Earlier this summer, at the annual Vacation.com conference, I moderated a panel featuring executives from Royal Caribbean International, Travel Impressions, Crystal Cruises, Globus and Viking River Cruises as well as Steve Tracas, CEO of V-com.
"True or false," I said: "Too many travel agents sell on price, not value."
"True," said Michele Saegesser of Viking.
"True," said Steve Gorga of Travel Impressions.
"True," said Scott Nisbet of Globus.
"True," said Vicki Freed of Royal Caribbean.
"True," said Bill Smith of Crystal.
"False," said Tracas.
Although outvoted by his preferred suppliers, Tracas is not ready to back down from his position. He later made his case to me in an email. "It's a misconception that agents sell purely on price," he wrote. "Every report I've seen shows the agency distribution channel generates the highest transactional revenue of any channel. I don't feel that the perception [that agents sell on price] serves the industry well and would love to put this myth to bed."
His email presented several good arguments that, if not putting it to bed, at least sends the myth to put on its pajamas and brush its teeth. "Suppliers set the price, not the agents," he asserted. "The suppliers, not the agents, have low-price guarantees to ensure that consumers always get the lowest price.
"I don't fault the suppliers for their pricing initiatives, by the way," he noted parenthetically. "It's just the fallacy that agents sell on price, not value, that I'm challenging."
The arguments on both sides are not new. I remember hearing them 20 years ago at a GEM conference (GEM was one of the consortia that was rolled up to form Vacation.com). Bob Dickinson, who was then senior vice president of sales and marketing for Carnival Cruise Lines, was on the stage and seemed to be trying to pick a fight with the hundreds of travel agents in the audience. He harangued them on the issue of upselling, saying they didn't know how to do it and instead just sold on the lowest price.
One travel agent stood up and countered that Dickinson contributed greatly to the problem, splashing low fares for cabins in ads but setting such limited availability that only a few agents could book them. Cruise lines, he said, planted the idea in the public's mind that cruises were cheap.
I do not remember his exact quote, but Dickinson seemed exasperated and replied with something to the effect that he got customers into agencies asking to take a Carnival cruise, and if agents were skilled, they could close the deal.
Today, the arguments may sound similar, but the issue that frustrated agents and suppliers back then about the price/value discussion differs from what frustrates them now. On the whole, agents are more sophisticated than they were 20 years ago -- the order-takers were washed away by online travel agencies, 9/11 and commission cuts -- and today's agent is better prepared to upsell clients brought in by low-price deals. But back then, low-price inventory was scarce. Today, the issue is complicated by the flowering of deals.
In response to this glut of bargains, Tracas has loudly raised the issue of commission protection. He is concerned that low prices (and, in the cruise sector, non-commissionable fees) will drive significant numbers of agents out of business unless there are special provisions for supplemented commissions during the course of the recession and recovery. (Some suppliers have, in fact, instituted temporary supplements.) He believes that it's in the suppliers' best interest to ensure there's still a healthy agency channel at the end of our economic distress precisely because suppliers can't afford to lose their best channel.
"The issue of commission protection has to do with suppliers, not the agent, continually reducing the prices," Tracas wrote. "Who is a better example [than travel agents] of selling up or selling on value? The cruise line res office? I don't think so. The online travel agencies? I don't think so. Commissions are agency lifelines, and they are tied to the sale."
Tracas closed his email with the request, "Fill me in. What am I missing?"
He may not be missing anything; the answer appears in his own email. He had also written, "Sure, every supplier will always want 'more' revenue."
To which I would add, "Especially in 2009."
It's a tough year for everyone, agent and supplier alike, and I have heard more frustration expressed on both sides than I remember hearing in years. From the suppliers' perspective, yes, prices are lower, but there is also unbelievable value in their premium products. They are annoyed that agents aren't always able to sell that value.
But from the consumer perspective, not only are prices very low for anyone wanting a vacation, but there's apparent value at every price point. The $25 and $49 per diem rates for cruise cabins that we saw earlier this year were not only unbelievably low, but they also represented value of a sort. It's hard to spend less than that on food, shelter and entertainment off of a cruise ship.
Twenty years ago, it was easy to argue, as suppliers and smart agents did, that a cheap price did not necessarily represent good value. These days, things don't always seem quite so clear cut.
Contact Arnie Weissmann at [email protected], or follow him on Twitter at twitter.com/awtravelweekly.