Royal Caribbean Cruises has followed rival Complete Cruise Solution in cutting commission but has not gone as far, bringing the base rate down to 10%.
The move comes some 17 months after CCS brought in a 5% flat rate, a cut of up to ten percentage points and to a level which many agents say is not commercially viable.
As well as the commission reduction Royal Caribbean will also use co-operative marketing funds to encourage agents to stop discounting and to support Royal’s brands.
It is hoped the dual move will bring more price clarity into the market and combat commission rebating which Royal Caribbean says is confusing customers and frustrating the trade.
The new commercial terms are being discussed with trade partners now and will come in on January 1, 2013 and relate to both the mass market Royal Caribbean and upper premium Celebrity Cruises brands but not Azamara Club Cruises, although a similar approach to marketing funds will be brought in.
Jo Rzymowska, Royal Caribbean UK general manager, said she has personally attended 15 meetings with agency bosses and while she admitted there was “some nervousness” there was a high degree of understanding from the trade that it was the right move for the line’s business.
“I have personally taken responsibility for how we work with the trade and I genuinely want this to work for all of us. If we lose the good will we have built up then we have seriously done something wrong.
“The other thing I would be very disappointed about would be, because of the relationships we have with our agents, that someone who was seriously unhappy did not say that. Not one of them has said that.
“They have listened to what we had to say and now it’s for us to show that we will fulfil on how we want to make this work. We won’t get it right every time, mistakes will be made but it’s important when they are we correct them.
“Will we please everyone? Of course not, but we have tried to make this as flexible as possible and we want to retain all our travel agent partners. I will care very much if we lose anyone, but it won’t be for want of trying to prevent that.
“We have been working through this for some time to make a change basically because we have had increased feedback from frustrated customers about the level of different pricing throughout the market and increasing feedback from trade partners from trade customers about the lack of clarity on pricing.
“It’s really important that we take our partners with us and we are not going in with a one size fits all approach.
“Ten percent allows trade partners to earn good retained commissions and enables them to still sell cruise. We did look at different levels and came out at 10% based on feedback from a lot of trade partners.
“We are going to continue to invest in marketing but we also want to drive more and more consumer demand and we want to be where the consumer wants us to be.
“We definitely need to get our brands better known, even Royal, which is the most well known, but yet people still do not really understand it.
“We have partners who are high street agents, some are cruise repackagers and some are call centres. The individual terms of our bonus schemes will be bespoke based on their business model. Agents will have the opportunity to retain more money – they should be able to earn more.
“We are working with them on what will be the most attractive override scheme for them to support our brands. The level of work that we put into this is far more complex than if we said ‘that’s it, a one size fits all, this is how we operate’.
“This is genuinely about trying to reduce the level of confusion that the consumer finds themselves in and the negativity from trade partners about the commodity situation we are finding ourselves in.”
Rzymowska said despite the base rate cut from 15% Royal will spend no less on distribution through agents in 2013 as it did this year.
She said both the Royal and Celebrity brands are undergoing multi-hundred million dollar upgrades and Celebrity last week took delivery of its seventh Solstice-class ship, Reflection, amid rumours of a third Oasis-class ship being ordered in Finland and the ongoing Project Sunshine, its next generation of ship.
Rzymowska said it was vital agents helped it to get the brands in front of customers to grow the UK market.
“We want to encourage them to run customer events and we want to work with agents managing them.
“But also if they want to do something different we want them to continue to do that, encourage originality and new ideas and ways of enticing new consumers to cruise and to clearly sell our brands to make sure they are attractive.”
Royal said it will invest in a range of agent incentives including sales incentives, sales initiatives and ship visits.
It will also continue to invest in major heavyweight above-the-line branding campaigns like the Sea Is Calling television advertising currently running in prime time periods.
“The feedback is that the positive impact when we are advertising is significant and there are very few cruise lines who invest in that level of consumer demand.
“We want to work with travel agents on some campaigns that have longevity to help them put together their own marketing material to help them talk to their databases.
“Very short sharp ‘wow’ sales do not give agents enough time to align their plans.”