For the first time in a decade, Carnival Cruise Lines will overhaul its commission structure, putting pressure on many agents to sell more cabins to maintain their current commission tiers.
Carnival pays from 10% to 16% commission, based on the volume of cruises sold.
Under the new system, agents must sell 1,000 or more cabins to earn 16% commission, up from about 300 previously.
“Obviously, whenever commissions get reduced or changed, there’s always an impact,” said Nina Meyer, recently re-elected president of ASTA. “I think this will affect a lot of independents. If they’re not associated with a consortium or host, they won’t easily be able to get to the higher commissions.”
Previously, an agent could sell as few as 13 Carnival cabins a year to reach the 11% commission threshold, fewer if the agent booked a longer cruise. That level will now require at least 50 cabins.
Carnival said it was making the move to bring it into alignment with competitors, and because its capacity has grown 50% since 2003, giving agents more selling opportunities.
“Some cruise lines do it every couple of years, trying to recognize those capacity changes over time,” said Lynn Torrent, Carnival’s executive vice president of sales and service.
Torrent said the changes would chiefly affect agents whose Carnival sales production hasn’t kept up with growth.
“More than half of our agents shouldn’t see any change,” she said.
Unaffected will be large-volume producers such as Cruise Planners Inc. “We sell thousands of cabins a year,” said Michelle Fee, CEO of the 750-agency franchise company.
On the other end, part-time or small agencies that sell fewer than a dozen cabins a year will also see no change.
But those in the middle “will need to sell more Carnival now to get back to the same base commission,” Torrent said.
No more ‘half-guests’
As part of the overhaul, Carnival will calculate commission tiers by the number of cabins rather than by the number of passengers.
The line had a unique system tailored to adjust for its large number of short cruises.
Each passenger on a two- to five-night cruise counted as a “half” guest in the old tiered system, and agents earned credit for a whole guest taking a six- to nine-night cruise and a “guest-and-a-half” for 10- to 12-night trips.
Carnival said agents regarded that as cumbersome and confusing. So it will now count cabins sold in determining tier thresholds.
Other cruise lines set tiers based on revenue targets, but Torrent said Carnival doesn’t because it punishes agents for fluctuations in ticket prices. “We can’t hold travel agents responsible for prices going up and down,” she said.
The new structure will be applied to 2013 cruises, based on sales volumes recorded in 2012. Carnival said it will provide agencies with their final 2013 commission rate by Feb. 1.
All business for 2013 sold in 2012 will reflect the former commission structure.
Some agents said they did not consider the change in tiers to be as important to agent revenue as the noncommissionable fee that Carnival and other lines deduct from gross sales.
“In the end, they take it all back in noncommissionables,” said Peter Ulbrich, owner of Holiday Cruise and Travel in Cincinnati.
Torrent said she hoped that agents would keep several factors in mind when evaluating the new structure.
She said that domestic capacity at other cruise lines has fallen as they have increased their international sourcing and deployment. There is proportionately more opportunity at Carnival for agents with U.S. customers, she said.
Carnival has built nine ships since 2003, which equals the fleet size of some entire cruise lines, she said.
As a brand, Carnival is often on TV, and it markets through other channels to stimulate new bookings. “When we’re investing in consumer marketing, we fuel their sales machines,” Torrent said.
Torrent said she was optimistic that Carnival would not lose market share to other cruise lines, because Carnival was the last market participant to revise its system. “It’s less painful if you’re asking [for more production] every couple of years than if you do it once in 10 years,” she said.
Royal Caribbean International last week did not respond by press time to a question about its commission tiers. “Our commission structure is proprietary,” Norwegian Cruise Line said in an emailed statement.
Comparisons between threshold levels in Carnival’s two systems are tricky, because one is based on passengers and the other on cabins.
Figuring two passengers per cabin, however, agents will have to sell 37 more cabins to get to 11% commissions; 80 more cabins to get to 12%; 162 more cabins to achieve 13%; 245 more cabins to clear 14% and at least 325 more cabins to reach 15%.
Torrent said Carnival does have an estimate of what its revenue increase will be as a result of the new structure. She declined to disclose it.
Follow Tom Stieghorst on Twitter @tstravelweekly.