Royal Caribbean Cruises will no longer be doing business with "card mills."

In a move that touched off immediate, widespread accolades from industry trade groups, other travel suppliers and travel agents, RCCL last week informed giant YTB Travel Network and two other firms that RCCL's three cruise lines were terminating business relationships with them and with all other firms the cruise line referred to as "card mills."

Card mills are generally defined as host agencies that sell ordinary consumers access to benefits designed for travel agents.

RCCL revealed its new policy in a letter to travel agents stating that Royal Caribbean International, Celebrity Cruises and Azamara Cruises were all taking action against these types of companies "in an effort to prevent a growing and troubling trend within the travel industry."

RCCL would not publicly name the companies with which it had terminated its relationship, but Kim Sorensen, CEO of YTB, confirmed that he had learned on Oct. 8 that Royal Caribbean was terminating its relationship with YTB as of Nov. 9.

Sorensen said that he would ask to meet with RCCL in the hopes of reversing the decision before it takes effect.

He said RCCL didn't take "enough of a look at our business, and we want the opportunity to show them that."

Lisa Bauer, senior vice president of sales for Royal Caribbean International, would not confirm that its policy specifically targeted YTB or similar firms, but she said in an interview that RCCL had notified three companies and that they were "the most egregious and the largest and the ones everyone's very familiar with."

The RCCL letter said the targeted companies "offer normal consumers the ability to become a 'travel agent' or 'travel agency' or receive 'travel agent credentials' with little or no professional training or certification."

Bauer and Dondra Ritzenthaler, senior vice president of sales for Celebrity and Azamara, both signed the letter and sent it to travel agents on Oct. 9. Bauer said she was immediately inundated by e-mail from travel agents applauding the decision.

Bauer anticipates that any loss of revenue RCCL experiences from the canceled business relationships will be made up for in additional market share that agents give RCCL because of the decision.

"I believe our brands will get more support as a result of this," she said, adding that the three businesses did not represent a sizable percentage of RCCL's business and that the card mill model hurts the cruise company. 

YTB, which reported $226 million in 2006 sales, earning it the No. 35 spot on Travel Weekly's Power List, said it had booked $13 million in cruises with Royal Caribbean so far this year.

Many agents told Travel Weekly that they commended RCCL's decision (see box below, for additional comments).

"I applaud Lisa Bauer for her actions," said Pam Vermons of Glendora Travel Service & Cruise in Glendora, Calif. "All I can say is, it's about time, and I hope they stick to their decision and enforce it."

Bauer said that besides the three firms it was now terminating, it will continue to look at the issue and at other alleged "card mills." These retailers are often identifiable, Bauer said, by having a large agent membership with low per-agent returns.

"If someone has lots of agents but the revenue per location is really small, it does cause you to wonder what the business model really is," she said.

RCCL said in the letter that there was a host of negative consequences of the card-mill business: Consumer experiences with untrained agents tainted their encounters, the business reputations of accredited and certified travel agents were being undermined, the costs of Royal Caribbean's operations had increased by having to provide benefits to people for whom they were not intended and customer services that Royal Caribbean expected a travel agency to provide were not being provided, despite the payment of a full commission.

Bauer said that RCCL could enforce the decision because it could identify any host agency for which a travel agent works. She said that agents must have a state business license and either a CLIA, IATAN or ARC number, in addition to a letterhead or Web site and W-9 from their agency.

Bob Sharak, CLIA's executive vice president for marketing and distribution, said that to obtain a CLIA ID card, an agent must be affiliated with an active CLIA member agency and that the agency owner or manager must approve the application for the particular agent. The agent must also complete mandatory CLIA training.    

YTB's concept

Though YTB is a "networking company," Sorensen he said it puts "major emphasis on the travel side. ...We want to legitimize the concept with our production."

On the other hand, he said, YTB makes no pretense of competing with "high-touch, high-service" travel agents. It is after the consumer who is comfortable booking on the Internet. He denied being a card mill, asserting that the travel emphasis was what differentiates YTB from card mills, which are merely networking businesses.

He also said that YTB did not sell access to travel discounts meant for the trade and that YTB issued an entry-level ID card that looks nothing like the IATAN card and was meant for use at time of booking, not for obtaining travel benefits.

YTB has an arrangement with major suppliers, including Royal Caribbean, whereby YTB screens its outside agents (called referring travel agents, or RTAs) for their productivity before allowing them to take a supplier's fam or other offer meant for selling agents. He added that he assumed most suppliers did not accept the YTB card as justification for trade benefits. "I don't know how to deal with that if suppliers do accept it," he said.

Petition drive

Sorensen said that RCCL's "senior management may have succumbed to the petition out there," a reference to a petition drive that has attracted hundreds of signatures from agents urging suppliers to either not support multilevel marketing businesses or to differentiate between them and traditional agencies. (See also: "Agent's crusade against travel MLMs finds backers on Web.") 

Bauer denied having been influenced by the petition, saying she had not seen it.

"It was completely our own internal decision," she said. "The [card mills] were causing disruptions. Some of our advisory board members were saying it really is commoditizing the industry." 

RCCL's decision has put other cruise and travel companies on the spot, since many travel agents expressed the hope that they would follow its lead. As of press time, no other cruise line had made any official statement about its own dealings with so-called card mills.

Vicki Freed, Carnival Cruise Line's senior vice president of sales, said that her line has always had a "strict policy in place" denying travel agent benefits to card mills.

"Since these folks are so large in numbers, it was always difficult for us to determine who were the real producers in the group," she said. "We took that no-benefits approach early on, so this has not been a problem for us. Many of their agents sail but at normal Carnival consumer rates. Simply put, they are denied travel agent benefits." 

Norwegian Cruise Line did not respond to requests for comment.

Kevin Froemming, president of Unique Vacations, worldwide representative for Sandals and Beaches, said that Sandals does not work with agents who do not invest in travel industry education.

"It is a clear distinction that we made long ago," he said. "Anyone who does not have a relationship with their customers and is not promoting brands runs the risk of being cut out of the marketing equation."

Enterprise spokeswoman Laura Bryant said, "At Enterprise, National and Alamo, we require only a valid IATA or CLIA card that must be presented at the time of rental for an agency-industry car rental discount. An invalid or suspicious card would not be accepted for a discount and would be reported through our security processes."

To contact the reporters who wrote this article, send e-mail to Johanna Jainchill at [email protected] or Nadine Godwin at [email protected].

Gay Nagle Myers, Dan Luzadder and Michael Milligan contributed to this report.      

 

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