Full steam ahead: Raising standards in the cruise industry and promoting the country as a port of call

A key group of travellers currently being courted by the Malaysian government’s tourism officials and businesses are those whose ideal holiday is an ocean cruise. Indeed, cruise tourism is an important Entry Point Project (EPP) identified in the national development plan, under the National Key Economic Area of tourism (see overview). This cruise EPP revolves around the creation of a “Straits Riviera” along Malaysia’s coastline, and is expected to generate RM1.758bn ($548.7m) in gross national income and create almost 10,000 jobs by 2020.

To help ensure this, the industry has received strong government backing in the form of promotional initiatives, updated regulatory procedures, and the development of destinations and port infrastructure. Upgrades in this last area will concentrate on pinpointing the enhancements needed to make certain coastal towns and cities more attractive as cruise destinations.

A Growing Segment

Worldwide, the leading cruise destination by ship deployments is the Caribbean, which receives 37% of global itineraries, according to the Cruise Lines International Association. The Mediterranean comes second, with 19% of all itineraries, followed by Northern Europe (11%), Australia/New Zealand (5.9%), Alaska (4.5%), Asia (4.4%) and South America (3.3%). In 2014, however, Asia was the fastest-growing market by this measure, increasing by 31.6%, ahead of Australasia (22%), the Caribbean (12%) and Northern Europe (5.2%). Not only is there plenty of room to grow in Asia’s cruise sector, cruise tourists are also looking for new shores to explore. With as many islands and miles of coastline as Malaysia has, the archipelago is well-positioned to seize a major share of these tourists. The only real obstacle lies in creating adequate infrastructure and programmes to welcome them.

Regulatory Change

The cruise EPP recently benefitted from a key regulatory change to the policy of cabotage. As of March 2012, non-Malaysian-registered vessels are allowed to disembark and re-embark passengers at more than one Malaysian port. This change was made with the aim of encouraging international cruise lines to expand their offerings to include multiple Malaysian ports. Given the fierce regional competition to attract and retain port traffic, such steps are paramount. Malaysia’s ports “must constantly improve efficiency and productivity, provide superior services at competitive costs and have adequate features to attract the growing sizes of ships,” Nazery Khalid, senior fellow at the Maritime Institute of Malaysia, told local press in March 2014. “To attract main line operators here, the country must also offer a wide range of supporting services to the shipping lines.”

Agencies

To streamline operations at the country’s primary ports, the government has formed several task forces that address port-related issues and develop recommendations for fixing them. Malaysia’s harbours – Port Klang, Kota Kinabalu, Langkawi, Malacca, Kuching and Penang – should benefit from these agencies by becoming more closely aligned with the operating procedures of international cruise terminals.

To develop the cruise sector further, the Malaysian Cruise Council was formed in June 2012 and charged with directing the cruise industry and coordinating marketing efforts to attract cruise operators. A year later, in May 2013, the Ministry of Tourism partnered with the Asia Cruise Association to hold the Malaysia Cruise Industry Workshop in Penang. A total of 26 international delegates took part in the workshop, including five cruise operators and various representatives from the primary Malaysian ports. To promote the sector internationally, the ministry engages directly with each task force’s lead agency to market Malaysia’s destinations at international cruise conventions such as Seatrade Asia and Cruise Shipping Miami.

Ports Of Call

The busiest port in 2012 was Penang, which saw 211,554 passengers and 139 international cruise ship calls. Port Klang came second, with 141,266 passengers and 98 international calls, and Malacca came third, with 54,166 passengers and 52 calls.

However, Malacca’s fortunes may soon look up. Its port area is in line for an estimated RM40bn ($12.5bn), 246-ha development called the Melaka Gateway. This will include the new Malacca International Cruise Terminal and Ferry Terminal, which will be able to dock as many as three cruise vessels at once, be equipped with maintenance and repair facilities for mega-yachts, and have a marina with up to 1000 berths. The project, being carried out by KAJ Development, will consist of one natural and two artificial islands, and include a waterfront tourist development with an international cruise terminal and marina, a cruise-oriented shopping gallery and designer shopping street, a luxury hotel, and a theme park featuring the Malaysia Eye, a 103-metre Ferris wheel said to be among the world’s tallest. “Melaka Gateway is a ground-breaking and innovative tourism product that complements the government’s tourism ambitions,” said Prime Minister Najib Razak at the plan’s unveiling in February 2014. “This development is projected to attract 2.5m additional tourists over the next 12 years, with high-yield consumers expected to contribute substantially to the tourism earnings of Malaysia.” International industry leaders like Royal Caribbean have signed memoranda of understanding to take part in the project, which is to be completed by 2025.

Jesselton Quay

Another project expected to raise the country’s profile as a cruise destination is the Jesselton Quay development in Kota Kinabalu, Sabah. Located on the waterfront in the city centre, this integrated complex will have an international cruise terminal, a mall and retail units, a hotel and convention centre and office towers with commercial suites. With 600 metres of private marina waterfront, it is expected to transform Kota Kinabalu’s harbour area, building on Sabah’s already rising popularity as a cruise destination. The project, a joint venture between Suria Capital Holdings and SBC Corporation, is to be launched in 2014, and built on 6.6 ha of prime ex-container-port land. The deal’s net sale value was RM1.8bn ($561.8m), 82% of this going to SBC to develop the site, and the rest to Suria Capital as payment for the land. “Sabah has been a top tourist destination for decades,” Edward Johann Leong, vice-president of East Malaysia operations for Star Cruises, told local media. Star Cruises began deploying its MS SuperStar Aquarius from Kota Kinabalu as its homeport in 2013, the first international cruise line to do so. “We envision that this deployment will help build the cruise tourism industry in this part of Asia and boost local tourism economies,” Leong added.

Port Klang Cruise Centre

A good example of how infrastructure enhancements are already paying off is the increase in cruise ship docking capacity at the Port Klang Cruise Centre (PKCC). A dedicated cruise terminal, PKCC is essentially the cruise centre for Kuala Lumpur (KL), where recent infrastructure enhancements have made it possible for bigger ships to dock. Authorities are expecting strong results.

“We see increasing berth bookings for the next two years by larger ships on itineraries previously undertaken by smaller counterparts,” Ahmad Kamal Abdollah, head of corporate communications at PKCC, told local press. “In East Malaysia, the opportunity to develop exotic itineraries leveraging the location’s pristine natural beauty and local cultural elements remains very attractive,” he added. “Larger ships have also been exploring this location as part of their itineraries; it was previously considered mainly by smaller ships.”

This is not the only respect in which attracting larger ships to PKCC will pay off. Because it is close to both KL and its international airport, KLIA, the port’s increased capacity makes it a natural hub both for cruisers wishing to visit the capital and for travellers flying in and out of KLIA on their way to or from a cruise. Indeed, several major cruise lines currently use PKCC as a port of call for both their South-east Asian and global itineraries, including Royal Caribbean, Princess Cruises, Cunard Lines, Costa Cruises, Star Cruises, the Queen Mary II, the Queen Elizabeth and Crystal Serenity.

With the government throwing such weight behind infrastructure improvements, promotional efforts and regulatory incentives, the prospects for Malaysia’s cruise industry look favourable. If the country’s coastlines do become the Riviera of the Straits, the target of boosting the numbers of affluent visitors may well be hit.

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The Report: Malaysia 2014

Tourism chapter from The Report: Malaysia 2014

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