RCI’s Vicki Freed: ‘Agents Need To Stretch a Little’

Travel agents are going to be around for a long time – but they “have to do their part” and some of them “need to stretch a little bit,” says Royal Caribbean International executive Vicki L. Freed, CTC.

Consumer confusion, courtesy of the Internet, gives agents a level of job security. “Now, the travel agents, they have to do their part,” and some agents “have to step it up to the next level,” Freed said in an interview with Travel Market Report. 

Freed, senior vice president, sales and trade support and services, sat down with Travel Market Report’s Marilee Crocker during the recent MAST Vacation Partners Owners’ Summit in Chicago. 

Here, in the second of two parts, Freed discusses Royal Caribbean’s thinking about direct sales, the role of agents, globalization, and what to do about younger consumers who are unaccustomed to consulting agents for their travel needs.

For the cruise industry overall, I’m told that agents drive 70% to 80% of sales. So 20% to 30% is direct to consumer. Is that close to ballpark?
Freed: Some cruise lines are more in the direct arena than others. We’ve made it clear that our direct business is in the teens. We haven’t taken an aggressive approach to change that. We don’t sit in meetings and think, ‘How can we grow our direct business?’ We think, ‘How can we get this travel agent distribution to play an even stronger and better role in our distribution?’

You’ve got to remember, we are a more complex product. We’re cruising worldwide. We have ships that take a lot of explaining. We’re not the price leader – nor do we want to be. So we need travel agents to sell the value and articulate that value to the consumer. Different brands may look at the relationship with agents differently.

So more than 80% of your business is from agents. How much of that is driven by the OTAs?
Freed: You know, I don’t even know. It’s not that I’m being secretive, because what really defines an OTA? You could say a Travelocity. But there’s lots of travel agents that use the web as a way to drive bookings, so they could be OTAs in a sense. It’s a fuzzy line.

In terms of your contracts with agents, what’s the dollar sales threshold where you’re willing to negotiate terms, where there’s more parity in the relationship? 
Freed: We are a very gray company. For example, I just made a sales call on an agent in California – huge potential, selling a lot of other people, just not selling enough of us. They were on 11% [commission]. I increased her commission, based on potential and her commitment to me. Did she earn the increase? No. Will she? I believe she will.

We like to pay it forward. If we know an agent is very engaged in the game of selling Royal Caribbean, or wants to be, and is driven and motivated and knows how to do it, we will give upfront commission ahead of the business, [because] we want them to be a long-term partner. So it’s not so black and white.

Where do you see distribution headed for the cruise industry?
Freed: In this world of the consumer thinking they’re in control, there is so much confusion out there. The Internet, while it’s been the power of information, provides a lot of confusion, and now the consumer needs a value interpreter, or a travel agent, to help guide them. So I think travel agents are going to be around for a long time.

Now, the travel agent, they have to do their part. We can do our part by supporting them. Many of them are doing their part, but some of them just have to step it up to the next level.

If agents currently drive 70% to 80% of sales in the cruise industry, where do you think that will be one to five years down the road?
Freed: I can’t talk for the industry; I can just talk for our brand. As long as travel agents support us, we don’t see a need to grow our direct business. There are some consumers that absolutely want to deal with suppliers direct. We’re not going to turn that business away, but we’re not going to aggressively grow our direct business if agents support us. Now different cruise lines may take a different approach. They may say, ‘The cost of sale with direct business is so much lower that we don’t care.’

You’re not willing to comment generally about the direction of the industry in this regard?
Freed: Do not want to go there. I have too much information, having worked at another corporation. (Editor’s note: Freed worked for Carnival Cruise Lines for 29 years, most recently as senior vice president of marketing and sales; she joined Royal Caribbean in 2008.)

As younger consumers come up, they’re not thinking about (or buying from) travel agents. Where does that figure in?
Freed: We have to really start talking about the value of being an agent in our industry. I think you can get younger people now, because younger people really want to have a passion for what they do. And the recession probably gave us a labor pool that’s somewhat educated, that’s looking for their first stop or their next stop in their career. There’s a great opportunity to get young people, because they will sell differently.

You’re talking about the agent. What about the consumer? How do you get younger consumers to buy from travel agencies?
Freed: Young people, many of them, don’t even understand what a travel agency does. So if you get young people selling travel, they’ll articulate the value. They can use Facebook, social media, in a way that they can reach their peers. So it’s hand in hand.

Where does globalization fit in terms of source markets? What’s the future of that?
Freed: I think you’re going to see a more global cruise market. We’re seeing it now. We’re very active in the Australia market, where we’re going to two ships this year. We’re active in Asia, Brazil. Some of those markets are heavily sourced from the local market. Obviously North America is more mature and has been in the game of cruising a lot longer. But now other markets are seeing the value and the customer satisfaction that a cruise has to offer.

Is your distribution strategy similar overseas?
Freed: Absolutely. We own offices now in 10 different countries, and yes, we’re relying on travel agents to sell the products over there.

Does globalization affect your U.S. strategy?
Freed: I don’t think so. We have some travel agents that want to play in the global markets. We connect them with our international offices, and then they have to abide by the different consumer laws and the governments. We have several agents that have main offices in North America that want to grow maybe the Australia market or the U.K. market. They can work directly with our international offices to make that happen.

Any feedback for Travel Market Report?
Freed: Keep helping travel agents to grow and to understand that they are important to the overall success of the entire leisure travel industry – not just cruising, but to land-based, to everybody – because they are. We just need them to stretch a little bit.

Please see Part One of Travel Market Report’s conversation with Vicki Freed, Royal Caribbean: Agents Are Expensive But Efficient, June 20, 2011.