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Hey, I need to make a living too

Last week, Les-Lee Roland’s column sparked a lot of comments. Usually, Les-Lee has a well formed opinion but this time she wasn’t so sure. The issue surrounded the lowering of an agency commission when a cruise line re-prices a cruise. Certainly it is to the consumer’s benefit; but the agent has already done the work to earn the commission and now the cruise line is adding more work and taking more money away. Les-Lee wrote:

An agent has complained to RCL about the commissions she is losing when a rate is lowered for her already booked clients. Sure RCL is honoring the new rates. If the sailing is imminent, the clients are getting the difference in a shipboard credit. The agent is upset because her bottom line is affected.

This is indeed a tricky situation. As I read the column and the comments that followed I had to chuckle at the irony. Several months ago, I spoke with a senior cruise line executive and we discussed the nasty habit of agents taking the path of least resistance. This executive could not understand the concept of price watching and adjusting prices to appease the client.

But don’t we now have the same situation? The cruise lines need to make money and be profitable as does any business. And, as with most businesses, you can make money on quality or quantity. So, when a cruise line drops the price, aren’t they really taking the path of least resistance themselves? There certainly are other ways to earn a profit. They could increase the price of shore excursions, or increase those clandestine NCFs we all hate, or they could add more amenities that demand a higher price. But the easiest thing to do when your sailing is not making enough money is to drop the price and hope it fills up with people. Does anyone else see any parallels with the “oh so profitable” airline industry? Here is some unsolicited advice to the cruise industry—don’t follow them!

There is not a real easy solution. As I said last week, we are likely to be operating in a “new normal” environment for a long time. Clients will not only expect the lowest price, but for you to monitor it for lower prices. If you are not going to be compensated by the cruise line for your efforts, it logically needs to come from the client. I have heard of several agencies that do not monitor pricing, but for a $100 fee, they offer a “concierge” service that does include monitoring. Perhaps that is a sensible way to insure yor bottom line is not eroded.

But in the interest of keeping things simple, the best solution is for the cruise lines to protect the commissions at the rate it was initially sold. All vendors like to tout the “partner” line with their agents, but few truly are. Maybe it is time for one to step to the front of the line and truly partner with the agencies that sell and market their product.  Who’s first?

  17 thoughts on “Hey, I need to make a living too

  1. Laura says:

    I can’t sit back and monitor cruise pricing, continually adjust pricing so that I can make less and less on a cruise. I just don’t sell cruises any more unless the client holds a gun to my head and insists they want nothing else.
    I don’t know where the cruise lines are going with all this. It seems as though they are slowly but surely pushing agents out of the mix.

  2. Tim Richmond says:

    Who do we work for the cruise line or our client? This is the dilemma we continue to face as long as your sole compensation is tied to selling a product and you want to provide service also.

    Isn’t monitoring for price fluctuations part of the service agents provide? Isn’t that part of the value we talk about so much.

    Seller or service – We have to pick one, because as we are seeing you cannot do both effectively and meet the needs of all involved.

  3. Les-Lee Roland says:

    I’m glad that this question initiated a dialogue. I did not offer my opinion- yet (except to the agent who asked me to give it a Thumbs Down).

    I hope more comments are written, because I have taken this problem to the cruiseline and more discussion is needed, and welcomed.

    John, your comment about the consierge service monitoring the rates, ie , charging a service fee is just a repeat of what the airlines forced agents into.

    I was around when air commissions were lowered from 10% to 8% . When agents started charging fees, the commissions dwindled down to 5% and then zero. Now the airlines are charging their own service fees.

    I also was around when Princess used to protect the commissions from day one. And over 50% of the rates did come down, but my commission retained the original cost.

    Agents do the work, they should earn the fair amount. The cruise line operates on volume, so one booking, or even six bookings, or 12 bookings, doesn’t make a difference to them. But it does make a difference to the agent.

    Keep comments coming.

  4. John Frenaye says:

    Les-Lee– I too was around in the old days when we earned 10% uncapped commission and had to deal with three offices with a lot of corporate international that really hurt us.

    I am curious why you think a concierge service for leisure bookings is akin to the airlines eliminating commissions. I do feel we will be in a commissionless environment soon, so in order to make a profit, we will have to do it via a fee or some other euphemism.

  5. Les-Lee says:

    My thought on it is when a supplier – like the airlines did- see agents charging a fee, they then feel they can decrease our earnings even more. They figure we will make it up on fees.

    A consierge fee may work for some clients. I have lots of clients who are computer savy and constantly check the rates to see if they can find it lower than I offered.

    Today- 2 couples- both past passengers called to tell me that the Xmas cruises I had booked for them are now offered for less on the internet. They want an adjustment.

    Another called to say that even though her 3 Princess cabins, each had $250 shipboard credit, she wanted the coupon books offered on an intenet company’s site. They were not offering the SBC, but she felt cheated if she didn’t get the coupon books.

