NEW YORK -- Although the major airlines' decision to slash travel
agent base commissions to 5% was something of a foregone
conclusion, cruise suppliers will not reduce agent commissions in
the foreseeable future, according to officials at several major
Nevertheless, cruise operators are likely to require agents to
increase their productivity to continue earning the segment's
traditionally higher override levels, even as fast-growing cruise
consortia bring more leverage to the bargaining table.
"There will be a continued emphasis on payment for
productivity," said Arthur Sbarsky, executive vice president at
Norwegian Cruise Line.
"We've already seen the opening rate for consortium commissions
standardized at 10% rather than the higher levels of a few years
earlier," he said.
"It all comes down to paying for productivity. We will continue
to see higher [cruise] override thresholds, i.e., minimum revenue
levels agencies must reach to earn bigger overrides. As an
industry, we will pay higher commissions to the people who
"There's been a broader emphasis on paying overrides based on
performance over the past few years," said Rick James, senior vice
president of sales and customer relations at Princess Cruises. "I
don't see that changing."
Indeed, suppliers say large cruise-retailing organizations like
and Travel Services International (doing business as The Travel
Company), won't necessarily earn higher pay by virtue of their size
"We are working closely with large consortiums like
Vacation.com, but about 40% of their members are 'ticket sellers'
who lack the skills to sell cruises effectively," said Bob
Dickinson, president of Carnival Cruise Lines.
"The skill sets are entirely different," he said. "Proficiency
with the CRS and GDS doesn't mean anything if they can't sell and
Yet Dickinson said large cruise consortiums do offer benefits
for suppliers. "They'll definitely help because they have a higher
level of resources" than smaller agencies, he said. "We are poised
to take advantage of their weight."
Still, while several agency groups are growing through mergers
and acquisitions, their size won't automatically entitle them to
higher commission levels, Sbarsky said.
"If I combine one large retail group we work with with another
large retail group we work with, we haven't increased our market
share just by their combining. But if that agency proves it can
move new market share to us, like I said, we will pay for
Meanwhile, cruise operators are already facing a decision on
air/sea package commissions. Cruise suppliers still pay 10%
commissions on the air portion of such packages, or twice the
airlines' base rate.
While comparisons are difficult because cruise lines buy airline
tickets based on contractual terms and not market rates, cruise
suppliers say the 10% air commission rate on air/sea packages could
be subject to change in the future.
"It's fair to say cruise suppliers are constantly monitoring the
values provided to us through our air agreements," said one top
official at a major cruise line who requested anonymity.
"Decisions will rest with the individual lines because we buy
air tickets based on net rates. Our reactions will hinge of our
contract rates versus what's out there on the street," the official
Both Sbarsky of NCL and James of Princess acknowledged that
their companies pay 10% air commissions on air/sea packages but
said their companies haven't begun to address the issue of changing
those pay rates.