Independent agents announced today they were joining forces to drive business away from a number of the largest cruise companies following cuts in their commission rates.
The move followed last week's announcement by Royal Caribbean that it will cut agents' base commission from 15% to 10% from January 1. Last year, Complete Cruise Solution, which owns P&O Cruises, Cunard and Princess Cruises, slashed commission to just 5%.
Advantage Travel Centres and The Travel Network Group, which together account for around £350m worth of cruise sales, are now advising their combined network of more than 1,500 member agencies to sell alternative cruise lines instead.
Gary Lewis, The Travel Network Group managing director, said: "We have now discussed this issue in great depth with our members and with Advantage Travel Centres and we are all deeply dissatisfied with moves by certain companies to reduce commission.
"Our strategy is, and has always been, to work with operators who help our members satisfy the needs of their customers, and who at the same time support the trade and our members commercially.
"There are a number of great quality cruise lines providing fantastic cruise product to us as a group and therefore, with immediate effect, we will be looking to strengthen our relationships with those cruise operators who are more supportive of our members and the trade.
"This will inevitably lead to a reduction of business going through those suppliers that are not supportive of this strategy."
However, agents suffered a further blow today when Norwegian Cruise Line announced that from January 1 it will move to a 10% base rate from a variable rate of 12% to 15%. Francis Riley, VP and general manager international said the revised business model had been devised following discussions with trade partners in an attempt to end discounting.
"Moving to 10% and putting in place policies to police the rebating will help attract new travel agents to the market who have in the past felt they were unable to compete with the big discounters," he said.
Advantage leisure director Julia Lo Bue-Said said the two consortia would be encouraging agents to switch-sell away from cruise lines that offer the lowest earnings potential. "If a customer requests a particular ship, the agent will make that sale, but good agents can use their product knowledge and business acumen to recommend alternatives that are right for the customer but also right for them as a business.
"There is always an opportunity to switch sell, providing it works for the customer."
Bue-Said said that where Advantage had advised members to switch-sell following commission cuts by other operators, it had resulted in a "significant" shift of business away from the principle.
It took a similar stance with TUI several years ago when it reduced commission. "Eventually they came back to the table and now we are working with them in a more productive manner," she said.
She said principles should also bear in mind that agents' commissions were being eroded by the growth of non-commissionable sales. "Seven years ago they earned commission on every component of the holiday, but now there's a whole stream of add-ons from air passenger duty to premium flights for which agents don't get paid.
"These non-commissionables can account for at least 2% of the holiday price but agents don't earn anything from them. Operators need to consider this factor when looking at commission payments."
By Linsey McNeill
Wednesday, October 24, 2012