    My invoices state that “if after deposit is made on a cruise or tour, the supplier lowers the rate, our office will negotiate to get the lower rate.”

    I’m looking forward to more responses from agents.

    Sorry to repeat it, but I didn’t want to sway anybody to one side or another, I wanted to be neutral and hear how agents felt.

  6. Mindy says:

    I have been providing this service to my clients but only until final payment has been made. After that, many cruise lines pay commissions quite quickly and, if the price comes down, commission recalls will be issued. That just adds a back office nightmare. After final payment, the cruise line is not lowering the cruise fare but, instead offering an on board credit. What % of that credit to they truly anticipate refunding? They will get their money one way or another. I feel if the prices come down after final payment and the client is getting OBC instead of a reduction in price, the commission should be protected.

  7. Random questions & thoughts:

    Who do you work for? The cruise lines? Your clients? There’s no right or wrong answer, except, “both.”

    Sound business models require that your compensation be tied to the value your work generates.

    Do you provide value to the cruise line when their past passenger marketing and associated loyalty programs sell cabins at a higher yield with lower churn?

    Do you provide value to your clients when you provide comparative analyzes of their leisure travel options, generate three-year travel plans based on their stated desires and major life milestones, and make sure they have a bespoke experience that gives them better stories to share when they return home?

    One of the characteristics of a commodity is that its price is determined as a function of its market because it is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it. Airline seats became a commodity. Are cruise cabins, ports, shore excursions, shipboard experiences truly different within price categories (mass, premium, luxury)?

    Do online travel agencies (OTAs) deal with commodities more efficiently than professional travel advisors? Does e*Trade appeal to DIY stock traders? Do wealth management advisors continue to prosper?

    Can OTAs provide bespoke leisure travel experiences based on first-hand knowledge, personal relationships and expertise with ports, shops, restaurants, events, cultures, and more?

    Are you a reservation-taker for cruise lines or an experience-maker for your clients? Each activity generates value: one is compensated on a sliding scale as a percentage of the net tariff and the other is based on the perceived value of advice, assurances, and guidance.

    If you are or want to become a professional travel advisor, what is your tangible product? What do you give your clients to touch & feel and demonstrate the value you offer? What does your financial planner or tax preparer give you? How is it presented?

    The product of a reservation is a confirmation number. The product of a consultation is a report, a proposal, an idea book, a guide book, a memory book.

    What are you selling?

  8. I have a group of 84 that I’m “escorting” on an RCCL ship on October 9th. Had I NOT monitored the rates and taken the hit on the price reductions, I wouldn’t have this group. Period.
    People are so computer/internet savvy, and they know what I SHOULD be offering. The amenities just don’t make up for the much higher rates I was quoted when I originally booked the cruise. Ex: 5-nights San Diego-Mexico cruise on Radiance. Cat E Balcony originally booked for $809 per person total cost. Cost by the time final payment rolled around? $477 total pp. Only $40 more pp than an INSIDE CABIN.

    So, if it’s between let the group go, or let the group GO, I choose GO! A $5,000 + commission is not a small fish to this agency!

  9. The whole partnership is already ruined the minute you provide the cruiseline with your passengers name and they then swipe your clients for their own Direct Marketing purposes – actually arguing with you that you are INCOMPETENT and don’t know how to sell !!
    On Celebrity the Royal and Celebrity Suites on ships like Solstice and Equinox are now being sold directly – first and foremost – to the same Captain Circle members YOU created over all teh years of putting them on their ships !!!.
    The success of Solstice and Equinox is based on all the Travelagents sailing on the overnite Inaugurals , putting their clients on the ships – but now – watch out – you may never get them back – your Client Base is used against you !
    To add insult to injury – you willl now be asked to sell the junk they can’t get rid of in their Flash Specials – distressed inventory – so you get get a booby price of a T-shirt!

  10. Ina’s comments hit so close to home its not even funny. We escort a group on 11/29 and the cost has been going down steadily for a Mexican Rivier cruise. The balcony rate is now less than the insiide cabin lead price we had! And this was a fundraiser cruise! What a joke as we are making $55 each on a 7-day cruise.
    When we asked about upgrading our lead balcony cabins for better one’s so they can give
    ‘X’ guarantees to the bargain hunters. Even though that would have been a PR coup for the cruise line and our office, we were met with a ‘huh’ and suddenly no one was getting our messages! Do those ivory tower execs have an idea what itakes to book passengers six months ahead of a cruise now a days? While I would be the first to admit yield management ignorance, there has to be a better way. The people who buy the $474 balcony cabins are NOT going to spend on board. I know that as we were on with another group in March where some members were proud to have spent a $100 all week! So, Mr. and Ms. Cruise Executives, getting bodies on board with cheap rates will not help the bottom line. Only serves to cheapen your product. And make us look unprofessional, which may or may not be the intent.

