Recently a travel agent asked me about group cruises, and she commented, “I’m sure that it won’t be as lucrative as other travel.” That caught me off guard for a minute. I find that cruise groups, if done with some forethought, can be very lucrative for travel agents. Granted, there are trips you can book that garner four figure commissions without blinking an eye, but they tend to be longer than your typical 7-night cruise (my clients going to Machu Picchu for 15 nights comes to mind). Unless your group cruisers are booking suites, the commissions for the individual rooms may not have commas, but groups can still turn out to be very lucrative business.
I thought I would share some tips on how you can increase your group cruise profits. Keep in mind these are GENERAL tips; your mileage will vary depending on the cruise line you work with and their specific group policies.
Is there a group leader?
This is an important factor. If you are doing a promotional or speculative group, you are the group leader. In this case, you don’t have anyone expecting to earn the tour conductor (TC) credit or other amenities.
If you are doing an affinity group with a designated group leader, then find out their expectations before you even block the space. Are they just looking to “cruise for free,” wanting enough TCs to cover the cost of their room? Are they wanting to earn cash above and beyond the TC credits (i.e. an author or motivational speaker leading a group)? What amenities do they expect for the group, like onboard credit?
Calculating the value of the TC credits
This is one area where cruise line policies will vary. Some cruise lines calculate the value of a TC based on the room category with the most bookings in the group. So if you are working with Royal Caribbean, you have 30 rooms (60 people) in your group space with 11 rooms in category N (interior) and 10 rooms in category JS (junior suite), the value of the TCs is based on the lower (category N) value. If you had 10 rooms in category N, your TCs would still be valued at the lower price (RCI always goes with the lower category when there’s the same number of rooms in multiple categories).
Some cruise lines automatically value the TC at the lowest category booked, even if there’s only one booking in the category. Other cruise lines may average the value of the cruise fares in your group and assign that value to your TC credits.
My rule of thumb is to tell group leaders, regardless of cruise line, that their TC value will be based on the lowest category booked into the group space. It’s important for them to understand that the TC value may be significantly less than what they have booked for their own room. This may incentivize the group leader to encourage their group members to book higher category rooms. That translates to more commission for you, and higher valued TCs for them.
If you quote the lowest category value to the group leader, then what happens if the TC value ends up being higher? You have two options: either give the extra TC value to the group leader as a surprise, or take the difference as bonus commission for yourself.
Another piece of advice: give the group leader any TC credit as a refund after the group sales. This protects you against last minute lost TCs due to cancellations. When you’ve applied TCs to a group leaders room, and lose a TC due to cancellations, it can be difficult to get the group leader to pay for the difference on their room.
NOTE: most cruise lines deduct the value of commission from the TC credit. So if you are looking at a TC credit value of $1,100 and you make 13% commission with the cruise line, the value is really $957. It’s important to build in this expectation with the group leader, or you’ll have to make up the difference in order to give them the full $1,100 credit that they are expecting.
Can you change the TC ratio?
With some cruise lines you can “buy down” the TC ratio with GAP (group amenity points). The standard TC ratio is 1 credit for every 16 people / 8 rooms booked. Sometimes you can reduce that ratio to 14, 12 or 10 passengers (7, 6 or 5 rooms) using some of the GAP (group amenity points). A group of 30 rooms would traditionally earn 3 TC credits (32 rooms would earn that 4th TC). If you buy down the TC ratio to 1 for 10 passengers / 5 rooms, then 30 rooms earns 5 TC credits. You can still give the group leader the 3 TCs they are expecting, and you can keep the additional 2 TC credits for yourself as bonus commission. Remember, the credit is reduced by commission being deducted.
You can also manipulate the value of your TC credits
Back to the scenario where you have 30 rooms in a Royal Caribbean group: Let’s assume 10 inside rooms, 6 ocean views, 4 balconies, and 10 junior suites. With that scenario your TC value will be based on the lower interior category. How can you change that?
Let’s say the inside room cruise fare (before NCF or taxes) is $900 per passenger, the ocean view is $1,100 per passenger, balconies are $1,500 per passenger, and the junior suites are $1,900 per passenger. If your group leader expects the TC value to be equal to the lowest cruise fare, they are expecting $900 per TC.
With a cruise line that bases the TC on which category has the most bookings, here is a trick to increase your TC value: Pick one interior room for a “complimentary upgrade.” You pay the extra $200 per passenger for the cruise fare difference. You now have 9 interior rooms, 7 ocean view, 4 balconies and 10 junior suites. Your TC credits are now valued at the $1,900 junior suite cruise fare, an extra $1,000 per TC credit. If your group leader is only expecting $900 per TC, you have an extra $1,000 per TC bonus commission for yourself. If you reduced the TC ratio with GAP points, and are getting 2 TC credits for yourself, the value of those credits has increased from $900 to $1,900 each. Either way, it’s worth the $400 out of your pocket to put an extra couple thousand dollars back into your pocket.
This will not work with a cruise line that bases the the TC credit solely on the lowest category booked or an average of the room cruise fares.
How to use the GAP (group amenity points) to your favor
This will not apply if your group leader is wanting onboard credit for their group. But not all group leaders are looking for passenger-based amenities. With promotional/speculative groups you don’t have to offer any amenities. Being able to offer lower cruise fares is often incentive enough to book with you.
Where you have flexibility with the GAP, you can use points to reduce that TC ratio or to earn marketing funds (aka bonus commission) for yourself. You have to do some math here (sorry). First figure out how much marketing funds you can get with the GAP points. As an example, with Royal Caribbean 8 GAP is equal to $100 per room in marketing funds, or you reduce the TC ratio to 1 for 10 passengers/5 rooms using 6 points, and use the final 2 points for marketing funds at $25 per room.
But, what if you pay the $400 to upgrade an inside room to an ocean view, then your TC value is $1,900 each. Whether you decreased the TC value or not, this can translate to extra money for you. Even if you give all the TCs to a group leader, if they expect $900 per TC (minus commission), you can bank the extra $1,000 per TC (minus commission and minus the initial $400 you paid for the room upgrade). This really increases your profit if you are getting all of the TCs on a group that does not expect any TCs.
The math can vary from one group to the next, based on how many GAP points you have to work with, how they translate to TC ratios, or marketing funds with each cruise line.
Can you increase the cruise fare?
Most cruise lines allow you to mark up (or “value add) your group cruise fares. You usually have to submit a form for their approval, telling them how much you are adding to the group cruise fare. If you have a group price that’s less than the FIT pricing, you can add a mark up that clients will never see. I currently have group space that is $715 per person less than FIT prices right now. I can do a $100 per person mark up, and clients still save $615 per person. They’re happy, and I’m making an extra $200 per room in addition to my commission.
Some affinity group leaders will want a mark up themselves, for onboard activities they will be hosting (or for their own personal speaking fees). You can still add in your own mark up of $25-$100 per room, based on what the group will tolerate. If your group leader is already marking up cruise fares $250 per person, and that exceeds FIT pricing, you may be hard pressed to add another $100 per passenger for yourself. You might be able to do $25 per passenger, however.
Group cruises are work. But if planned right, they can be a very lucrative business!
Susan Schaefer is the owner of Ships ‘N’ Trips Travel located in Tennessee, and specializes in leisure travel with a focus on group travel and charity fundraisers. Through their division Kick Butt Vacations, she focuses on travel for 18 to 23-year-olds. Susan can be reached by email at email@example.com or by phone at (888) 221-1209.