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By Johanna Jainchill
According to recommendations by Goldman Sachs analysts, Carnival Corp. and Royal Caribbean Cruises should lower the average travel agent commission to 10% and redirect bookings from travel agents to their own Web sites in an effort to save money.
Assuming 90% of bookings come from travel agents who charge 14% commission, the report published earlier this month said, Carnival could save $330 million and Royal Caribbean $140 million, leading to a $0.38 and $0.59 per share impact on their bottoms lines, respectively.
The report said that the two largest cruise lines have “overlooked” opportunities like this to cut expenses in the current high fuel-cost environment.
[ 03-24-2006: Message edited by: greybeard ]
I recall that few cruisetalkers actually book cruises on-line.
The day will come when cruise lines cut back their commissions to travel agents, like the airlines did, but at this point in time, travel agencies are the major distribution point for the cruise lines' products. The lines are willing pay commissions to agencies who will handle all the customer service related details involved in a cruise sale.
If cruise lines wanted all the business to be direct, they would have to invest millions in additional service reps and in-house agents to take the clients' hand and help them with the myriad details--so far the lines have been reluctant to go that far.
And don't anyone think that if the cruise lines can save money by cutting out commissions to agents, that it will lower the cost of a cruise! They aren't going to take away from their distribution source and give it to the customers!
Rich
I need a travel agent the most when booking last minute, or have very specific requirements. A good cruise agent such as Rich, Darrell, and Russ know the ships, lines, where to place clients for cabin location, itinerary, cruise format, sea days vs. port days.
Reniassance went under mostly due to not dealing with travel agents.
quote:Originally posted by Linerrich:A cruise vacation isn't always a simple commodity like an airline seat--many customers need and prefer to deal with an agent to answer questions, make various arrangements, etc. Of course many a web-savvy cruise veteran can book directly with the cruise lines, but perhaps not get the discount an agent would offer if it's on a cruise line that still permits rebating.The day will come when cruise lines cut back their commissions to travel agents, like the airlines did, but at this point in time, travel agencies are the major distribution point for the cruise lines' products. The lines are willing pay commissions to agencies who will handle all the customer service related details involved in a cruise sale.If cruise lines wanted all the business to be direct, they would have to invest millions in additional service reps and in-house agents to take the clients' hand and help them with the myriad details--so far the lines have been reluctant to go that far.And don't anyone think that if the cruise lines can save money by cutting out commissions to agents, that it will lower the cost of a cruise! They aren't going to take away from their distribution source and give it to the customers!Rich
quote:Originally posted by greybeard:From travelweekly.com . . . .By Johanna JainchillAccording to recommendations by Goldman Sachs analysts, Carnival Corp. and Royal Caribbean Cruises should lower the average travel agent commission to 10% and redirect bookings from travel agents to their own Web sites in an effort to save money. Assuming 90% of bookings come from travel agents who charge 14% commission, the report published earlier this month said, Carnival could save $330 million and Royal Caribbean $140 million, leading to a $0.38 and $0.59 per share impact on their bottoms lines, respectively. The report said that the two largest cruise lines have “overlooked” opportunities like this to cut expenses in the current high fuel-cost environment.[ 03-24-2006: Message edited by: greybeard ]
By Johanna JainchillAccording to recommendations by Goldman Sachs analysts, Carnival Corp. and Royal Caribbean Cruises should lower the average travel agent commission to 10% and redirect bookings from travel agents to their own Web sites in an effort to save money. Assuming 90% of bookings come from travel agents who charge 14% commission, the report published earlier this month said, Carnival could save $330 million and Royal Caribbean $140 million, leading to a $0.38 and $0.59 per share impact on their bottoms lines, respectively.
14% commission on a cruise booking? I'm pretty sure every Agency does not earn that much on a cruise booking unless of course the sale is for a large group. Here in Canada the commission is usually 10%. The traveller is not charged a booking fee on cruises. Keep in mind too that the traveler's bottom line includes Port Taxes, etc.etc. non of which are commissionable.
We're considering a Christmas/New Year 14 day cruise - here's the quote for an outside cabin - Caribbean itinerary
Point here is that an additional 14% would be totally out of line - in fact any 'booking fee' would be out of line! We could of course do our own air but it's doubtful that we'd save much and would have the hassle of getting our own transfers.
I am very sure that the cruise lines will lower this percentage as we go on. I say in 10 years we will see the 1st commission cuts. This will happen until they pay 0%. I beleive that the lines have a plan to make consumers comfortable with booking online or via phone. They already have begun doing that. They have "vacation specialists" to assist those who may need help. What I find interesting is even their commericials on TV tout using their website 1st, 2nd they put their phone number and then it says "or see your travel agent". The TA has become the last option. Almost like your last resort.
