Agents Finding Alternatives to Cruises To Compensate for NCFs

Cruise lines clearly use NCFs as a way to decrease their travel agent commissions, according to a just-released white paper on non-commissionable fares (NCFs) from ASTA.

The white paper found that agents, in return, are compensating for that loss of revenue from traditional cruise sales by increasing their sale of alternative products like river cruises and all-inclusives.

According to ASTA, the cruise lines are walking a fine line with the potential of dis-incentivizing agents to sell their products.

“The decision the cruise line has to make is how much of the fare they make NCF without reducing the incentive for agents to sell the product and provide time-intensive customer service to support the product,” said the white paper.

Decreasing commissions
ASTA based its white paper on a review of historical data on NCFs as well as interviews with agency members. It also examined cruise line invoices to determine NCF levels over time brand-by-brand.

The white paper found that NCFs on cruises invoiced for August 2015 range from 8 to 12% of gross fares on Mediterranean cruises, 9 to 14% on Caribbean cruises, and 11 to 13% on Alaska cruises.

“It is evident that cruise lines use NCFs to decrease their commission costs, as many cruise lines say ‘NCFs are the portion of the fare we chose not to make commissionable,’” the white paper said.

“It is also clear that each cruise line defines their NCF differently and can, and will, alter that definition when they deem it necessary.”

Great concerns
As a result, agents are beginning to sell different types of cruise and ancillary products to increased their profitability.

“We know many of our leisure-focused agencies have great concerns about NCFs,” said Zane Kerby, ASTA president and CEO. “Clearly, travel agents should be fairly compensated for creating demand for the cruise lines.”

An ASTA financial benchmarking survey of its members, cited in the  white paper, found that the combination of low pricing and high NCFs is encouraging many agencies to look for profit elsewhere. That survey was conducted this past summer.

A comparison of NCFs as a percentage of gross fare against the cruise’s total gross fare shows that, for the majority of cruise bookings—which range between $1,000 and $5,000 in gross fare—the average NCF is 10 to 12%.

Of those polled for the survey, 44% said their agency is selling more cruises, 29% said their agency has shifted cruise lines used to get a better return, and 18% said their agency sells fewer cruises due to lower revenues caused by NCFs.

Looking elsewhere
“The NCFs have made us look at lines and offer lines to our clients that do give us a better return. We are selling more high-end and river cruises and clients are very happy,” said one survey respondent.