Monday, October 1, 2007

CND Headlines - A Different Take on the Situation

Crystal Cruises has changed their commission structure to discourage agents from stealing other agents' business by undercutting pricing.

* A Different Take on the Situation
Cruise lines aren't excited that travel agents discount their product. They want a knowledgeable and professional sales force selling their product, not ones cutting their profit to the minimum and hiring inexperienced sales people who don't stay very long. To that end, they don't want travel agents giving up significant portions of their commission just to compete with each other on price.

As we've reported in the past, several cruise lines have come out with policies meant to discourage agents from rebating and advertising discounted rates, but last Friday, Crystal came out with a unique policy to address their situation.

The discounting and rebating came to the luxury end of the market relatively late. What Crystal has noticed lately is a growing number of customers requesting to switch their bookings to a different travel agent after they are under deposit.

As they have looked into this phenomenon, what they've found is a growing number of travel agents soliciting other agents' booked customers by offering to surpass whatever discount, onboard credit or other incentive the other agent is offering if the passenger will transfer the booking to them. Of course, why not? The first agent has done all the work of finding the client, helping them select the cruise, discussed all the options and has done the booking. The vast majority of the time and expertise necessary for the booking has already been done. On most bookings there is usually a relatively minimal amount of time necessary to finish assisting the client _ usually just processing the final payment and delivering the documents. So why shouldn't the second agent be willing to work for a lot less money. Of course the first agent ends up with nothing for all the time and expertise invested.

Crystal came up with a clever solution that should put a stop to the practice, at least if the first agent has gotten as far with the customer as collecting a deposit. Effective January 1, if a customer under deposit wants to switch travel agents, they can still do it, but the new agent's commission will be capped at 10%.

The theory is that if the agent isn't making as much money in the first place, they don't have as much to discount/rebate, so the problem should be solved.

"We believe this is another step toward curbing rebating activity and we want to protect the original agent who has worked hard to service a client," said Bill Smith, Crystal's SVP of sales & marketing. "Guests are free to choose the agent or agency with whom they work. In the luxury sector, they should be evaluating service and not who is willing to buy them away from another agent because of promises of discounts or rebates."

This applies both to bookings coming from agencies, and from bookings made onboard Crystal ships. (At the time of booking onboard, passengers must designate the agency with whom they want to be the agency of record.)

Simply put, the idea is that the customer should shop for his agent first, not after the agent has invested the time with the client. Once the agent has done that, the agent should then be paid for his investment.

Previously to curb rebating, Crystal instituted a policy that they will only process credit card payments for the full amount of the booking, not a discounted amount.

This article appeared in the October 1, 2007 edition of Cruise News Daily.