FEATURE THE DEBATE
Complete Cruise Solution. Cruise lines need to bear in mind that they still only receive 10 per cent of their bookings from direct sales; they need travel agents and can’t afford to get too cocky, as agents will focus where the growth and revenue is."
CAROL MARLOW managing director, P&O Cruises "This will put the
travel trade partners who can sell our brands for the value they offer and make sure they get the right guest on the right ship. I believe agencies whose model is based on price won’t survive long term. "I think the move encouraged smaller agencies in to sell cruise, where previously they couldn’t compete, so it will please agents who want a fairer playing field, but it’s a complex issue and you can’t please everybody. "We will do what is right for our business and our travel partners overall; we look at whether we are commercially competitive but we want our trade partners to continue supporting us, as they are the ones who get in first timers and persuade them to try a cruise. "That said, consumers don’t understand why cruises are more expensive direct from lines than via agents and they then fear we are ripping them off, so this really needs to be addressed. We don’t need this level of discounting so we are looking at how to reduce it while letting travel agents retain sufficiently high earnings to carry on selling cruises."
NIGEL LINGARD UK marketing director, Fred. Olsen Cruise Lines "The level of reset
commission payments was a surprise, as some agents had been producing better margins and not giving such big
discounts. So I suspect CCS have had to soften the deal to some extent, but it’s raised the issue of how to set a sensible commission level. The 15 per cent mark allowed a level of agent discounting, which affected brand integrity and made it impossible to market tactically on price, and nobody could be clear about what the actual price would be. "Britain is a discount-geared economy and it’s hard to break that mindset, so it was good to see the market leader taking the initiative. I think agents know the writing is on the wall; there are behind-the-scenes talks about agency consolidations. "But any restructuring of commission
has to be done cleanly, at the launch of a new programme. With 2012 and some 2011 capacity still being sold, the full impact has not yet hit. I think we may see more developments and other lines make their moves with the launch of their 2013 programmes."
ANDREW GARDNER chairman, Cruise.co.uk
"I think CCS brands will feel the effect of the big
commission cut. Agents might have worn a cut to 10 per cent but five is too low; you simply can’t run a business at five per cent commission rates. It will make it hard for some agents to survive. "Big-hitting agencies are already
agreeing a higher base rate so there are a lot of back-door deals going on, and agents are selling away from
emphasis back on agents’ quality of service and away from endless discounting and fare-matching, which many agents found time consuming and bad for business. Agents can see there’s no need to give money away and this puts pricing responsibility back in our court as we have to make sure we get it right. It also means customers are not faced with such complex choices – they can use their own local agent and still get a good price, while agents can sell on service, imagination and product knowledge rather than having to undercut each other."
PETER SHANKS president, Cunard Line "I think most agents recognised the
commission cut was a sensible move, as discounting was out of control. They are now under less pressure to discount our products, so there is more clarity on prices and more focus on the quality of the cruise product. "We have not seen evidence of cross-
selling but we have a strong brand and loyal guests and have made our offering compelling. We’re also seeing smaller agents start to sell us, as they feel more able now to compete."
ROGER ALLARD chairman All Leisure Group "I understand why
Carnival UK cut commission rates and for most of their brands I don’t think it will affect sales as most clients now know exactly what cruise and cabin grade they want and the departure date they need, so agents are just taking the order. "Where it might have an impact is
on getting bookings from first-timers; Royal Caribbean may gain more of these in the short term but in time other cruise lines may follow Carnival UK’s lead on commission. "Realistically, the industry needs to get its house in order on discounting.
British consumers might look for the lowest price but what they actually need is a good-quality experience. "There are parallels with the aviation industry. Twenty-five years ago people dressed up for a flight but now it’s like going on a bus. Cheap prices just mean more secondary costs onboard – for luggage, coffee, drinks, food and so on – which would be better included in a more realistic upfront price. Passengers don’t like feeling they are
being ripped off, but they will if a cheap ticket price means they can’t enjoy their cruise because everything on board – when they’re a captive audience – costs too much. "It’s better for agents to earn commission by selling not discounting – by promoting the value of cruises and explaining that’s why they cost more upfront. Then higher ticket prices will raise commission earnings anyway, and this will make it easier to maintain cruising’s reputation as a very high quality experience."
JENNY ELLIS head of cruise and commercial, Cruise Thomas Cook
"It’s a bold move but will encourage agents to be creative rather than price- fight. We price match every week and before this very few were not discounting – they had to to compete. "The question now is what do agents
sell on if products are the same price? There’s no margin to add value any more so you have be clever to get people through the door. Generalist agents are going to find it tough, but it won't be impossible if they build a name and reputation and package creatively. Will other lines follow? It's early days so it’s hard to say. Discounting was not as high on their brands, because CCS brands were the biggest volume and best known, and customer expectation of discounts was higher."
LYNN NARRAWAY Md UK business, Carnival Cruise Lines and Holland America Line
"My brands have a different business model so we’ve no plans in the short term to follow the CCS move, but it did improve the discounting situation. "There’s no need to discount; many
of our travel partners are keeping margins healthy with dynamic packaging, thinking imaginatively about add-ons to the cruise product."
• Autumn 2011 15
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