Royal Caribbean Cruise Line has confirmed that it will ditch its 5% online discount as part of plans to reduce base rate agent commission.
The new 10% base rate will come in from January 1, but the line has pledged to offer more marketing funds to agents that do not sell purely on price.
The commission reduction is the second in the UK cruise sector in the last two years after rival Carnival UK cut its base rate to 5%, angering many agents who said this was not enough.
Royal Caribbean UK general manager Jo Rzymowska said the line was determined to bring price clarity to the market and to work with agents to increase the profile of its brands.
She said: “We will be taking our 5% online discount off our own website as from January 1st 2013, when we introduce the new terms to show how serious we are about doing all we can to ensure price clarity.”
The new commercial terms are being applied to both the mass market Royal Caribbean International and premium Celebrity Cruises lines but not Azamara Club Cruises.
However, Royal Caribbean will be sitting down with agents to negotiate bespoke marketing arrangements over the next few months tailored to their particular business models.
The reaction to the Royal Caribbean announcement from agents this week continued to be broadly supportive.
However Barrhead Travel chairman Bill Munro said he feared the cut was the “thin end of the wedge”.
“I think they shouldn’t class all retailers the same. If you are in a small high street office and someone comes in and wants to buy a Royal Caribbean cruise, then 10% commission is probably enough.
“But if you are a proactive agent who goes out to the market place, works hard to promote, advertise and entice customers in, it’s not enough. We are doing a lot of the marketing for them.
Munro added that when non-commissionables are taken into account agents end up earning a lot less than 10%, and this problem was particularly acute on Royal’s three and four night taster cruises.
“Who’s going to go to work for 3% [the commission they would end up getting, taking into account non-commissionable elements] – you would have to be off your head.
“It costs £70 just to make a booking. We don’t want to lose money. Those short duration sample cruises are quite good at getting people to buy week or fortnight holidays, and if people stop selling them, they [Royal Caribbean] are going to lose out.”
Howard Davies, director of Delmar World, agreed saying: “We do a lot of business out of Florida.
“What we find is that we have people doing the family holiday in Orlando, and then have a few days relaxation. We have often suggested they have a Royal Caribbean cruise for a couple of nights.
“They are a way of introducing them to the potential cruise market. In the past, although it’s not been a very high earner – at least on the percentage – it justified the effort.
“Perhaps they haven’t thought that one out. At the end of the day, if something costs more to process than you earn, then there’s little point in selling it to someone.”
Dawn Jordan, cruise director at Bath Travel, said: “I’m very happy with it [the cut in commission to 10%].
“We as a company don’t work in a very heavy discounting culture and we find that we lose a lot of business to the people that give anything away to get a booking, and therefore if people adhere to conditions and don’t discount then it would be a lot better for us.
“I personally don’t think it’s a bad thing if it brings some sense into the market place, because there are too many people who are building their business on discounting. It devalues the product.”