Maximizing the distribution channel
This is the year to take partnering to another level as suppliers and their distribution channel promote travel and tourism. Both groups need to market supplier products like they’ve never marketed before…because quite frankly, their livelihood depends upon it…to stimulate traffic with price points that get the telephone to ring.
The suppliers have the product and the distribution channel has the sales skills to close the sale! The travel agency channel continues to provide two significant benefits to the suppliers they represent: (1) first and foremost, the consumer has recognized the travel agent as the ‘most trusted’ channel from whom to purchase leisure travel, and (2) they know how to up-sell to produce a revenue premium while at the same time providing the consumer with a ‘valued’ vacation experience.
In the spirit of partnering, I want to recognize Richard Fain and Micky Arison for taking a stand on behalf of their valued distribution channel when challenged by Wall Street. As Micky Arison stated: “…times like this, more than ever we need a strong distribution system, and we need folks out there selling the cruise concepts….The reality is that we will support that distribution as long as I’m CEO of this company” When pressed on the same topic, Richard Fain remarked: “Our challenge is to educate the public on that value and reach out to those who haven’t yet experienced all that cruising offers….the key will be in the success of our travel partners in disseminating that message….”
The distribution channel could not really ask for more forceful support… and for that we are all appreciative.
Many individuals in our industry have voiced their concerns over cruise lines’ NCFs and the need to ensure that the distribution channel is fairly compensated for their efforts. It is vital for the cruise industry and their distribution channel to weather our current economic situation and ensure it continues to be a vibrant channel to sell those 36 new ships and 77,000 new berths that are scheduled to come onto the market….at a revenue premium.
Due to the current economic situation, I believe at this moment in time, we should expand our resources to go a step further…to everyone’s benefit. From all indications, not only are cruise yields down and booking windows shorter, but onboard revenues are also suffering. At this moment in time, the cruise lines should ‘activate’ their distribution channel to aggressively sell onboard revenue products and make it commissionable back to dollar one above a certain threshold:
- The agents are already selling their clients on cruising, why not increase advanced sales for onboard revenue products. Get the money in-hand, in advance…and have your distribution channel actively selling it.
- Establish a threshold per agency for on-board revenues that is above and beyond the average on-board revenue historically produced by the cruise lines, per cruise passenger. Incent the agent with commissions back to dollar one for exceeding that level.
- The cruise lines are probably thinking: “If we do this, we won’t be able to turn back the clock down the road.” I’m not so sure. These are unique times. Put the policy in place for 2009/2010. It is intended to generate increased on-board revenue which is good for the suppliers; and generate additional income for the agent by rewarding those who sell above the norm. Leave it at that, recognizing the immediacy of today’s situation.
- For 2011, evaluate the program. If it’s of value it will continue; if it isn’t, it won’t…or, it might only continue for a select numbers of agents who generate a strong ROI. If it is rolled back, there will be much debate and discord in some sectors….but I believe it’s worth the repercussions to address the immediate situation…while actually testing the validity of such a program.
The industry is sincerely appreciative of the stand both Micky Arison and Richard Fain have taken. We are in a unique moment in time, and I feel we can partner in a more significant way to the benefit of both the supplier and the distributor.
I’d like to leave you with some quotes I read from an article in the USA Today about the demise of Circuit City. The title was: ‘Circuit City’s death traced back to Layoffs’. The article stated “…most experts point to the chain’s 2007 layoff of thousands of its highest-paid – and most experienced – sales clerks as the start of the rapid descent…. Circuit City miscalculated when they decided that price was the ultimate factor in customers’ choice of electronics retailers… As a result, they suffered immensely…” The article went onto say, “Despite growing comfort levels with online shopping…most people still want to physically see big-ticket items in person before buying them…”
The cruise industry (as do the tour operators) ‘gets’ the value of a knowledgeable, experienced distribution channel for the sale of a very complex and big-ticket item. They walk a very fine line between addressing the cost of distribution with Wall Street and the consumers’ desire for consultative sales for these big-ticket items. The cruise lines’ objective needs to ensure this vibrant, knowledgeable channel is maintained for years to come. I feel the partnership can go even further than it is today to the benefit of all those involved.
There is little doubt we will weather this current storm….as partners working together.
Steven Tracas is the President and Chief Executive Officer (CEO) of Vacation.com – North America’s Largest Vacation Selling Network – with 5,100 agency locations throughout North America.