The Royal Caribbean Cruises Q4 2008 Earnings Call makes for interesting reading, and serious travel agents should take the time to do so. Firstly, the transcript is an excellent tutorial in the complexities of the cruise business. But the Royal Caribbean call also firmly confirms the importance of the travel industry distribution chain for the cruise lines.
It is difficult to go any further with this article without pointing to the great irony inherent in the executives of Royal Caribbean being critically questioned by the representatives of firms whose own financial acumen is best characterized by the word “bail-out.” Be that as it may, Steven Kent of Goldman Sachs asked “(W)hy isn’t (direct internet booking) more of a focus rather than raising travel agent commissions given the high returns of that (direct booking) strategy?”
Both Adam Goldstein and Richard Fain of Royal Caribbean set the analyst straight:
Goldstein – “(W)e truly believe that we have the best relationship in the business with the trade to produce 80% of our revenue. And maintaining that relationship, fortifying if it were possible in the current difficult circumstances. It’s a very high priority for us. So trying to substantially increase our direct business in this timeframe would run counter to a key priority for our revenue generation efforts.”
Fain – “We honestly believe, we’ve been consistent about this for many years, that what we are getting for those commissioned dollars is well worth the expense. We simply believe, as a matter of dollars and cents, that the travel agent community is good business for us. And that’s why we continue to use that as our absolutely dominant way of obtaining business going forward.”
In a world where you are only as good as your last quarter, those were bold words by the Royal Caribbean executives.
So all is good, right? Hold on – not so fast. You see, travel agents are important right now because they produce 80% of the booking revenue for the cruise lines. However, it is not too much of an exaggeration to indicate that much of the dominance of the travel agency distribution chain is historical accident. If direct bookings continue to make encroachments, the travel agency distribution chain will be proportionately less important.
Too often, agents have acted as though supplier relationships were a one-way street. Suppliers were roundly criticized for any act that appeared to even remotely to threaten the travel agency distribution chain. The agent rhetoric and language used at times sounded angry, even threatening. Yet, in most instances, the cruise lines were doing exactly what they should be doing – acting in the best interests of their shareholders by developing alternative channels of distribution. Plain and simple, that is their mission.
It is now time for agents to do act in their own best interests as well – determine how to best make themselves as important as possible to suppliers and to directly demonstrate that support by increasing their product knowledge, their marketing skill set and by guiding their clients into the suppliers that best demonstrate support for the travel agency distribution system
Don’t get me wrong. Travel Agents need to first represent the interests of their clients. Many clients come with their minds firmly established on a particular supplier, or the client profile strongly suggests one supplier over another. When that is the case, the agent has a moral and ethical responsibility to book with the supplier that best meets the needs of the client. The truth of the matter is, however, most clients do not have sufficient expertise to choose a supplier for themselves. That is, in fact, why they come to an agent. All other things being equal, then, the suppliers that support agents deserve your support. Most travel – tours, cruises and complex itineraries still qualify as the type of “high touch” travel where a travel professional can excel.
Here are the ways you can show support for agent-friendly suppliers:
- Learn their product – attend trade shows, take supplier courses and read everything you can get your hands on about their products. Ask suppliers for training. Become the expert you want to be as a true travel professional.
- Enhance Your marketing skills – Sales do not just “happen”. They are driven by marketing. Study marketing as hard as you study product. Spend as much time thinking ABOUT your business as you do IN your business. Make travel accessible – move market share by focusing on the population of people who do not travel or who do not understand the value of a travel agent and book their own travel.
- Book, and Book Loudly – Let suppliers know why you booked with them. Encourage the cycle of mutual respect by applauding their efforts at great customer service, superior product and support for travel agents, as you book their product.
You might even get a head-start by writing your top 5 suppliers right now. Thank them for their support and ask what you can do to strengthen the relationship in the coming months. Send them a copy of this editorial and pledge your support.
It is the responsibility of travel agents to get this right, to make themselves relevant and to continue their role as the most important distribution channel for suppliers.
The Royal Caribbean Earnings Call sounded more like a Wake-Up Call to me. It’s time for travel agents to get very, very serious about their supplier relationships and support.