Azamara-Virtuoso Deal Draws Mixed Reviews

Travel agents have had a mixed reaction to the recent deal between Azamara Club Cruises and Virtuoso in which the luxury small-ship cruise line will pay the consortium’s agencies higher commission on high-value clients—as opposed to high-volume business.

Some agents called this kind of arrangement, in which high-yield bookings garner increased compensation, a win-win for the agency community and suppliers.

Others are skeptical of Azamara’s motivation and said the new commission structure raises competitive concerns. The Azamara-Virtuoso program launches Jan. 1 and will run for three years.

It offers Virtuoso agents a 3% commission override on bookings that meet select criteria including the stateroom category booked, including suite, penthouse and balcony cabins; bookings made more than a year in advance of travel, and length of the voyage.

A different commission structure
“What we were looking for was a different way to compensate our members based on the value they added,” said Bill Smith, Virtuoso’s vice president of cruise sales.

“Our clients spend more and book higher category cabins, so how can we compensate agents for the high-yield business suppliers are looking for?”

The agreement is a “profitability opportunity”  for Azamara, according to Carmen Corvos-Roig, director of field sales for Azamara.

“This may not be the compensation model for everyone, but it allows for big or small agencies to participate and be compensated on a performance basis,” she said.

Shifting market share
But Eric Goldring, owner of Colts Neck, N.J.-based Goldring Travel, said the move is about shifting market share rather than rewarding successful agents.

“To me it’s a sign that Azamara is having great difficulty getting the near-luxury traveler to book its product unless it is a very good deal,” said Goldring.

Goldring believes selling clients products based on higher commissions will set a precedent for booking clients on cruises that may not be the best fit for them, hurting the industry overall.

“By shifting the travel agent’s focus to lining his pocket with higher commissions, Azamara is attempting to get travel agents to book clients that aren’t necessarily best placed on Azamara.”

“Why would I place my Seabourn guest on Azamara if my motivation is a higher commission?” asked Goldring. “It would happen only once and I might well lose that client.”

A response from other cruise lines?
Henry Harteveldt, a travel industry analyst with Hudson Crossing, said the program will likely be a boon for agents selling upmarket cruises.

He said his research has pointed up three reasons why companies offer bonus commissions: “They hope they will be more strategic than practical with a partner in trying to raise awareness with agents; [they’re going for] a broad strategy, and there is desperation that the brand isn’t selling and they’re using commission to steal share by appealing to agents whose customers are brand neutral.”

Agents should also expect some response from competing cruise lines, especially if Azamara is able to shift significant market share away from them, he said.

“What would concern me is if this is an open-ended program and obviously the concern from a business and financial standpoint is whether this creates a zero-sum game where other luxury cruise lines also raise their commissions and it spirals out of control,” Harteveldt added.

“The big question is what other top-end lines like Seabourn will do [in response], along with other consortia,” said Harteveldt.

Competitive concerns
Marlys Aballi, owner of Connection to Cruise in Redlands, Calif., also raised the question of competitive issues.

“It doesn’t seem right,” Aballi said of the agreement. “If you have an extra 3% commission [like the Virtuoso agents who will earn this] you can do something a little extra for your client,” she said.

“This makes it very difficult to be competitive,” she added. “I think they [Azamara] should make it across the board. I don’t think it should be exclusive to one consortium.”

A unique program
Not all the agent reaction was negative.

“I congratulate Virtuoso and Azamara for creating a unique compensation program that is based on mutual strategic goals and individual client spend, not just overall, year-end volume,” said Kimberly Wilson-Wetty, co-owner and co-president of Valerie Wilson Travel, a Virtuoso agency.

“The opportunity to make a bonus commission if you book a suite, book early and/or book back-to-back voyages really engages advisors to work more closely with their clients about their travel preferences and helps to accelerate the booking process,” she said.

Matching agents with clients
Virtuoso’s Smith said the consortium will use analytics to identify those agents that sell to the high-yield cruisers Azamara wants to target.

“We worked with Larry Pimentel [Azamara president and CEO] and his team on identifying just what the right kind of program and the right matrix to do this,” he said.

“At Virtuoso, with our back-of-house software programs, we can drill it right down to a specific agent that sells these high-yield clients.”

The targeting will help ensure that the right clients are matched with the right agents, Smith said. “This would have been a bad test for us if we didn’t pick a client that picks a Virtuoso type of experience.

“Certainly an agent isn’t going to put a client onto an Azamara ship if he should be on a Carnival ship;  it would be a big mistake if we were directing people just for an override.”

Merit-based
Azamara’s Corvos-Roig said the program is based on merit not on volume.

“It’s not about volume and it lets the agency focus on net value,” she said. “This supports the small agents. Most are telling me this is great since they are no longer competing against huge volume players.”

Corvos-Roig added that she has fielded calls from consortia and agency partners inquiring about working out similar programs.

Not charity
Ultimately, the program is a good one, according to Harteveldt.

The short duration of the program, coupled with the focus on top-selling agents, “Tells me that Azamara has a plan and that makes me feel confident that is a very well thought out program,” he said.

However, “It make makes agents who aren’t invited unhappy and I hope Azamara will be open to hearing from those agents.”

“If you don’t produce, you’re not going to get the money,” said Harteveldt. “This is not charity; Azamara is doing this because they expect agents to shift business.”