Many of the agents who have been informed about Royal Caribbean’s decision to cut commission will not have been surprised by the move and may even feel relieved that the line has plumped for 10%.
By all accounts that is a level most agents can live with as opposed to the 5% imposed last year by Royal’s great rival Complete Cruise Solution for its P&O Cruises, Cunard and Princess Cruises brands.
Needless to say no agent will have whooped with delight at the news because a commission cut is a commission cut and this appears to only add to a trend of lowering commission seen across the travel industry.
But agents are just as concerned with the impact of higher commissions, namely that this income is often used to fund price wars against each other and there is a fear that this race to the bottom will ultimately benefit no one; agent, operator or customer.
One of the first stories I wrote when I started covering cruise seven years ago was after having spoken to Andrew Dixon, then of St Andrews Travel in Bolton, who said he would prefer there to be a fixed lower base rate to stamp out discounting and allow him to compete with the big volume players.
Well, it seems some agents are getting what they wished for, although I’m sure Andrew would not consider 5% enough to make it worth his while.
So the question many agents want answers to is has the CCS commission cut been a success or a failure and what does this suggest for the chances of Royal’s move being positive?
The picture that seems to emerging is a mixed one.
CCS insists it has worked to bring price clarity into the market and allowed it to wrest back some control of price.
The trade arm of Carnival UK claims it has also attracted a broader mix of agents to their product but it’s apparent that it has alienated some one-time extremely big trade partners who have successfully been selling their clients on to other product including rival brands still offering good commission within the Carnival family.
Speculation within the trade is that P&O Cruises may have been able to offset any loss of trade business with direct sales.
These are rumoured to have risen up to as much as 28% because the flat base rate means the line is no longer more expensive than some agents and the brand is strong enough to attract direct customers.
Also, agents who were big traditional supporters and who have been unable to switch away can only do so by no longer offering their clients added value like a taxi transfer so the customer has no incentive to go through the intermediary.
The pucture for Cunard and Princess Cruises, however, is believed by many in the trade to be markedly different.
Although this is denied by CCS, trade sales are said to have fallen by a considerable percentage and it is thought highly unlikely that this has been made up by direct sales, due to the brands having less of a loyal following, or sales from other markets like Germany where Cunard’s popularity is growing.
And this is the potential danger for Royal Caribbean and Celebrity Cruises which, as the firm itself admits, could do with higher profiles among UK holidaymakers.
That is why Royal would never have gone down to 5% and has been careful to work closely with its trade partners to keep them very much on side.
Royal already has a broad distribution mix in the trade but it’s possible that a levelling of the playing field will bring in more partners and the line is certainly open to anyone who can open up new channels without simply coming in and cannibalising the business of existing partners.
It’s certainly interested in working with niche players, like a weddings specialist for instance, who can source new to cruise clients for them.
What seems certain now is that Royal, as the second biggest cruise operator in the UK by volume, has set the market level for commission and others are likely to follow or else concede a competitive advantage.
The other clear development is a move by lines to use marketing money as a carrot to reward ‘good behaviour’ by agents, something Fred Olsen and Silversea have brought in.
Lines have always said that UK law prevents them from setting prices but agents fed up of discounting by others have always argued that it is the line’s choice whether to work with them or not.
It seems suppliers have listened and appear to be coming around to the idea that much of the discounting in the market was not driving higher volumes for them but just depressing prices and those all-important yields from business they may have got anyway.
Royal Caribbean’s vow to crackdown on the heavy discounters will have raised a cheer among most agents in the trade, but they are sure to be keeping a close eye on the situation to make sure the operator is good to its word.