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China will someday be the largest cruise market in the world, Carnival Corp CEO says

Key Points
  • "Mad Money" host Jim Cramer sits down with Carnival Corporation CEO Arnold Donald on one of his company's ships, the Carnival Horizon.
  • Donald discusses his outlook for the cruising industry and his company's main competition.
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One day, China will be largest cruise market in the world: Carnival Corp CEO

From the deck of the Carnival Horizon, docked at New York City's Pier 88, Carnival Corp. CEO Arnold Donald told CNBC that, eventually, his cruise line's U.S. business would shy in comparison to China.

"China, someday, will be the largest cruise market in the world," the CEO told "Mad Money" host Jim Cramer on Wednesday. "It's in their five-year plan, so if cruising is in their five-year plan, ... they're going to make it happen."

Passenger volume from China has been increasing sharply over the last five years, with cruise capacity increasing across all metrics, according to a 2017 report from Cruise Lines International Association and Chart Management Consultants.

The same report pegged China as the "main driver of passenger growth in Asia," with Chinese customers accounting for two-thirds of the region's passenger volume in 2016.

"We just want to be a part of that," Donald said about China's anticipated growth. "We partnered ... with [the China State Shipbuilding Corporation] and the sovereign front, [China Investment Corporation], to establish a domestic cruise line there and to build the first ship in a Chinese ship yard, so that's in 2023."

The non-binding agreement establishes a joint venture between Carnival, CSSC and CIC to help build two new cruise ships in China, with the option of building two additional ships.

"Meanwhile, we have a number of ships home-ported there, and our ships are doing well. It's a challenging market, but it's embryonic," Donald told Cramer on Wednesday. "We are teeny-tiny in terms of accessing the total number of travelers that are from China."

Conservative estimates from a 2017 report by Cruise Industry News, an independent news and research organization, predicted that China would deliver more than 5.6 million domestic cruise passengers by 2024.

For context, Cruise Lines International Association estimates that 27.2 million passengers around the globe will go on a cruise in 2018.

"Every market in the world, Jim, is underpenetrated, including the United States," Donald said, adding that all of the ship cabins in the world add up to less than 2 percent of total hotel rooms.

"One of every two people who cruise cruise on one of our nine world-leading cruise line brands, so our competition ... is actually land-based vacations," he continued. "It's not other cruise lines. Because we're chasing the other 98 percent, not the 1 percent we don't have of the 2 percent penetration."

Watch Arnold Donald's full interview here:

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China will someday be the largest cruise market in the world, Carnival Corp CEO says

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