While you were sleepingJune 12th, 2010 . by John Frenaye
Very quietly in the middle of the night, two things happened that can have a decided impact on your bottom line. Well, OK, maybe it wasn’t the middle of the night, but if you were not paying attention, you may have missed it—and it was a biggie. Carnival Cruise Lines took a little more cash from your pocket, while Viking River Cruises added a lot more to it!
Beginning on Monday, Carnival Cruise Lines will be calculating tour conductors a little differently. Instead of offering a tour berth based on the category of the greatest number of cabins sold; they are now basing it on the average price paid per passenger. Of course with their announcement came an example of how this policy would make money for agents. But rather than take their made up numbers, why not plug in some numbers from actual groups and see how you come out. I tried it on three and decided I had a better shot at winning in their casino. Once again, here is a conglomerate, making billions of dollars and rewarding their shareholders (as they should), yet instituting an incredibly unfriendly policy towards their number one channel of distribution.
On the other hand, Viking Cruise Lines has decided to pay their travel agents commission on 100% of the cost of a cruise. Torstein Hagen, chairman of Viking Cruise Lines simply said, “Say hello to more profits and goodbye to NCFs. Our partners will be paid for everything they sell.” Bravo to Viking! Here is a small company who can see the value of their primary distribution channel and has made an adjustment in their policy to reward the efforts. Sure this will impact their bottom line, but I imagine they will make up for it with increased sales. While it seems that suppliers in the industry toss around the term “partner”, very few seem to mean it.
The unfortunate part of this is that Viking River Cruise Lines is a relatively small niche player in the cruise industry and Carnival is not. Cruise lines have never explained exactly what constitutes a non-commissionable fee (NCF) other than to say it is part of the price upon which they will not pay commission. Most travel professionals believe it to be a method to offer “too good to be true” fares, and reclaim some of the commission paid to their distribution channel. Perhaps someday, the US Government will intervene with cruise pricing as they are finally doing with airline pricing now. Hey, we can dream can’t we?
Here on TRO, Roger Block, of Travel Leaders has called for the cruise lines to rely on the agency community to pull them through the tough times by paying their agents on the full price of the product sold. We have echoed this sentiment as have most every consortium, host and travel franchise in the industry.
While Viking River Cruise Lines is a niche product, the products offered by Carnival, Royal Caribbean, and NCL are homogenous. Aside from the individual “never before at sea” features, the products are strikingly similar. The ships are built by the same shipyards, the crews are typically of the same nationalities, the ports of call are essentially identical. The only thing that sets them apart is the name of the ship and the company managing it. Carnival Cruise Lines is the grand daddy of cruising and their recent changes seem to indicate a strong shift toward direct to consumer booking. I wonder what would happen if a progressive major line that is not afraid to take a chance (does anyone remember when Royal Caribbean and NCL decided to terminate their relationship with Your Travel Biz/TYB?) would perhaps make a temporary revision to their policy and pay their number one distribution channel on the full cost of the cruise. Do you think there might be a market shift since the products are so similar? I do! So how about it Vicki and Andy? Are you game?
PS: And lest anyone feel too sorry for the “poor” cruise lines, Steve Wynn’s new yacht , (a hand me down from Sheri Arison) Aquarius, was in town this week. She is 211 feet and was recently sold to Wynn for $103 million.