Are travel agent-cruise line relations headed the way of agent-airline relations?
Squeezed by declining commissions, particularly for bookings on mass market mega-ships, even some of the most cruise-focused agents say they are hard-pressed to keep business afloat.
So when top cruise line executives expressed high regard for agents’ role in selling cruises at CLIA’s recent cruise3sixty conference, their words rang hollow with some agents. (See story, “A Cruise Industry Without Agents: No Way, Execs Say,” May 3, 2012.)
Agents react to executives
“Did anyone of these [cruise executives] explain why, if we’re so important to them, our commissions are at least 30% less than 15 years ago?” asked Lucy Hirleman, CTC, MCC, president of Berkshire Travel, an Ensemble agency in Newfoundland, N.J.
The executives’ declarations of support also meant little to Nancy Yoffe, owner of CruisePlanners in Spartanburg, S.C.
“The cruise lines love us as long we’re willing to work for minimum wage or for free,” she said. “Our commissions have gone down so much – we’re only getting paid on the base fare, while the non-commisionable aspects of the cruise are often more than the base fare.”
More favorable view
Chuck Flagg, co-owner of The Flagg Agency, a Cruise Holidays franchise in Canton, Ga., said he thinks the cruise executives were sincere in their praise for agents.
“The cruise line execs know we are their best sales force. We are their best PR and advertising machine,” said Flagg.
Flagg acknowledged that cruise lines “have a lot of a lot of hardware to fill” and “will do what they have to to put people on ships.” He also said that "certain cruise lines talk out of both sides of their mouth.”
No longer promoting cruises
The declining profitability of cruise sales has prompted Hirleman to stop actively promoting cruises to clients, preferring to steer clients toward land vacations.
While Hirleman will book cruises for clients who request them, “I’m moving on from cruises just as I moved on from air,” she said. “I’m finished with cruises – I won’t work for 10% or, as is often the case, a lot less.”
On land vacations, Hirleman said she earns higher commissions – around 15%.
Difficult to make money
While she doesn't believe the cruise industry will adopt the airline model in their relationship with agents, Cindy Clifford of Gotto Go Cruises in Riverhead, N.Y., said too many lines have created the perception among consumers that they will get a better deal by booking directly.
“If we were to start a new business today, we wouldn't," she said. "It's more difficult to make money and there is the pervasive feeling of being in competition with the cruise lines.”
The industry should take a stand against cruise lines who drop comissions too low, said Dorothy Flannery, owner of Top Sails Journeys in Jacksonville, Fla.
"When Renaissance Cruises cut commissions by 5%, agents would not sell their product and they were out of business within a year.”
Moving beyond cruise
For many agents who came into the business as cruise specialists, broadening their focus is a growing necessity.
“I need to find a way to make up in volume what I am losing in lower commissions,” said Flannery. “I am investingating niches that could work because we are being told by our industry that niche markets are the way to go. I need to make it work.”
For agents like Yoffe, whose first love is cruising, it's not an easy transition. “Cruising is what I know and love and what I am trained to do,” she said. “Sadly, if you sell a $5,000 Sandals package, it’s much more lucrative.”
Yoffe sympathizes with the fact that cruise lines often have a huge inventory of staterooms to fill, but their strategy of pitching deep, last-minute discounts directly to consumers is wreaking havoc with her business, she said.
Forced to match
“A client of mine got an incredible deal on the Celebrity Equinox, a beautiful ship – a rate of $1,049 for a concierge-class stateroom with balcony,” she said. “Then she calls me with the news that Celebrity is offering a happy hour discount that drops the rate down to $899.
“Of course, I’ll see if I can get that for her, but I’m making very little money as it is.”
Online cruise discounting has been a growing problem since the economic downturn three years ago, she noted.
“Every consumer, even in the luxury market, is now aware of the deals, and they are constantly checking the web and saying, ‘Can you get this for me?’ Clients are now expecting the cruise lines to give things away, and they are holding out until they get it.”
Cruise lines differ
Agents do not paint all cruise lines with the same brush. They note that individual cruise lines vary in their commitment to agents.
"Some cruise lines are going to solicit more direct business, and others will see agents as a sales force and a good investment," Flagg said.
"There are cruise lines who are making it more agent-friendly and encouraging agents to book, because we answer a lot of questions their call center agents can't.”
Cruise lines’ agent relations and direct sales and discounting tactics also vary according to market segment. Mass-market lines with excessive inventory on megaships to fill are most likely to ramp up direct marketing to consumers and cut base fares to the bone, agents said.
Turning to river cruises
For agents, sales of luxury, small ship and river cruise lines remain profitable.
“With the mainstream cruise lines, it’s all about filling up the megaships,” said Mary Helen Maupin, CTC, president of MHM Travel in Nashville, Tenn. “That’s why I’m leaning more toward the smaller ships and river cruises. They are the most eager to work with agents.”
River cruises are a growing focus at CruiseBrothers, according to Steve Gelfuso, president and CEO of the agency, which is based in Cranston, R.I.
“The commissions on river cruises are several times those of the mass-market cruises,” he said.
Still focused on cruise
CruiseBrothers is encouraging agents to sell more land vacations these days, but its bread and butter still comes from the main cruise lines, Gelfuso said. He doesn’t see that changing anytime soon, he added.
“There’s never been such a push from the cruise lines to direct sell as there is now, but at the end of the day we offer value and have good agents who really know their product,” he said. “So I believe I will still have a business for awhile longer.”
CruiseBrothers maximizes profits by selling a large volume of cruises and by capturing as much revenue as possible on non-fare items. “We go after everything that is part of the cruise vacation – shore excursions, insurance, hotels. Anything we can peel off the cruise line, we do.”
Still, he observed, maintaining cruise profitability is a growing challenge.
“There are really tight margins in this business – and it hasn’t gotten any easier.”
While Amber Becker, owner of CruiseOne in Aurora, Colo., “shakes her head” over the bottom-line percentages on some bookings, she said it has not affected how she considers cruising as a business.
“A true specialist can make money by differentiating themselves,” she said. “I do that through deep and extensive knowledge of ships and destinations.”
Fran Golden and Harvey Chipkin contributed to this report.
For previous reporting on this topic, see “Agents Turn Away from Cruise Sales: The Thrill is Gone,” Aug. 1, 2011)