Lead generation for preferreds
In an industry in which a host agency or consortium can often identify every major cruise line as a preferred supplier, where exactly is the preference?
That is the question posed by Scott Koepf, vice president of sales for Avoya Travel.
“The incentive for any agent or agency is commission, but if you have 12 preferred suppliers at maximum commission, who has preference?” Koepf wondered. “You lose the meaning of the word.”
The distinction Avoya makes, he said, is that it shows preference to certain suppliers by generating leads for those brands. “We don’t purely incentivize agents with commission,” he said. “The primary incentive is they get a lead for that brand.”
Avoya has long hung its hat on its ability to deliver leads. As such, the real preference a supplier can get is a lead based on marketing for that product. Avoya affiliates choose specialties, and Avoya drives them leads based on those specialties.
“The stronger our relationship, the more we will market that particular supplier and get more leads for that particular brand,” he said. “Everyone else that talks preferred suppliers and those relationships talks about getting on a list, commission enhancement, and some marketing opportunities, with cost involved. Yes, we have commission enhancement, but it starts with getting a customer under that particular brand. The difference with us is we can say we are creating that new business and continuing to grow the market.”
This system, he said, means more money for agents: “It’s all about the marketing that brings in the customer that’s requesting a specific brand.”
— Johanna Jainchill
At Vacation.com’s 13th annual conference in Las Vegas in June, a parade of the consortium’s preferred suppliers took to the stage at Mandalay Bay’s conference center, touting the benefits of their special relationship with V-com.
From Hertz to Amtrak, Travel Guard to Royal Caribbean International, the suppliers, along with V-com’s top executives, continuously reminded the 1,000 or so agents in the audience that the more they sold their preferred suppliers, the more money they would make.
The preferred supplier has long been a staple offering of any consortium or host agency. But what the agent and supplier each get out of the relationship often varies, and in a world where so many suppliers can be “preferred,” these groups increasingly have to convince both their members and the suppliers of the value of the relationship.
Promises of higher commissions, override bonuses and marketing support have long lured agents to join consortia and hosts, which tout the power of their numbers to negotiate the best earnings for their agents.
But that power is squandered if agents fail to sell the product.
“It’s important for members to support preferred suppliers so that they see the value of the overall distribution,” said Anthony Hamawy, president of Cruise.com, a V-com member. “The suppliers are more likely to strengthen their support in instances where they see an immediate and consistent return on their efforts.”
In return for making better commissions, agents are expected to maximize sales for the suppliers in question. But agents sometimes walk a fine line in balancing the expectations of the preferred suppliers with the best interests of their clients.
“Our job is not just to sell the products, but at yields acceptable to the customer and right for our suppliers,” said Mike Batt, chairman of V-com’s parent company, Travel Leaders Group. “We want ships’ carpet changed every two years and hotel curtains that haven’t been there for 15 years. We want our suppliers to make enough to provide a quality product.”
Symbiosis is the hallmark of every host’s or consortium’s relationship with a preferred supplier. Groups vary in the way they work with suppliers, but access to preferred relationships is often the main reason why an agent bothers to join a host or consortium.
“Agents and agency owners understand the need to have a preferred-supplier strategy,” said Alex Sharpe, executive vice president of Signature Travel Network. “You can’t be an expert on everything, and you can’t create a relationship with every travel supplier in the world.”
Agents must deliver
Both sides agree that the value in the relationship comes down to numbers.
“The more effective the consortium is at strategically driving the business to their preferreds, frankly, the stronger they get,” said Dondra Ritzenthaler, Celebrity Cruises’ senior vice president of sales. “The revenue that [suppliers] gain from that network significantly increases. … When they deliver on what we put in place at the beginning of the year, the next year we will continue doing that. They keep getting the investments we make, and we continue to benefit, as well.”
For tour operators, which generally have less exposure to the public than cruise lines, for example, preferred relationships are paramount.
