Giles Hawke’s article for Travel Weekly last week contained inaccuracies, assumptions and misleading facts that should be addressed.
Carnival UK has every right to operate its business the way is sees fit, but like it or not there has been a significant drift to selling cruises on price and growing the business by discounting.
The travel agency fraternity has suffered from this massive discounting and it has undermined sales by conventional agents.
There is a perception, by agents, that Carnival UK has supported this discounting with specific agents by giving large marketing spend, override deals and extended credit in private whilst publicly denouncing it, or at least paying lip-service to not supporting it.
By doing this Carnival fuelled the discounting war by its very actions to grab more sales. Carnival, having lost money in this way with the demise of Cruise Control in 2005, stated that it would bring stability to the market by reducing commission, which it did early in 2011.
So, good agents were punished again and the symptoms of discounting were tackled rather than the cause. But Carnival had to balance the importance and growth of Thomas Cook and needed high volumes from other sources to avoid the Thomas Cook tail wagging the Carnival dog.
Then July 2011 came and the curse and mistakes of Cruise Control were revisited in the form of Gill’s Cruise Centre.
Now Carnival, to prevent a third debacle, plans to change payment terms and feels it needs to justify the change by blaming agents who were innocent, its woes being all totally self-inflicted.
If Carnival feels it must change it has every right to do so, but to blame the reasons on the agent fraternity is unjust.
Within agency agreements, payment terms are clearly defined and Carnival is at fault if is has not collected money within the terms of that agreement.
Abta’s SPS payments system is good, but only as good as those who operate it using correct procedures. Credit insurance is available, but it is only valid if money is collected within the criteria of the insurance policy.
Carnival is a member of Abta, so in the event of an agent going bust it receives a proportion of pipeline monies. Each Abta agent pays a bond so these pipeline money payments can be made and, ironically, one of the biggest recipients of these payments down the years has been Carnival.
When an agent such as Gill’s goes bust then Abta agents pay for much of the shortfall that Carnival has incurred.
Agents, after the disaster of Cruise Control, have now been subjected to the Gill’s triple whammy: loss of business due to discounting, paying for pipeline monies through bonding and now having a new payment collection process foisted on them.
In addition to the above, suppliers, such as airlines and cruise companies, themselves utilise customer money to fund the core business, taking risks with that money by using it for capital projects. So whatever is laid at the door of the agent is more than applicable to suppliers as well.
Giles claims that the US payments system should be adopted, but I don’t believe it can be. The US market differs tremendously in so many ways from the UK model.
In the US financial protection is minimal, the main products sold in the travel industry are cruises and what Americans know as ‘tours’. Most other travel products are sold via websites with a more computer literate audience booking component part travel within the US.
So most cruises sold in the US are ex-US comprising just a cruise, or a fly-cruise from the principal or a flight being added to a cruise and paid for at a different time than the cruise balance.
The reduction in commission has created unintended consequences, as it has forced many agents to create their own Atol cruise packages, with a single invoice made up of component parts but offering one inclusive price to the customer. How is Carnival going to separate the components in a single invoice environment?
In the US agents are not allowed to discount so the cruise invoice is what the customer is charged, whereas in the UK suppliers cannot, by law, prevent agents from discounting.
So it is easier in the US to collect balances direct from the customer as there is no discount and consequential variable price, the customer payment would always match the principal invoice. Not so in the UK.
Also, if direct payments are made to Carnival what mechanism is there to financially protect the agent from losing commissions if Carnival goes bust?
I seriously doubt that there is a system that could collect all customer cruise payments directly in the UK.
But if one is concocted it could, along with the reduced commission, loss of cash flow and loss of interest on balances, alienate agents enough for them to consider whether it’s worth the hassle to sell cruises at all.
Giles’s parting words – ‘It’s time for agents to stop passing the buck’ – will no doubt have brought a wry smile to all travel agents.