  11. Susan says:

    Met with our Carnival BDM today … 35% of Carnival’s business is now coming from their Early Saver Rates which includes that repugnant nonrefundable deposit (at least RCI and Celebrity don’t have nonrefundable deposits).

    She admitted Early Saver was a result of passengers booking too close in these days (averaging 60 days at this point), because they’ve come to believe if they wait until the “last minute” they’ll get lower prices. The cruise lines desparately want people booking and depositing further out. The “close in” bookings are killing them. Of course they created this scenario by lower prices to sell what someone referred to as “destressed inventory.” Now they’re looking for a way to reverse the trend….

    I have two major fundraising groups that I’m going to start promoting in the coming weeks, and they don’t sail until Fall 2010. It’ll be an uphill battle to convince people the amenities are worth the chance prices may drop later (and probably not be combinable with groups). This particular cruise line has NOT declared a price guarantee program/rate of any kind, so it’ll be interesting to see how this ultimately plays out.

  12. Charles says:

    I love the title of this article – Hey, I need to make a living too. That’s right you do or at least you would think so – which brings us back compensation. We don’t need to here any more mumbo jumbo about whom we’re working for. The facts are that the Travel Agent distribution system has made many cruise line families, executives, ship yards, suppliers and stock holders very wealthy. In fact, I just read a report issued once again by Carnival Corp boasting on how many Billions they recently netted – all while in a downturn economy. So don’t worry about the cruise lines. They’ve already taken a lesson from the airlines and cut the travel agent’s commissions in several devious ways. And the consumer has made out like bandits too. They very idea of agents struggling with clients and suppliers over worthless onboard coupon books – Give me a break. Travel Agents are being used and abused by both the clients and suppliers. And the massive amount of competition and unfair pricing practices makes things even worse. You can move home all you want, but you still can’t get a Harvard degree in travel. You can however in ruthless corporate management. I know this all sounds very negative but it is reality, and there is nothing you can do about it because there are agents that will work for nothing! And both the consumers and suppliers know it!

  13. Sandy says:

    I still have the Calendar Delta sent out to our travel agency – pre 0% commission – which included 1 cartoon per month saying how important their “TRAVEL PARTNERS” were to them. Before that calendar year was over, we were getting nothing. So BEWARE of those who want to claim you as a ‘PARTNER”. So if no one wants to pay us and the pool of people going into the industry has shrunk to a puddle, who is going to book all these clients who want a leisure experience. Are the cruise lines changing the experience, as well, to copy the airlines – booking fee if you call them, fee for food, fee for seats, fee to breath? So cruise lines – fee for a dining seat, fee for a show, fee for a dip in the pool, fee to watch someone fold a towel?

    A vacation is supposed to be an escape from stress and that starts with their booking experience – with the travel agent. Ask the cruise lines own reservationists how they like dealing with the internet bookers who scan for prices every 15 minutes.

  14. Dillon says:

    Well, my two cents is that a “win-win” would be for the cruise lines to protect a certain portion of the commission. For instance, in Ina’s case the commission likely dropped almost 50%. But if RCI were to protect, say 80%, the agents would be happy, the clients would be happy and RCI is still making more money.

    And yes, clients have gotten used to the “sell it or smell it” pricing. When I took my first cruise in 2003, fares went up about 15% between when I booked and when got our docs three weeks out. Now, unless it’s an incredibly hot sailing, prices ARE going to drop. Even the nonrefundable deposit is easier for some folks to swallow than to pay for a cruise they can no longer afford (like loss of a job, etc). In this case, the cruise line has to sell a cabin real quick (right at the penalty period). So that $1000 a person JS on the Rhapsody becomes an $850 pp. Now, if Carnival takes that $100 deposit and drops the price of the cabin $80, they make money AND pay $12 less in commission.

    WOW, I’m on the wrong side of this business.

  15. Al Magee says:

    When we get a lower price for an existing booking we have started explaining to clients, ‘It is customary to tip for good service’. Example: We saved you $100. A 10% tip of $10 would make up for our lost commission and still leave you with $90 extra dollars. 15 to 20 % tip is the norm now in restaurants and other services and that is just for taking orders and delivering food to your table. It does not compensate us for the extra work we are doing for the client. It is voluntary. Some do, some don’t. It is a bonus to us if we get it. It seems to be well received. Everyone is used to tipping for all kinds of service. We think a client tip is well earned if we are saving them money . BTW, we have few fees. Mostly bounced check fees. We mark them up and usually recover quickly. One lady tipped us $500 on a group of 9 cabins she was paying for her whole family to go. Saved her over $3000. She was very happy with the whole thing and our good service for more than a year. We expect repeat business. People are waking up to the way suppliers rip them off making them do all the work on line or by phone and make the client take all the risk. Their time is valuable. Let us help them.

  16. John Frenaye says:

    Now THAT is an interesting concept!

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