“The one key issue for us is that guided vacations need to be promoted and actively sold,” said Paul Wiseman, president of Trafalgar. “What we seek in a consortium is an understanding that these things don’t sell themselves.”
Trafalgar looks to a consortium to market and communicate to the company’s target clients, and to stand out.
“Travel agents are deluged with tens of thousands of emails from suppliers,” Wiseman said. “We ask for assistance in filtering that to try to get our key messages through, which really is the true definition of support around a preferred program.”
Wiseman and other suppliers understand that there is value in this, and they are willing to pay the extra commission and marketing dollars in order to be promoted and sold over the non-preferred partners.
Even so, Ritzenthaler said, “No supplier has endless funds. So you have to strategically go in and allocate resources and funds and time to those partners who not only talk the talk, but walk the walk.”
Minimum entry requirements
That relationship is so important that for some consortia, becoming a member is contingent on sales of preferreds. At Signature, for example, a potential member has to already be producing a minimum of $2 million in preferred cruise and tour supplier revenue to qualify. That is the highest threshold in the industry.
“I think others bend and hope for agencies to convert business,” Sharpe said. “But we ask them to shift prior to becoming a member, at least to qualify. Then we work on them to continue to convert.”
At Ensemble, the minimum preferred-sales threshold is much less, $350,000. As with most consortia, both Signature and Ensemble let their agents know that selling preferred is better for their bottom line.
“Signature’s preferred suppliers generate the lion’s share of total revenue,” Sharpe said. “And we make certain members understand that it is those suppliers that allow us to deliver marketing and best-in-class technology to them and their frontline staff.”
Signature is unique in that it is member-owned.
“All members are entitled to profit-sharing, so they have a vested interest in selling designated suppliers,” Sharpe said.
A matter of discipline
When agents sell companies that are not preferred, it is a source of frustration to both the consortia members and the suppliers.
Jack Mannix, a travel industry consultant and former head of Ensemble, said it can be difficult to persuade agents to sell preferred suppliers, even though it makes sense from a bottom-line perspective.
Consortia and hosts, Mannix said, “have to make sure their employees are disciplined, and that’s where a lot of retailers don’t sell effectively. They let the frontline counselors sell whatever they choose, or don’t manage it.”
Mannix said suppliers are looking for a few key returns: growing their volume overall and getting business they might not have gotten otherwise.
“That’s why it’s important for these groups to move share and manage the business to the point that they are delivering incremental business to the supplier, business the supplier would not have gotten otherwise without that marketing investment and relationship,” Mannix said.
Consortia and host agencies can’t force their agency members to sell one supplier over another, but they let them know that selling preferred is more profitable.
“It’s not in their best interest,” said Joe Jiffo, Ensemble’s vice president of business development. “They won’t earn profit sharing as they would with the preferred supplier.”
A nonexclusive affair
However, Jiffo said, if members have good relationships and deals with non-preferred suppliers, Ensemble doesn’t discourage them.
“Sometimes members are geographically located where they have to work with certain suppliers,” he said. “Maybe it’s a tour operator with strong charter lift from that destination. We can’t tell them not to. We try to tell them what’s in their best interest, but they have to think about what’s the best interest for their customers, as well.”
Suppliers don’t necessarily see these nuances in the same way, and they expect to be marketed above other products.
“The most important share shift we’d see is from non-preferred products to preferred products,” Wiseman said. “There is no point in a supplier being preferred if that consortium and its agents don’t support the preferred program … with marketing and training and communication.”
At V-com’s conference, this was a point several suppliers made to the members.
“Stop selling those suppliers that aren’t supporting you in a big way,” Royal Caribbean’s Vicki Freed, senior vice president of sales and trade support, told the audience. “We put our eggs in your baskets. We want your support. It’s important to us. And at the end of the day, you’ve got to vote with your bookings. You’ve got to sell the suppliers that are really there to support you.”