Royal Caribbean Cruises last week said it
would no longer accept bookings from "card mills," or multilevel
marketers that sell travel agent benefits to nonprofessionals.
Cruise Editor Johanna Jainchill talked with Lisa Bauer, Royal
Caribbean International's senior vice president of sales, about the
new policy.
Q:
Who are these companies?
A:
I can't tell you. But I can tell you that they are three of the
most egregious and largest, and the ones everyone's familiar
with.
Q:
How did you inform them of this?
A:
They received letters from Dondra [Ritzenthaler, senior vice
president of sales for Celebrity and Azamara] and me, and we also
personally called to tell them we were exercising our 30-day out
clause from our existing contract and that we were terminating the
relationship. And we terminated the relationships basically without
cause, so we really didn't have to say specifically why.
Q:
Will this hurt earnings?
A:
I don't believe so because the agencies out there are so supportive
of what we've done for taking a stand. We're trying to create a
healthy distribution system and help the credibility of the
accredited and certified travel agents out there. So I really
believe our brands will get more support as a result of
this.
Q:
What was going on that led you to do this?
A:
Philosophically, we totally disagree with the business model. We
don't think it's aligned with any of our policies, especially when
you look at the level playing field.
Some of us have
been in situations where we've actually heard pitches of, "For $495
you can be a travel agent or get the benefits." And the sheer size
and volume of it ... it's gone through such explosive growth. It's
just everywhere.
Q:
How do you enforce this?
A:
They were advised that with the 30-day out clause, they are on
no-book status with us. We will not accept any new bookings from
those three accounts. Whenever any of them tries to call in, we
will not accept that booking.
Q:
What's to stop a company from re-incorporating with another name
and continuing to work with you?
A:
The reality is that people have to be registered to do business
with us. In order for somebody to earn commission or have a profile
with our brands, they must have a valid business license or
business certificate from their state and a CLIA, IATAN or ARC
number. They have to provide us with their letterhead or Web site
and a W-9 from their agency.
What we see with
the card mills is none of them is independently registered with us.
We have such sophisticated revenue reporting systems that we can
see where the revenue is coming from. If someone says they have
over 100,000 agents, we can see what their revenue is, and it can
be as low as $40 or $50 per location. That's hardly a legitimate
agent who on an annual basis would only produce $40.
Q:
How was doing business with card mills costly for your
brands?
A:
The business was not going to legitimate travel agents. It was
going to consumers who were paying $495 to be part of "travel like
a travel agent," and then they were sailing on our brands and
getting 15% or 16% discounts because they were getting the
commission as a travel agent. And that's against our guiding
principle of no-discount pricing.
Q:
What was the reaction of those companies when you told
them?
A:
It was a difficult conversation. Those conversations are always
difficult when you're ending a business relationship.
To
contact reporter Johanna Jainchill, send e-mail to [email protected].