Charlie FunkI've always had difficulty understanding why, beginning about 2004, Wall Street analysts became so disdainful of the role agents play in cruise and vacation sales.

Continually questioning the need for a commissioned retailer in the sales process proved that none of these analysts had a clue about the travel industry, cruise sales in particular.

The hypocrisy, of course, was that the analysts work for investment firms, which themselves collect handsome commissions on myriad securities transactions. They would no doubt argue that the research and advice that leads to the actual transaction justifies sometimes-large commissions. And I would agree; I just don't understand why a seemingly intelligent group of professionals was unable to see the parallels in the two activities.

Yet each quarter, some analyst would ask a question during a cruise line earnings call about reducing or even eliminating agent commissions, as the airlines had done.

To be sure, cruise line executives consistently fend off the questions with assurances that commissions would not be cut and certainly not eliminated. If analysts even noticed that certain portions of cruise fares and cruise-related services and products have become noncommissionable, it apparently hasn't satisfied their irrational hunger to cut commissions more deeply.

Some people speculate that Wall Street's focus on the subject might have played a role in NCFs, but it's more likely that at least some of it stemmed from retailers who rebated, sometimes as much or more than a small agency would earn on a given booking.

After 2000, rapid capacity growth created a dilemma for some cruise lines, especially the largest ones: Agency sales weren't growing fast enough to keep the ships full. While cruise lines (and tour operators, too, for that matter) have always sold a portion of their inventory directly, whether to wholesalers, charterers or consumers, by 2004 it had became apparent that more direct sales were needed if burgeoning capacity was to be filled.

To its credit, Carnival Cruise Lines, the first major line that appeared to mount a concerted direct-sales effort, not only assured the retail channel that it had no intention of supplanting them but also offered to teach any agent who wished to study its Personal Vacation Planner program how to do what the line was doing successfully.

In 2007, Carnival committed to scaling back direct sales as long as agents kept the ships full. When we failed to rise to the challenge, that which had to be done was done.

Norwegian Cruise Line created an internal direct-to-consumer sales team in March 2008.

Where do we stand today? According to a Jan. 10 article in Travel Weekly, Carnival Corp. Chairman Micky Arison said that in 2009, direct-to-consumer sales among all its brands made up 17% of its revenue. NCL divulged that in the past three years, its direct business has tripled and is now 27%. Royal Caribbean Cruises Ltd. said that its percentage of direct business is in the mid-to-high teens for all three of its brands. 

The amount of business that any line sells direct to consumers may, at the end of the day, matter less to travel agents than the fact that they must fill the balance. Even if direct sales were nearing 50% for a line, the reality is that the retail channel still can and must sell at least 50% of passenger capacity.

The bottom line is that direct sales are higher today than they were before the first direct-sales efforts began. How nervous should that make us? Is there no turning back from the path of direct sales? Will it simply continue to grow and, ultimately, spell the end of cruise sales through the retail channel?

No. About four weeks ago the strong interest in European cruises that my agency had begun to see beginning last fall slowed to a trickle and has all but stopped. Middle East unrest, higher airfares to Europe, falling consumer confidence and a fear of the impact of rising gas prices on household budgets are all factors.

But as a result, the retail channel has the opportunity to demonstrate more clearly than ever the value it brings to the table.

And there's plenty of evidence that, in fact, the lines are keenly aware of a growing, rather than shrinking, role agents can play.

The Royal Caribbean brands have ramped up their support of travel agents, especially consortium members, with marketing initiatives ranging from bonus commissions to onboard amenities and more.

Especially noteworthy is the directive by Larry Pimentel, president of Azamara Club Cruises, that the product will not be diluted with excessive discounts. Instead, airfare subsidies will be used to spur consumers to action, which protects retail channel earnings.

Carnival Cruise Lines has launched a campaign that passes along names of casino high-rollers as agency leads.

Regent Seven Seas Cruises has instituted a past-guest program for any passenger who has not booked in 37 months, providing names to the travel agency. The intent is to send those clients direct-mail pieces that mention the booking agency and then follow up with a phone call.

NCL just announced its "Partners First" program, which appears to be a direct reversal from the direction it seemed to be heading after launching its aggressive direct-sales program. Despite some fits and starts with actions and programs that seemed to move contrary to the stated intent of "Partners First," I believe time will show that NCL has made a clear change in marketing philosophy in an effort to regain retail channel market share.

So it's all beer and skittles from here on out, right? Far from it. The retail channel has been offered a gloved hand, but we all know that if agents don't deliver, the gloves come off. Cruise lines, to varying degrees, have again embraced the travel agent community (some never stopped). The retail channel is being given another opportunity to move the needle and fill cruise ship berths.

I truly believe sufficient travel agency sales will lead to a reduced direct-sales effort because travel retailers are the most cost-effective cruise distribution channel.

But the retail channel has been warned by the cruise lines, perhaps for the final time: Fill the ships for us, or we will do what must be done to fill them ourselves.
 

• • •  


Update: I have found a source of cockroach pins to celebrate the adaptation and survival of the travel agent (see my Feb. 28 column). To get yours, write to me at [email protected].  

Charlie and Sherrie Funk own Just Cruisin' Plus in Brentwood, Tenn., and have provided agent and agency owner training throughout North America. They are the authors of several books, including "A Recipe for Travel Agency Success," "A Blueprint" and "You're Invited," a complete guide to hosting consumer travel events. 

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