Charlie FunkWe started as an outbound tour operator in 1981, and when we opened the first cruise-only agency in Tennessee on Jan. 4, 1988, there were 37 cruise lines.

Putting together our first cruise show that March was a snap. We changed the complexion of the cruise business in Middle Tennessee. We asked suppliers for ways to improve the show each year, and we implemented those changes, growing from 1,000 to 4,000 attendees ready to buy vacations in what has become an anticipated event for customers and suppliers.

It was a good time to be in business, with the cheapest cruise available earning $300 in commission, because we were paid commission not only on the cruise and airfare but on excursions we booked for the clients.

But then things began to change.

Royal Caribbean bought Admiral. Princess bought Sitmar. Holland America bought one of the Homeric ships and Windstar. Norwegian Cruise Line bought Majesty, Royal, Royal Viking and Orient. Then Carnival Corp. bought Holland America, Costa, and Princess and P&O (among others). Royal Caribbean bought Chandris Fantasy/Celebrity. Premier bought two of the Home Lines ships. Dolphin was purchased by a holding company and became Regal Cruises. And Radisson was merged with Seven Seas.

Along the way, American Hawaii, Premier, Commodore, American Family, Regency, Delta Queen, Pearl, Dolphin, Bermuda Star, Epirotiki, Sun, Renaissance, Ocean, Regal, Windjammer, Cruise West and others either went bankrupt or just ceased to exist. These changes consolidated the industry, making our jobs easier in some ways, harder in others.

We changed from an industry where a Carnival cruise to the Western Caribbean was on the Holiday and Royal Caribbean to the Eastern Caribbean was on the Sovereign of the Seas to one that became so complex that one supplier produced circular slide rules just to keep track of ships and itineraries.

And still the changes kept coming.

"Port charges" gave way to noncommissionable fees, taxes and fees and ballooned from $38 in charges when we began to more than $225 on a seven-night Caribbean cruise.

Cruise lines that proclaimed the "inclusive" nature of a cruise compared with land vacations soon learned that the key to business success and profit lay as much in onboard purchases as in ticket price. That led to dramatically lower ticket prices and a business model that today generates more than 40% of some cruise lines' profits from onboard sales.

As these changes multiplied, the agent earned less and less for the same amount of work (or more work), in some cases earning less than 5% commission on some bookings as measured by the amount they got to keep, divided by the total amount they took in.

The size of the market area that an agency served also changed. We went from a five-mile-radius standard to one that sold nationwide with toll-free numbers, and then to one that sells worldwide on the Internet.

Those agencies that changed their business model survived and thrived. Many didn't. Economic recessions, the events of 9/11 and the outbreak of war in 2003 claimed fully a third of all agencies that couldn't/wouldn't adapt.

For the agencies that remained, change has been continuous.

We've learned we have to change from selling a product to selling ourselves and the service we provide and building a relationship. We've had to change to the fast-food business model ("You want fries with that?") and sell third-party insurance (which many agents considered beneath them at one time), transfers, shore excursions and tours, pre- and post-cruise hotels for cruise clients.

We learned to use consolidators for air transportation in addition to the base vacation ticket price, to increase earnings on bookings to the break-even point. Doing so turned out to be beneficial for at least two reasons: It's often a better product and provides greater client satisfaction, and it provides substantially higher profits to those agencies that change their mindset. A business model that doesn't pay attention to profitability for the agency leads to unhappy changes.

Just when we thought things might be settling down, changes accelerated over the last three years or so, running the gamut from tight restrictions on supplier trademark and intellectual property use to huge growth in suppliers' direct sales, restrictions on call-in agent service and assistance and the use of compulsory productivity tools, to final payment due-date policies that automatically cancel reservations.

The agency that can't adapt is in an evolutionary cul-de-sac. The changes that must be made range from as small as a programming update to back up the final payment date for your client to as large as deciding to stop promoting suppliers that don't support you or make it harder to do business with them than with another supplier.

For a lot of us, it will mean changing from a business model that tries to be all things to all people to one that accepts that we can't and don't need to compete with large online travel agencies. Instead, some will decide their chances of success lie in filling a niche or providing more service and searching out those clients who understand, value and appreciate that service. Change isn't optional any longer, and probably never was.

Enjoy the ride, and keep the change.

Charlie and Sherrie Funk own Just Cruisin' Plus in Nashville. They have written several books on travel agency operations and produce sales, marketing and operations seminars for agency owners and managers. Contact Charlie at [email protected].

Comments

From Our Partners

2020 NTG Webinar Series
Travel, Our Future and Yours A Series of Conversations with Industry Leaders
Register Now
American Queen South
American Queen Steamboat Company
Read More
2020 Club Med Webinar
Let’s Escape Again with Club Med
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI