Cruise executives defend commission policies at ASTA panel

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LAS VEGAS -- Maurice Zarmati, president and CEO of Costa Cruises, told travel agents last week that they can park their paranoia about the intentions of cruise lines toward travel agents.

"I guarantee you we'll support this distribution system until I retire and until you retire," Zarmati said.

He offered his reassurances during ASTA's Retail Travel Leadership Summit here, but his comments were by no means part of a love-fest; the session was largely driven by a growing disconnect between cruise line commission policies and travel agencies' compensation needs.

Moreover, noncommissionable cruise components are a harder pill to swallow in a recession year, when the commissionable base cruise rate is very low or the agency loses some commission while doing the extra work to rebook clients who qualify for a reduced price.

In a panel session devoted to the "financial dynamics" of the cruise companies, Steve Tracas, Vacation.com's president and CEO, told cruise executives there were a few kinks in the system. One was the failure to protect commissions when a cruise fare was lowered after the initial sale was made.

The other was the agents' need to find ways to make a profit. As a result, Tracas said, agents spend a lot of time during a cruise sale looking for alternatives, such as selling commissionable third-party shore excursions or offering clients a river cruise.

Roger Block, president of the Travel Leaders Franchise Group, said an agency could double its income by using commissionable shore excursions rather than the products cruise lines offer.

He pushed hard on noncommissionable fees, as well, saying there had been a severe drop in agency compensation as a portion of customer dollars spent on cruises, particularly in a year of greatly discounted cruises. He said there had been cases of NCFs amounting to more than half the cruise price, and the results are "out of whack."

"Our folks are worried about putting food on the table," Block said. "Dang it, we have to make a living."

Excursions and other noncommissionable products are a cost of doing business and should be commissionable, he said.

Block said agents make more on land tours now than they do on cruises, a reverse of the situation a decade ago.

From the audience, John Lovell of Breton Village Travel Services in Grand Rapids, Mich., said he could earn twice the income on a land tour.

"Can I afford to push the cruise product?" he asked cruise executives.

Panelist Ken Muskat, vice president of sales at Royal Caribbean International, responded by saying that protecting a commission when a fare is reduced "would be great, but we can't do that."

Instead, he said, Royal Caribbean is trying to take away some of the problem by providing upgrades or onboard credits, alternatives to reducing the base price to ensure that commissions aren't "dinged" in the first place.

Zarmati said that "Wall Street and Micky [Arison, the CEO of Costa parent Carnival Corp.] would hang me up" if Costa provided commission protection after reducing rates.

The alternative, both executives said, is selling aggressively in order to push prices up "to protect you and us," as Zarmati put it.

Mary Peters, president of Friendly Travel/American Express in Alexandria, Va., asked for help in protecting commissions on her own.

She said that when she advises a client at the time of final payment that the price has been reduced, say, $500 rather than the real $600, the client is thrilled. She wants to keep the other $100 for her extra labor and as commission protection, but current processing systems don't provide that opportunity, except for groups.

"We'll do what is necessary to protect you on your transaction," Zarmati replied. "I'll put as many dollars in your pocket as possible."

As for shore excursions, prebooked group shore excursions are commissionable at Costa and Royal Caribbean, but Muskat said the problem with paying agents for individual shore excursions is that prices on the tours would rise, making them uncompetitive.

In contrast, Zarmati said he hoped to make individual shore excursions commissionable in six months, once he has the software to manage that.

As for NCFs, Zarmati said he would like for them to go away, but they won't. He said they were not commissionable because they were pass-through charges.

On the other hand, he said, Costa's most significant cost is agency commissions, and he added that he wanted agents to earn up to 17% by signing on for the line's educational program.

Muskat said Royal Caribbean also offered extra points for education, and this year the line is protecting commissions even when agencies don't make goals.

Block acknowledged that agencies are getting that kind of help, but he said a higher commission rate on extremely low-priced cruises "doesn't matter. The dollars earned per sale have to be a livable wage."

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