By not having the TA in the picture saves them money on commission and it saves money becouse new cruisers, especially, will run on brand name recognition. When people visit an agency MOST agents like myslef (good little old me!) give our honest opinions about cruise lines, resorts even airlines (these opinions are based on personal experience, client feedback, professional reviews, etc). The companies really dispies this!!!! Thats one of the reasons why the airlines stopped paying commissions. The airlines say that they can't afford to pay travel agents a 5% commission (with a $20 per ticket cap) and so most major carriers have stopped paying commissions entirely. But, if the airline sells the ticket to the traveler themselves via their 800 number they have probably incurred $20 in costs (the cost of the phone call, the cost of the employee, related costs for supervisors, etc,) by selling it to the traveler directly. Even more strangely, although they 'can't afford' to pay up to $20 to a travel agent, they can offer as much as a 10% discount off all their fares if you buy from their website. It doesn't make sense!!
The reality is that there is a major cost to the airlines which travel agents cause them - a cost they are desperate to hide and eliminate. What is that cost? It is the cost of losing revenue every time a travel agent advises a client how to save money on an airfare (for example, by changing routing or flight times), and/or the lost revenue every time a travel agent advises a client about a more convenient schedule or a lower fare on a competing airline. With the difference in two fares being potentially the difference between perhaps $300 and $1500, good advice from a travel agent can cost the airline (and save the traveler!) a huge amount more than just $20.
When was the last time you called an airline to book a flight, and the reservations agent at the other end said "Oh sir I think I should volunteer the information that their is a flight on one of our competitors that leaves at the same time, but flies nonstop instead of requiring a change in plane, and with a fare $250 cheaper than our fare.'" Theywould never do this instead, if you ask about other airlines, they'll say "Im sorry but our computer system doesn't have that information" That, in a nutshell, is the difference between booking direct with an airline or with a travel agency.
They want to deprive their customers of access to the best comparison information and expert advice that could otherwise save you huge amounts of time, trouble, and money.
The cruise lines are down this same path! I know a cruise is not an airline seat however the cruise line's are using the airlines' business model. The big guys like Carnival, Royal Caribbean, NCL will rely on the comusmers ability to choose a brand and recognize a brand from their novelties they provide.
Bottom line is I think agents will exists but it will be for a traveler who wants the planing and expertise and they will be willing to pay hefty services fees. And the cruise lines will be able to become autonomis.
quote:Originally posted by Green:14% commission on a cruise booking? I'm pretty sure every Agency does not earn that much on a cruise booking unless of course the sale is for a large group. Here in Canada the commission is usually 10%.
14% commission on a cruise booking? I'm pretty sure every Agency does not earn that much on a cruise booking unless of course the sale is for a large group. Here in Canada the commission is usually 10%.
Actually - for the cruise portion of a booking it is NOT uncommon for a Canadian agency to receive 15% commission or more if the account belongs to one of the major chains i.e. Carlson, Cruisehsipcenters, Cruise Holidays, Sears, etc. If I were to tell any agency they were were at 10% commission they'd figure out a way to book at either a higher commission or go tell me to jump in a lake.
quote:Originally posted by billee:The cruise lines have already cut our commissions when they added the "NCF" (non commissionable fare) to the cruise fare.
SunViking you're probably right....but many people aren't as savy as you are on the internet. What about those who still do not have online access for one odd reason or another?
Cut cruise commissions? No way
A Goldman Sachs report suggesting cruise companies could save millions by cutting agent commissions has been rejected by the two largest cruise lines.
In addition, the American Society of Travel Agents (ASTA) has refuted the report's logic.
"The recent statement by Goldman Sachs shows a complete lack of understanding of the travel agency and cruise industries and travel agents' relationship with the consumer," said ASTA CEO and President Kathryn W. Sudeikis.
She said, for example, the report did not attempt to analyze cruise lines' competitive position against land-based tours.
"Nor did it attempt to analyze the impact of a shift that might occur should a drastic commission change happen," she added.
She quoted figures showing that the cruise industry grew by 8.2% annually from 1980 to 2004. More than 88% of Royal Caribbean Cruises and Carnival Corp's berths are sold by travel agents.
Said Ms Sudeikis:
"Cruise lines may not be ready to risk potential movement to land-based competitors and need a highly skilled and experienced sales force to create demand for cruising over land vacations."
Carnival and Royal, the world's two largest cruise lines, both said they had no intention on following the recommendation by Goldman Sachs to reduce travel agents commissions.
The report, which stirred a buzz in the industry, assumes that agents book 90 percent of cruises for an average 14% commission. Reducing that to 10% would save Carnival $330 million and Royal $140 million.
"We have no plans to do this," said Michael Sheehan, director of corporate communications for Royal Caribbean Cruises.
Report by David Wilkening
quote:Originally posted by Mariposa:As someone who frequently books my own cruise directly from the cruise line website, I wish the industry would consider a bit of a "commission" for those of us doing this. It would be GREAT to get 5% off (commission) when I book with the line directly - and they would still increase their bottom line.
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