Carnival Cruise Lines will implement an anti-rebating policy with “teeth” effective Aug. 1, Joni Rein, vice president of worldwide sales, told Travel Market Report.

The policy extends the line’s five-year-old anti-rebating policy across all marketing channels and expands it to include value-adds. Reins said the policy will be good for the agency channel, allowing travel sellers to sell Carnival on their expertise and service, not price.

Selling on price is a no-win situation, Rein said. “The customer you gain by price today is the one you lose tomorrow to price.”

She noted, “One of the top three issues I hear consistently across the country is the non-level pricing. Rebating has been very problematic for a lot of the mid-sized players and the home-based, and even some of the large producers.”

The policy’s objective, the line said, is to ensure a level playing field among travel agencies and to eliminate the unauthorized manipulation of pricing.

“Inconsistent pricing in the marketplace confuses the consumer, encourages shopping, undermines an agent’s ability to sell on service and to close sales, and erodes the value of the Carnival brand,” the line said in an announcing the policy.

The new policy will tackle rebating from two angles.

First, as of Aug. 1 only Carnival approved rates can be used in any form of communication. Since 2005, Carnival has enforced uniform pricing in mass media and now will extend that policy to phone sales, direct mail flyers and face-to-face meetings.

Second, the line is modifying its policy on how value-add items can be marketed in conjunction with a cruise. This includes non-cash equivalent items such as wine, chocolate, beach towels, etc., and cash-equivalencies like onboard credits.

Value-Adds Rule

Carnival’s new value-add rule states that Carnival will continue to permit value-adds as long as they are part of a formal sales and marketing plan to promote the Carnival product. However, pre-approval will not be required for non-cash equivalent items where the actual (or perceived) value does not exceed 5% of the complete cruise fare or $25 – whichever is greater.

Non-cash equivalents that exceed that and all cash-equivalent value-adds require submission of a travel partner sales and marketing plan, as well as pre-approval by Carnival. Furthermore, the value of the giveaway item must always be less than 10% of the complete cruise fare.

Travel sellers should work with their business development managers to create such plans and get approval.

Enforcement

“We really are putting teeth into the policy because I think it’s such an important part of the health of the distribution, of the industry,” Rein said.

To enforce the policy Carnival has put together a team within its sales administration division with a primary focus on monitoring and auditing of pricing throughout the distribution system. Methods will include Web site browsing, shopping around and checking payments applied to bookings, among others.

“They will use a lot of different proactive approaches to determine not just that the pricing is correct, but how our brand is represented as well,” Rein told TMR.

When a violation is found, the agency will be notified that it is in violation, and to remedy the situation. A follow-up will then be done. If the agency is still in violation of the policy any number of penalties may be applied.

“Violation of the policy will result in a range of actions such as the elimination of co-op marketing support, reduction or elimination of base commission and placement on a no-booking status,” the line said.

Travel agents can also report violations by e-mailing ad_compliance@carnival.com.

We believe this policy is going to have a really positive impact on the distribution system,” Rein told Travel Market Report, adding the line reached out to key travel partners before hand for feedback. “All were very positive,” she said.

Most agents TMR spoke with agreed as well, though cautiously.

Agents Express Cautious Optimism

“I love it,” CruisingAgents.com’s Mark Jacobs told TMR. “It will help all of us to make more money. It makes it even for all of us. There will be less shopping by clients… therefore not wasting agents’ time.”

Toby Nash, of Utah-based Cruise & Travel Masters, is also pleased to see cruise lines trying to level the playing field.

“I do believe that a level pricing shelf for all agencies keeps our industry more respectful and not so cut throat. If I were a vendor, I would want all customers paying the same price. It has undermined the industry as a whole,” he told TMR.

“I definitely think that cruise lines’ sticking to approved rates is great,” agreed Lisa Silvestri, CTC, of Florida-based Silvestri Travel.

“Maybe it will keep the ‘shoppers’ from jumping around from one Internet site to another. Most of the time, one sees the online travel sellers being the ones with the DEEP discounting.”

“I think it is a good idea because there are many agencies, mainly – but not exclusively – online that sell at cost – just to get the volume and hopefully more commission and backend,” said Stephanie Turner, president and CEO of Brentwood Travel when informed by TMR of the policy (but not the cruise line).

“I think the problem that smaller, highly service-oriented agencies face is that customers call them, get all the advice and info and then buy elsewhere if it is just a few dollars less,” she added.

Carnival says the new policy will eliminate this shopping pattern, as well as agencies selling at cost.

Wholesale Clubs a Threat

However, Stan Jenson of All Ways Cruising and Out Cruising said wholesale clubs, like Costco,  are now the largest threat to small agencies.

“They have advertised rates well below what small sellers of travel can match, seemingly through a combination of sweetheart deals with the cruise lines and rebating. If the cruise line is now going to make them fight on the same field as us, then kudos”

When asked if the policy will be applied to, and enforced with, these super large suppliers of volume for Carnival, Rein was adamant the answer is, “Yes.”

“We really did wrestle with that because there are some very large online players who do rebate. But we’ve made our policy clear and we are hoping there’s compliance. And if they don’t, they won’t be selling Carnival,” she said.

“The intention is good but others have tried before… it never seems to work,” Turner said. “They truly have a very hard time enforcing the policies… I like the concept, but I think the reality of enforcing this is they will give little slaps on the wrist.”

However, Nash told TMR he believes it is enforceable when clients make a final payment by credit card, making it harder for agencies to rebate money afterwards.

In particular however, agencies were most leery about the value-adds part of the policy. It is hard, they said, to know when agencies are offering things like complimentary pre-cruise nights, referral discounts and third-party pre-paid credit cards.

According to Carnival’s new policy these value-adds are only permitted if they conform to the line’s rules.

For instance, in the policy FAQ the answer to the question “Can an agency offer a pre-paid credit card or pre-paid gas card as a value-add?” is “Yes, as long as the actual or perceived total value does not exceed 10% of the Complete Cruise Fare and with submission of a travel partner Sales & Marketing plan and pre-approval from Carnival.”

But even Rein admitted Carnival has no control over an agency giving a client an American Express pre-paid check card.

However, CruisingAgents.com’s Jacobs is optimistic. “It is hard to make the policy a 100% policy. A lot of agencies do sell package deals and it is hard to break down a package. Most importantly, it is the spirit of the policy that will stop the automatic discounter, and make things even.”