Carnival UK sweetens commission cut by ditching direct discount

Complete Cruise Solution is to ditch its 5% online discount and add credit card charges for direct sales under a raft of plans to shake up its commercial terms for travel agents.

The trade sales operation for P&O Cruises, Cunard and Princess Cruises said these moves showed that its reduction of base commission to 5%, as revealed on on Tuesday, was not about competing with agents to drive sales direct.

In an exclusive interview with Travel Weekly this week, Giles Hawke, sales director of Carnival UK, said the aim of the new remuneration deal was to regain control of pricing.

The shake-up of commercial terms will end the volume-based commission structure under which agents could earn anything between 10% and 15%. Instead, all will be put on a 5% flat rate.

Hawke said: “Hopefully, agents will see that by removing our online discount and introducing credit card fees, this is not about going direct.

“We are not going to compete with our travel agent partners. We are not trying to get in a position where booking direct with us is better in terms of price.”

CCS believes the changes will put an end to the rampant discount culture in the industry that sees many agents give away much of their commission by competing for business against each other. CCS already offers a basic 5% for late sales.

The change means that for all cruises sold from the 2012 programme and beyond, the operator itself will advertise with a discount that would previously have been offered by agents.

Hawke said: “This creates clarity for consumers. It means all agents will be able to offer the same holiday at the same price.

“Because we are putting the discount in, we will be going out with the lower level of 5% commission effective from launch of the 2012 programme for all 2012 product and beyond.”

Hawke said CCS might come out with other tactical offers during the ‘sales cycle’ to act as a spur, but he said there would always be some form of discount to make the offer attractive.

TWnewsmakerVideo: Carnival UK chief executive David Dingle talks exclusively about commission cuts on TWnewsmaker, in association with Qatar Airways

Another key change intended to prevent discounting is an end to large volume-based overrides for agents that achieve or surpass targets.

It is rumoured that some large cruise retailers have become too dependent on overrides because they discount away most of their earnings, leaving them constantly chasing volume.

Hawke said this change would help agents have a “much more predictable” business model and would benefit those with the best product knowledge and customer service.

“The differential that agents have complained about for years between very big and very small players is not going to exist in the future,” he said.

“The approach here, very much, is that those agents who have got a good route to market, good databases, good marketing skills – and a lot of those will be the big agents – will still do just as well in our new world as they are now.”

Hawke said substantial co-operative marketing money would still be available to partners prepared to invest in their cruise businesses. He added: “We will continue to work with good, strong agents who are profitable, and we will be aiming to ensure that prices are more attractive to everybody and to invest in marketing overall.”

CCS believes its new way of working with the trade will not only ensure its products are sold in a way that reflects the quality and value for money they offer, but that lower basic commission could actually prompt more agents to move into cruise.

Hawke said: “This should mean that consumers have much less need for shopping around, because the price will be the price.

“This means agents can be much more effective in their marketing and call centres because they won’t have people constantly phoning to compare quotes.

“Consumers will learn that shopping around will not save them hundreds of pounds. Agents will be able to focus on consumer retention and marketing activity. It should ensure agents have a much more predictable model.

“We think the opportunity is there for more agents to sell our cruises and to sell them profitably and for existing big agents to continue to sell them profitably. Opportunities exist for both groups.

“We would like them to support us and we want to support them. There is going to be some change and uncertainty, but we think this approach will work well for those agents who want to work with us.

“For those who do not, they have a choice. I cannot and would not dream of forcing an agent to work with us if it does not work for them.

“The commission is what the commission is, and agents will decide whether it works for their business model or not.”

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