Study Sees Agents ‘Stagnating’ as Cruise Distribution Channel

Traditional travel agencies and OTAs are both losing share in the cruise market as cruise lines aggressively pursue direct bookings on their own websites.

The largest cruise lines are going after online direct-to-consumer strategies most aggressively, including by increasing their consumer supports for direct sales, according to PhoCusWright’s 2012 U.S. Online Travel Overview report, released last week.

The fallout for travel agencies in terms of market share is considerable and likely to worsen, though overall expansion in cruise will offset the losses.

“Traditional travel agents are stagnating as a channel for cruise distribution,” the report said. “They made no significant gains in 2011 and lost out to online and direct channels.”

Declining share
Traditional agencies delivered 62% of cruise passenger revenue in 2011, but that was down from 66% in 2010. Agents’ share of cruise sales will decline further – to 57% – by 2014, PhoCusWright predicted.

Overall, online cruise sales grew by 32% to hit $1.9 billion, or 13% of all cruise sales in 2011. And online cruise sales are expected to grow by double digits from now until 2014, when they will account for 18% of cruise revenue, according to PhoCusWright.

Cruise line sites outpace OTAs
Cruise line-branded websites are fast outpacing OTAs in share of cruise revenue.

The cruise lines’ own sites will expand their share of online cruise revenue  from 43% in 2010 to 59% in 2014, according to the report. OTAs and cruise line-branded websites had an even 50-50 split in the share of cruise revenue in 2011.

“That pattern will continue as more consumers go straight to the cruise lines and as cruise lines continue to ramp up their capacity to support direct sales, both by processing transactions through their websites and by referring shoppers to 800-nmbers to complete bookings,” the report stated.

As OTAs lose ground to supplier sites, “travel agents will struggle to compete with OTAs, supplier sites and cruise line call centers,” according to the report.

Large lines most aggressive online
The largest cruise brands are driving the trend towards online/direct sales. Those leading the charge include Carnival Cruise Lines, Royal Caribbean International, Norwegian Cruise Line and Princess Cruise Lines, according to PhoCusWright.

However, distribution channels vary widely among the cruise lines, the report noted.

For instance, Holland America line and Celebrity Cruises, rely more on travel agents and have lower online penetration.

Others, including Crystal Cruises, Regent Seven Seas Cruises and Silversea Cruises, rely overwhelmingly on travel agents or do not accept online books at all, the report said.

Agents: smaller piece of a larger pie
While the online shift looks grim for traditional agencies, a mitigating factor is the robust growth expected for cruise sales overall. The cruise market will expand from $14 billion in 2011 to $17 billion by 2014, according to the report.

So even if the agency share of cruise sales is shrinking, it is coming from a larger pie.

“Agencies will still see some sales growth in real terms, even if it does not keep pace with online channels,” Douglas Quinby, senior director of research, told Travel Market Report.

Positive factors for agents
“While the agency share of the market is declining, that is of more relevance to large agency groups than to the individual travel agent or agency,” he added. “You can still set your own goals and work to achieve them.”

Another mitigating factor is that many online cruise sales tend to be for shorter, lower-priced cruises, which “may not even be worth the trouble for agents to handle,” Quinby said.

“However, if someone wants a once-in-a-lifetime small-ship cruise to the Galapagos, this is where the consumer really needs to consult with an agent,” he said. “The consultation process for vacation planning has not gone away.”