Royal Caribbean’s confirmation that it plans no significant changes to commissions for 2012, issued at last week’s Abta Travel Convention, was a well-timed bid to grab agents’ attention.
Having seen rival Carnival UK reduce base commission to 5%, many in the industry had assumed Royal Caribbean would look to split the difference and go to 10%, offering agents a working margin while taking a slice out of the cost of distribution. So there was pleasure at the news, despite the caveats that future changes are not ruled out and it is too early to assess the impact of Carnival’s move.
Agents will have noted, however, that behind the announcement was the clear message that they cannot expect something for nothing. The status quo is only sustainable if the company enjoys the increased support it seeks.
Royal Caribbean clearly sees an opportunity to press home an advantage presented by the UK market leader ahead of the post-Christmas peak selling period when more price-sensitive, less brand-loyal consumers come to market.
Figures bandied around the trade – and confirmed by a succession of senior figures – suggest the three Carnival UK brands (P&O Cruises, Cunard and Princess Cruises) have suffered in terms of trade sales, with talk of double-figure percentage-point falls.
By contrast, rivals Royal Caribbean and Fred Olsen are said to have seen no comparable shortfall in bookings.
It remains unclear whether Carnival UK has offset any dip in trade bookings by increased sales direct, having limited agents’ ability to discount. However, I would suggest the true level of direct sales for brands such as P&O Cruises might raise some eyebrows.
What is taxing many in the industry – and there were numerous conversations on this in Palma – is whether the ripping up of the established operator/agent relationship forms part of a coherent strategy.
Commission cuts allied to efforts to force agents to get customers to pay direct – as is already the custom in the US – together with a likely move away from GDS distribution looks like a co-ordinated assault on three fronts.
An alternative theory is that the timing was not entirely in the hands of the UK office and that the three potentially game-changing moves happened to come together by chance, driven in part by the costly collapse of Gill’s Cruise Centre in June.
Whatever the explanation, the changes come as the cruise industry tries to work out, for the first time in years, where growth will come from in a flat market – and that has left Carnival UK under pressure to defend and explain its policies.
Rivals have been free to portray themselves as the agents’ friend while, as Cunard president Peter Shanks put it last week, Carnival UK makes the “bold decisions” to address issues such as discounting.
Rumours abound that Carnival is back around the negotiating table with large-volume agents, offering incentives in return for active promotion of its brands – a move that would risk a return to agent discounting, precisely what the company said it wished to put an end to.
That would suggest the current strategy is under strain and the impact of some powerful agents switching support had been felt. Yet everyone, and no one more than Royal Caribbean, wants to see prices rise to reflect the multi-billion dollar investment in product. At present, Royal Caribbean simply sees an opportunity to take market share.
Agents should not be lulled into a false sense of security. Commission levels are increasingly conditional on results and therefore at risk, even in cruise.
This is a community-moderated forum.
All post are the individual views of the respective commenter and are not the expressed views of Travel Weekly.
By posting your comments you agree to accept our Terms & Conditions.