Analysis: Have Carnival UK’s commission cuts worked?

When the UK’s largest cruise operator announced plans to reduce base rate commission to 5% in February, the move was variously described as arrogant, cynical and a clear two fingers to the trade.

But according to a number of smaller agents and miniples attending a conference at the company’s Southampton headquarters last week, the cuts have achieved what Carnival UK claimed was its aim – cutting out rampant discounting and “levelling the pitch” to regain control of pricing.

Agency gains

Mark Pilkington, head of sales for Complete Cruise Solution, which covers the P&O Cruises, Cunard and Princess Cruises brands, said statistics showed smaller agents were more likely to retain or regain lost customers as a result of the commission restructure.

He said assessment of customers booking through small and medium-sized agencies since 2008 showed a third were retained by the same agency for future bookings, but another third went on to book again with a larger agent which could afford to offer better deals and discounts – often by giving away more commission and relying on volume overrides.

Under the new structure, Pilkington argued that pricing was more consistent and large-scale discounting was a thing of the past, a comment echoed by Travel Angels managing director Peter Grayson.

“We have eight shops in market towns and a loyal client base, but if they were going to get something £100 cheaper by booking with someone else, you could understand why they would do it,” said Grayson.

“Now the pitch has been levelled, and we are seeing many of those customers coming back to us, as they value the personal service and consultation we can offer.”

He added: “Before the changes we were only being left with 5% anyway [after discounting to remain competitive], so we are in line with last year, and now we hope to be able to retain and gain  more customers who won’t be able to get a better deal elsewhere.”

Louise Eakins, general manager of South Wales miniple The Travel House, agreed. She said: “Our cruise business has been improving over the past four years, but it has really started to do well since the commission changes.

“It’s taking a bit of time for customers to realise that they are largely getting the same price everywhere they go, but when they do realise, we are seeing them coming back and we then have to make sure our service ensures we get the booking.”

Tight margins

Despite the generally upbeat tone of the sessions, some agents were unconvinced by the changes.

Alison Jones, from Woods Holidays in Bognor Regis, West Sussex, said the cuts had removed the ability to be flexible and create deals that still allowed for decent margins.

“We are finding it harder to offer customers anything, which makes them wonder what they are gaining from booking with us,” she said. “I can give them all the service in the world, but can’t make any margin. We are still booking, but we are not making any money on it.”

Pilkington argued: “We believe these changes will mean more people who come back will come back to the same agent, and we also believe that as customers realise they are getting the same price everywhere, agents will be able to be more productive and waste far less time giving speculative quotes to people who are clearly just shopping around for the biggest discount.”

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