Rebound expected in 2013
2013 will be a "year of year of yield recovery for pricing momentum lost during 2012," said analyst Robin Farley of UBS Investment Research.
“While Concordia and macro issues may combine for a soft  in Europe, we believe Europe over the long term has been a high growth market and will continue to be, with relatively low penetration rates and subdued supply growth,” Farley predicted.
UBS estimated that Carnival Corp.’s 2013 net yield growth will reach about 4% and Royal Caribbean Cruise Ltd.’s will be up by about 3.5%, excluding currency effects.
Positive longer-term trends include below-average capacity growth, international source marketing of passengers, a high rate of repeat cruisers, and the ability to tap into drive-in markets through increased use of homeports in the U.S., according to the study.
— Donna Tunney
Major cruise lines are broadening the base of their agent distribution systems in an effort to sell more cruises through smaller agencies that are less likely to reach override volume targets, according to a UBS Investment Research study.
“Cruise lines benefit from selling through smaller agents who have lower commission costs if volume override targets are not hit, and cruise lines have meaningfully shifted share to lower-cost distributors in the past few years,” wrote UBS analyst Robin Farley in a report titled “Cruise Lines Outlook 2012-13.”
In terms of share shift in the distribution channel, the report stated that in the past, 20% of agents did roughly 80% of bookings. However, as recently as a few years ago, Royal Caribbean noted that 40% to 50% of agents do 80% of the business.
“So sales are less concentrated in the distribution channel,” said Farley.
“Both Royal Caribbean’s and Carnival’s effective commission rates have come down without the companies having to resort to commission cuts as a result of this share shift to selling through lower-cost agents,” she said.
“Carnival noted that in fiscal year 2011, no controlled group of travel agencies accounted for 10% or more of their revenues.”
The report noted, “Many have argued the way to reduce distribution expense is to increase direct sales and disintermediate the travel agent, but that may not have gained much traction.”
Farley said she estimates that between 70% and 80% of all cruise vacations are booked through travel agents.
Another cost-cutting approach, she said, is making agent sales more efficient through automated bookings rather than call centers.
“We believe 90% of Carnival brand bookings and 75% of companywide bookings [at Carnival Corp.] are automated,” she said.
For cruise news and updates, follow Donna Tunney on Twitter @dttravelweekly.