Norwegian Cruise Line's (NCL) plan to do away with noncommissionable fares on sailings booked at least 120 days in advance was hailed by travel advisors as a sign of the line's commitment to the trade.
"This has been something we have been asking for for a long time," said Jackie Friedman, president of the Nexion host agency, who called the move a "game-changer for advisors" and said she hopes it will encourage other lines to follow suit.
NCL said on Nov. 2 that travel advisors who book sailings at least 120 days in advance and have submitted a marketing plan through the company's agent portal, Norwegian Central, by Dec. 31, will be eligible to make commission on the full cruise fare for new reservations made Jan. 1 or later.
Noncommissionable fares, or NCFs, are the portion of a cruise fare on which most cruise lines don't pay commission. They have historically included port charges, government fees, taxes and other fixed, pass-through costs, although NCL did not specify what it typically includes in its NCFs. The fees have at times been a sore spot with the trade, and the move makes Norwegian the first major cruise line to pay travel advisors on NCFs for an extended period.
The new policy only applies to NCL and not its sister brands, Oceania Cruises and Regent Seven Seas Cruises.
While speaking at Travel Weekly's CruiseWorld conference this week, Royal Caribbean Group CEO Jason Liberty was asked whether the company might match NCL's NCF position.
"I think we have and will continue to be very thoughtful about how we compensate and partner with travel agents," Liberty said. "At this point in time, we don't have a position on it, outside that we think that when our travel partners need us, which hopefully most have seen with our RCL Cares program, we've been there for you."
The RCL Cares program, launched during the pandemic, has made interest-free loans available to travel agencies, among other benefits.
As of Wednesday afternoon, Carnival Cruise Line had not commented on the decision and whether they would match it.
Although NCFs have a long history with cruise companies, lines have at times courted the trade by paying commission on NCFs. Celebrity Cruises, for example, a few years ago did a limited-time promotion, offering to pay advisors on NCFs for booking veranda cabins and above. Some newer cruise brands, meanwhile, have decided not to introduce NCFs at all: Viking, Virgin Voyages and Explora Journeys.
Advisors react to NCL's offer
Nexion's Friedman said that the noncommissionable portion of cruise fares has grown to become a higher percentage of the total, sometimes eclipsing the commissionable part of a fare on a lower-priced sailing. It has led some advisors to avoid selling short cruises because the commissions are not always worth the effort.
Norwegian's shift in NCF policy, she added, will be viewed as a commitment and investment in the travel agency distribution channel, something the cruise company's executives also stressed. The move comes shortly after the line's parent company, Norwegian Cruise Line Holdings, forecast that direct bookings would eclipse travel agency bookings in 2023.
"Our decision to pay commission on NCFs is further proof of our commitment to this community," NCL CEO Harry Sommer said in a statement about the new policy. "We want our partners to thrive; we want to see their businesses grow all around the world."
David Crooks, senior vice president of product and operations for World Travel Holdings, called the move "an incredibly huge deal."
"I would describe it as one of the best stories we've heard in a long while," he said, adding that World Travel Holdings looked forward to showing Norwegian how removing NCFs would enhance its support in selling the brand.
Crooks said that NCFs will probably always exist to some extent and that his company has had to navigate how to maximize earnings despite them.
"Our advisors' top priority is making sure our guests are vacationing on the product that best serves their needs," he said. "But when all things are considered equal, they will migrate toward those cruise lines that have no NCFs, such as Viking, Virgin and Explora."
However, Henry Dennis, a leisure travel advisor at Frosch in Charlotte, said that the move was "a nice gesture but still doesn't solve or explain the issue of what is really in an NCF and why they are considered noncomissionable."
Roger Block, Travel Leaders Network's president, meanwhile, called the offer from NCL "a breakthrough move."
"We are thrilled that NCL is recognizing the important role travel advisors play in the success of their business and we are prepared to help our advisors take full advantage of this incredible opportunity," Block added.
TLN plans to share sample marketing plans with members to ensure they qualify for the offer; members will be able to choose from a selection of marketing plans to find one that works best for their business, the network said in a release.
Todd Hamilton, NCL's senior vice president of sales, said this week that the move to provide commissions on NCFs on sailings 120 days out was designed to incentivize advisors and clients to book in advance. He said that not only helps fill ships sooner but that customers who book further out are more likely to book again with the brand, rebook with that travel advisor and provide higher satisfaction scores after their sailing.
Hamilton also said that he has questioned NCFs since becoming vice president of sales in mid-2021, saying they have "always been the third rail of what you can't touch inside the cruise industry, and as an advocate of the travel agent community and the travel partner community, I look at that as something we can do to be a supportive partner."
Hamilton said the marketing plan advisors will have to submit in order to receive commissions on NCFs will include the advisor's marketing activities, budget and timeline.
"We are a marketing company that sells cruises. Every decision we make should have a marketing component to it," he said. "So we want our team to be talking to the travel partners about their marketing, how we can best market ourselves."