Cruise lines to increasingly tie overrides to performance

By
|

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 cruise lines.

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 produce."

"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 Vacation.com and Travel Services International (doing business as The Travel Company), won't necessarily earn higher pay by virtue of their size alone.

"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 market cruises."

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 productivity."

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 said.

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.

Comments

From Our Partners

Crystal Cruises – What’s Next, 2020 & the 30th Anniversary Collection
Crystal Cruises – What’s Next, 2020 & the 30th Anniversary Collection
Watch Now
HAL_AlaskaCruising_Hero
Capitalizing on a Peak Year for Alaska Cruising
Read More
2020 Elite Island Webinar
More Family Fun in St. Lucia @ St. James’s Club Morgan Bay
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI