6.8 billion in 2013, according to research firm, Euromonitor. Despite the recent slowdown in the Chinese economy, the increasing middle class population makes it ideal for cruise companies.
Carnival currently carries a Zacks Rank #2 (Buy). Another well-ranked stock in the same sector is Diamond Resorts International, Inc. DRII sporting a Zacks Rank #1 (Strong Buy).
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