The Future of Asian Cruising After Genting’s Demise
Genting Cruise Lines celebrated the float out of its Dream Cruises’ new ship, World Dream, in Germany on August 26, 2017. Archived photos: Genting Hong Kong
Crystal Skye: The exquisitely outfitted Boeing 777-200LR has a spacious design for up to 88 guests, and is appointed with features rarely found in even the most luxurious private jets.
By Anna Sim, 11 March 2022
Covid-19 was the straw that broke the camel’s back for Genting Hong Kong, which was expanding rapidly to seize a fast-growing Asian cruise market and was asset-laden by the time the pandemic hit in 2020.
The Asian cruise pioneer started humbly as Star Cruises nearly three decades ago. As cruising proved popular for Asians, it started having luxury and global ambitions, sparking off a series of costly acquisitions.
A recap of what Genting bought, and built, in the past seven years shows its relentless drive to transform itself as the homegrown international luxury cruise company catering for wealthy Asians. It acquired Crystal Cruises in 2015 for US$550 million. Since its takeover, Crystal Cruises received new Boeing 787-8 and Boeing 777-200 aircraft servicing a new private jet arm; a yacht, several river ships and an expedition ship.
In 2016, Genting launched its new cruise line, Dream Cruises, with new “Asian-centric” luxury ships, Genting Dream and World Dream. That year, when ship orders hit all-time high because of rising cruise demand, it acquired German shipyard MV Werften for US$257 million and poured an additional US$111 million to modernize the shipbuilding group. Aside from ensuring its new ships get built, the ownership would save it the hefty margins imposed by shipyards for ship construction.
It might have been a great move, had it not been for Covid-19. In 2020, total revenue dropped US$367 million as cruises were suspended from February 2020. Compare this with a revenue of US$1.6 billion in 2019, and a cruise EBITDA of US$190 million, up from US$152 million in 2018.
Cruise suspensions in Hong Kong went on to July 2021 and again with the rise in Omicron cases this year.
A Sinking Ship
A debt-laden Genting with little revenue to speak of started sinking from mid-2021.
MV Werften went into insolvency on January 10, triggering cross-defaults on US$2.78 billion in debt. And after Genting Hong Kong filed a winding up petition with the Bermuda Supreme Court on January 19, company CEO Lim Kok Thay and deputy CEO Colin Au resigned.
On February 4, two of Crystal Cruises’ ships were seized in the Bahamas, where they had fled to evade a court-ordered arrest related to unpaid bills. Peninsula Petroleum Far East had successfully filed a lawsuit against Crystal Cruises in a Florida district court, seeking the arrest of ships to reclaim US$4.6 million in unpaid fuel bills dating as far back as 2017.
“This was disastrous for the reputation of Crystal Cruises. Passengers were [diverted from their intended destination] and abruptly dropped off in Bimini. It would be hard for the brand to come back from this,” said a cruise industry veteran who requests anonymity.
Shortly after, Crystal Cruises ceased operations with its headquarter in the US closed and staff terminated.
Hanging in the balance is the fate of Dream Cruises, which in late January filed a winding up petition and appointed the same provisional liquidators working with its parent.
The Dream World, one of two ships under the line, did its last cruise to nowhere in Singapore and returned to shore on March 2. Citing troubles with liquidity and mounting creditor pressure, Genting Hong Kong said “it has become impossible for the company to make further financial commitments necessary to enable the World Dream to continue to operate”.
The Future of Cruising
Genting Hong Kong’s demise is an opportunity for a “much-needed reset” of the Crystal and Dream Cruises brands, according to the industry insider.
He alleged that a gaming focus floundered the international ambitions of Dream Cruises, attracting a limited segment of guests. “[The Miami-headquartered] Crystal Cruises was a great brand at the time Genting Hong Kong bought it, but lost a section of its original guests when casinos were added,” he claimed.
The source said a reset would reintroduce the region’s cruise-goers to international-standard cruising. Casino cruises are no longer the standard in a maturing market as on-shore casinos are no longer in short supply, he argued.
In February, Heritage Group, managed by the former owner of Silversea Cruises Manfredi Lefebvre d’Ovidio, confirmed its intentions to acquire Crystal Cruises.
“Crystal Cruises was a truly beautiful luxury brand before Genting Hong Kong’s [misguided decision to] add casinos to the ships, which drastically altered the experience and eventually the profile of guests,” the insider alleged, adding that Manfredi is the right person to restore the brand to its former glory.
There are companies interested in buying Dream Cruises and its ships, including the unfinished Global Dream, set to be the largest cruise liner by capacity. Provisional insolvency administrator for MV Werften, Christoph Morgen, confirmed this while speaking to reporters.
Norwegian Cruise Line, which has been trying to penetrate Asia, is speculated as the cruise company with most interest in Dream Cruises. NCL declined to be interviewed, while Royal Caribbean remains tight lipped on the situation.
The Silent Casualties
In the wake of Crystal Cruises’ closure, customers are reportedly owed upwards of US$100 million in deposit or payments. Most of these customers, who paid by credit card, are eligible for refunds from the credit card company.
Meanwhile in Asia, Alvin Tan, Singapore’s trade and industry minister, said in Parliament, “Genting Hong Kong and Dream Cruises have appointed provisional liquidators to facilitate restructuring of both companies. We are closely monitoring the impact of these developments on those who have booked upcoming sailings on World Dream and the impact on Marina Bay Cruise Centre Singapore, and also on the Singapore cruise industry.
“Royal Caribbean has brought forward its deployment of Spectrum from October to April 2022…The Singapore Tourism Board is in discussion with other cruise lines on their interest to resume sailings from Singapore. Pre-Covid, Singapore had the most cruise ship calls among ports in Asia. As Singapore transits towards living with endemic Covid, we will continue our efforts to anchor more cruise ships [here] and maintain our attractiveness as a cruise hub in the region.”
Yet, what remains unanswered is the impact on appointed cruise agents, some of the hardest hit with no recourse in sight.
The cruise insider said, “I expect things to unfold in a very ugly way. There is so much money owed to agents in Malaysia, India, Indonesia, etc. I estimate agents have hundreds of thousands of dollars stuck in the company. To be a General Sales Agent, they need to invest in a booking system and put in large sums of money to secure bookings in blocks. It is rare that agencies have insolvency or related insurance as those come with premiums [too high for small and medium players]. Who’s going to compensate them? There is little they can do.”
Hotels-Asia reached out to Prime Travel, believed to be the GSA in Singapore, but did not get a response.
Chan Brothers, one of the leading travel agencies in the country, said: “Since this is a complex legal and corporate situation, we are not in a best position to comment or represent our opinions.”
– Anna Sim is contributing writer, Hotels-Asia