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Cruise lines warned of dangers of discounting

The boss of Norwegian Cruise Line Holdings (NCLH) has warned rival cruise lines about the dangers of discounting and urged agents to sell its voyages at their high price point.

Agents earned more commission selling NCLH’s sailings because the company’s pricing had remained high since operations resumed in the pandemic, said NCLH president and chief executive Frank Del Rio.

“If you’re earning a 15% commission, would you like to sell a $2,000 cruise or $1,000 cruise? I think the answer is obvious,” he said.

He highlighted how “bundling” amenities across the NCLH brands is “one of the things that we do better than anyone else”.

“When we include free beverages, specialty dining, shore excursions, Wi-Fi, and air [fare] those are all included in a price point that is higher and therefore a higher commission for the travel agent without doing any more work,” Del Rio said.

He warned rival cruise lines about dropping prices to “ridiculous levels”. “That’s just not good business, it damages your brand and needless to say your bottom line as well,” he said.

“Throughout the pandemic, we have stuck with our go-to-market strategy that has been so successful for all three of our brands – we don’t discount.

“We would rather spend marketing dollars to get ahead of the game.”

In a heartfelt message to travel agents, Del Rio said the trade had obviously been “hurt more” by the pandemic than major cruise companies including NCLH.

He said: “We’re a public company. We can go to the capital markets and raise billions of dollars. A typical small business, like a travel agent, can’t and they’ve been hurt in relative terms. Our heart goes out to them.”

Del Rio acknowledged that “many” travel agents had left the industry but added, as cruise ship operations resumed, the trade was now beginning to “wake up”.

“Business was down [during the pandemic],” he said. “In absolute terms, all channels were down a lot. Travel agents dropped a bit but now they’re coming back.

“We first saw it in the US, now we’re really beginning to see it in the UK and throughout Europe.”

He said the cruise industry needed agents to survive long-term as it was “a symbiotic relationship” between the lines and the trade.

Del Rio added: “We’re doing everything we can [to help agents]. I know it’s not just our company but our competitors as well. We all need the travel agency community; we don’t want to do this [recovery] by ourselves.”

Outlining how NCLH protected agent commission payments during the pandemic, he said: “We recognise how important the travel agency community is to our business.”

He admitted that it was more “costly” working with travel agents but said it was not as “efficient”.

Del Rio explained how NCLH spent “tens of millions of dollars” in advertising, marketing and promotions with travel agents to “stimulate demand”.

“We need our advocates out there, our travel agents,” he added. “We’re rooting for them and we’re doing everything we can to make sure they come back stronger than ever.”

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