Optimal subsidy policies of the Chinese cruise market under the impact of COVID-19

Abstract

The spread of the COVID-19 pandemic has caused severe damage to the Chinese cruise market since 2020. It is crucial for the local government to reformulate the subsidy policy to respond to the changing environment. We propose a cruise supply chain system to investigate the choice of subsidy recipients and the setting of optimal subsidy levels with a budget-constrained government during the access restriction period and post-epidemic period. We find that in both periods, as long as the subsidy achieves the optimal level, either the cruise lines, the travel agency, or the passengers as recipients of the subsidy policy can maximize the market demand and recover the cruise market after the COVID-19 outbreak. However, as the budget increases, subsidizing passengers can improve the “low price dilemma” of the Chinese cruise market. Compared with the access restriction period, the local government should adjust the subsidy level in the post-epidemic period. Interestingly, the subsidy policy does not always positively impact the international cruise line's profit in the post-epidemic period.