ABOARD THE NORWEGIAN JOY -- Norwegian Cruise Line has increased its spending on agent commissions by roughly 30% over the past three years by including a variety of "free" amenities in the base fare.

Norwegian Cruise Line president and CEO Andy Stuart said the promotions in which guests can pick from a basket of amenities have brought added commission through the back door to agents.

On a three-day cruise to show off the Norwegian Joy, which was transferred to the U.S. from its original market in China, Stuart appeared at an agent forum along with senior vice president of sales Camille Olivere.

An agent asked why Norwegian (like other cruise lines), doesn't pay commission on shore excursions. "We're just not going to go down that road," Stuart said. 

"We've taken commissions up by 30% by adding more stuff, including a $50 credit on shore excursions. So essentially there is a commission on shore excursions inside the cruise fare."

He said travel agents shouldn't ignore how much the value-add marketing adopted by the industry in recent years has increased their earnings.

"It's a huge change in commission, honestly. The way I look at it, it is game changing. There aren't many businesses where margins have been taken up by 30% over a three-year period, and that's really what's happened in our relationship over the last three years," Stuart said.

In 2018, Norwegian's parent company, Norwegian Cruise Line Holdings, reported $999 million in expense for "commission, transportation and other," up 12% from $894 million the year before.

But as a measure of Norwegian Cruise Line commissions, that expense item is clouded by non-commission items such as air transport costs for air-sea packages. It also includes commission figures from Oceania and Regent Seven Seas Cruises, a cruise line that has long had the most all-inclusive fare in the industry, and thus a more stable commission level.

Stuart said that the 30% figure represents the increase in the amount that consumers are paying for cruises since 2016, and that the value-add promotions have paved the way for that rise.

Stuart also discussed an April 1 change in Norwegian's promotion in which free or reduced airfare was taken out of the standard promotion and made into a kind of standalone offer on a more limited basis.

What had been marketed as "Take 6 Free" is now back down to a choice of a maximum of five amenities, including a "free" beverage package, dining package, shore excursions credit, an Internet credit and a "friends and family" rate on third or fourth bookings in a cabin on selected sailings.

At one point, prepaid gratuities had been one of the choices, but Norwegian dropped that. In response to a question, Stuart affirmed there are no plans to bring it back. "It's just really, really expensive. There's some things we just can't do," he said. 

Stuart agreed with an agent who commented that the value-add promotions had become so rich, particularly when free air was added to the mix, that they overshadowed Norwegian's benefits that were offered in affinity group sales programs.

"We understand it's been a bit bumpy," Stuart said. Norwegian is finalizing a new affinity group program that should address that issue, he said.


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