Posted by: cruise2 | 9 July, 2012

How Cruise Sales Differ Across the Atlantic

Image of the house flag of Carnival Cruise Lin...

Image of the house flag of Carnival Cruise Line. This flag is also used within the corporate logo of Carnival Corporation & PLC (Photo credit: Wikipedia)

by Kevin Griffin – The Cruise People, Ltd writing in

Cruise selling policies differ on both sides of the Atlantic, the most obvious contrast being that in North America deposits remain fully refundable up to final payment date, while in Europe’s largest cruise market, the UK, one forfeits their deposit if they cancel. But even in Europe practices differ.

In Germany, for example, Europe’s second largest cruise market (and soon to be largest), deposits are usually refundable up until just a month before sailing. But in the meantime, a couple of other notable differences have sprung up in recent times, first on who can buy a cruise where and second on agents remuneration.

On the first subject, P&O has long been known for prohibiting cross-border cruise sales. Three decades ago, the author was quoted a fare by P&O Los Angeles on a cruise from Sydney that was 33% higher than the same cruise quoted in Australia. A similar complaint was made to UK cruise magazine “World of Cruising” in more recent times when Swiss clients were told they had to book a Princess cruise through Swiss agent Kuoni at a higher fare than offered in Florida.

Through its association with P&O, this restriction has now also spread to Cunard, which no longer allows cross-border bookings and whose Transatlantic sailings can be as much as 25% more expensive in the UK. But even here there is no consistency, as sometimes UK fares for the same sailing are lower than the North American fares.

Meanwhile, this prohibition has spread beyond P&O. To cite an example, Vacations to Go, a US agent with a UK phone number, states on its web site that “the following cruise lines now prohibit all US travel agencies from selling cruises to citizens of countries other than the US and Canada, unless they have a residence in the US or Canada.
This is not a Vacations To Go policy or a US government policy, it is a corporate policy instituted by each of these cruise lines.”

It then goes on to name “Holland America, Oceania Cruises, Princess, Royal Caribbean and Star Clippers.”

More recently, appointed as US agent for P&O Cruises, its site adds for good order that “residents of the UK may not book P&O Cruises through Vacations To Go.” Missing from the list is one line that used to be there, namely Costa.

In an age of globalisation this practice of cruise lines prohibiting cross-border sales is in effect a restraint of trade and we wonder how legal it is. Apple once tried something similar with its iTunes pricing within Europe, restricting buyers to making purchases in their own country, and thus forcing some to pay higher prices. In 2004 the UK Office of Fair Trading referred Apple to the European Commission for violation of EU free-trade legislation and in 2007 Apple was threatened with a £330 million fine.

In the end Apple had to agree to offering common pricing throughout Europe. In a single market such as Europe customers should be free to purchase goods and services from any member state, but this still appears to be not the case with many cruise lines.

On another subject, P&O, Princess and Cunard last year announced that they would cut agents’ commissions in the UK to 5% in an attempt to try to stop them from rebating, a process whereby agents would pass on part of their commission to the client in order to “buy” their business.

Meanwhile agents selling the same Princess and Cunard cruises in North America (and elsewhere) are still paid on a scale of 10-15%. One of the reasons P&O, Princess and Cunard UK did this was apparently a fear of being accused of resale price maintenance. This is a practice whereby a manufacturer and its distributors agree on pricing, a practice that is outlawed in the UK. But whether a service is a manufactured good and an agent is a distributor are moot points.

Meanwhile, this spring, Fred. Olsen Cruise Lines’ adopted a different approach, which is to offer 10% agency commission and threatening to stop sell agents who rebate from their commission. Those who did not rebate would be rewarded by a 5% bonus at the end of the year.

This in effect would punish agents who rebate, as opposed to punishing those who do not rebate by cutting their income, which was the case with P&O, Princess and Cunard UK. The Fred. Olsen approach shows strength and is a refreshing change and it will be interesting to see where this all goes. Clearly at 5%, P&O, Princess and Cunard UK are well below the usual cruise sales norm of 10%.

Back in North America, on August 1 Carnival Cruise Lines will further toughen its own anti-rebating stance. From that date, agents may only offer clients non-cash value-add-ons equivalent to a maximum of $25 per person.

Non-cash equivalents means bags, hats, beach towels, memory books, sunglasses or Carnival favours delivered on board, and on-board credits will no longer be allowed. Carnival first introduced level pricing in 2003, then an advertised price policy in 2005.

Last week, Carnival president Gerry Cahill visited London in anticipation of the Carnival Magic sailing from Dover next year. Illustrating the dichotomy on commiassion policies within the Carnival group, Cahill told the UK’s Travel Trade Gazette “we have our own commission structures, ranging from 10-15%. We want to make sure that we’re different to our sister brands as sensitively as we can. Each brand makes its own decisions.”

P&O’s commission cuts seem to have had some effect, however. Cahill’s ultimate boss, Carnival Corp & PLC ceo Micky Arison seemed to be supporting P&O’s stance when he told the UK’s Travel Weekly last week that “The reality is that the ones who were the biggest screamers were the biggest discounters. They lost their competitive advantage as they could no longer give their commission away and found they couldn’t make a living.”
Meanwhile, there was a lot of collateral damage among agents who were not rebating.

Royal Caribbean has also been tough on North American agents who rebate and at one stage even put a stop-sell on Vancouver-based CruiseShipCenters, now Expedia CruiseShipCenters. But Royal Caribbean and Celebrity Cruises also continue to offer normal commission levels in the UK market, leaving P&O, Princess and Cunard somewhat isolated.

Indeed, it was Royal Caribbean Cruises’ ceo Richard Fain that told a London audience in April that the agency distribution system “is not broken” and that Royal Caribbean would take “no precipitate action” on commission levels.

How different things are on the two sides of the Atlantic!

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  1. […] post: How Cruise Sales Differ Across the Atlantic « The Cruise People, Ltd … This entry was posted in Blog and tagged alaska, america, archives, author, business, […]

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