Posted by: cruise2 | 10 June, 2013

What Kind Of Pressures Are Bearing On Carnival UK?

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

 

Last week the news that took the cruising community by surprise was that Cunard president Peter Shanks and P&O Cruises managing director, or at least their positions, according to Carnival UK, were being terminated with effect from the end of September.

One must ask why and there are rumours circulating that not only are volumes down with these two UK-based lines but so are revenues. While independent figures are not published, there is no reason to doubt this, and other than the recent debacles with Carnival Cruise Lines in the US it could be that performance in the UK is bringing down the overall averages more than the parent company, Carnival Corp & plc, would like to see, bringing greater pressure on Carnival UK.

Along with this radical action it was announced that Carnival UK chief executive David Dingle would take over as chief executive of both Cunard and P&O.

In the past two years, in all its wisdom, Carnival UK decided to drop travel agents’ commissions from former levels of 12.5 to 15% down to the derisory level of 5%. Although many travel agents have been stupid in the past by giving away large chunks of their commission to buy business, this action was unnecessarily disruptive to the whole Carnival UK distribution system.

Furthrmore, it allowed most of its serious UK competitors to save a little money by dropping their commission levels to 10% and at the same time take away a large slice of Cunard and P&O’s business because they treated agents with a little more respect.

How did this all start? It started years ago when P&O Cruises was still based in New Oxford Street in London. Clients would call P&O asking how to get the best rate on one of its cruises. At that time, showing its huge disdain for travel agents the standard P&O response was “call a few travel agents and see who gives you the best price.”

It was thus P&O and its own attitude to the trade that caused this giveaway bandwagon in the first place.

The author well remembers being on a cruise on the then-new Oriana when his half-dozen tablemates spoke about how many travel agents they had each called to get the fare they finally booked.. It should be remembered that in the UK cruise market of the mid-to-late 1990s, P&O Cruises was almost the only show in town and clearly had provincial UK travel agents over a barrel when it forced these bidding wars onto them.

At that time, Cunard Line was entirely different. It gave service to travel agents, ran something called the Cunard Inner Circle for its best agents, and supported them instead of looking down on them. Those differences disappeared quickly after Carnival acquired P&O and transferred control over its Cunard subsidiary from the US to UK-based P&O.

In fact any independence Cunard had as a brand in the UK disappeared when its marketing activities were rolled into P&O’s Total Cruise Solution, which included P&O, Princess Cruises and Ocean Village, was renamed Complete Cruise Solution with the arrival of Cunard in March 2004. This was also the end of Cunard’s ability to market itself independently in the UK.

Perhaps a good indication of the situation that prevails at Carnival UK to-day was an article that appeared last September in “Travel Weekly” that reported that Complete Cruise Solution sales through Reader Offers, an agent that sources its business from newspapers, had dropped from 45% of Reader Offers’ business to a meager 7%, and that in the same time Reader Offers’ profit had grown by more than 60%, from £1.33 million in 2010-11 to £2.15 million in 2011-12. No better sign could be given of the effects of Complete Cruise Solution dropping commissions to 5%. The results must have been a disaster for CCS.

Another measure of possible internal discord occurred in December when Princess Cruises announced it was setting up its own sales team independent of Complete Cruise Solutions and was reverting to the industry standard of 10% for travel agents commission.

Finally, Giles Hawke, former Complete Cruise Solution sales director, resigned after eleven years to announce that he will take up a senior position with another cruise line in November. It seems unusual that Carnival UK should have decided to retain him when he is going elsewhere in the same industry.

In an interview with the Daily Telegraph this weekend, David Dingle was quoted as saying that he needed “people who have real specialisation in marketing, distribution and revenue management. Peter and Carol were finding it harder to have a role in this organisation because their skills are more as general managers.”

In point of truth, the brand managers’ positions for Cunard and P&O were both emasculated when their marketing and pricing powers were delegated to the new Complete Cruise Solution. So it is not suprising that they found it “harder to have a role.”

It seems to show that Carnival UK has in some ways lost its way as it seeks younger cruisers. In essence, it seems to be breaking both brands in an attempt to create new ones.

“I want to bring in newcomers to the brands and newcomers happen to have a lower average age,” Dingle told the Telegraph. The old brands are thrown out while new brand building is to commence for both P&O and Cunard.

Carol Marlow has been with Carnival for sixteen years, and has headed brands including Swan Hellenic, Princess Cruises UK, Cunard and P&O Cruises.

Peter Shanks joined Carnival UK eleven years ago, and has held executive positions with Cunard, Ocean Village and Princess Cruises UK in that time.

This storm began in December when Premier Inns executive Gerard Tempest was recruited as Carnival UK’s chief commercial officer, reporting to Dingle. Six months later the result has been announced. Whether Lenny Henry will be brought in to welcome the new P&O liner in 2015 has not yet been revealed.

 

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