Carnival’s New Commission Tier Program Leaves Agents Asking Questions
By Theresa Norton Masek
September 20, 2012 2:43 PM
Carnival Cruise Lines’ new commission tier program, announced Sept. 19, is not exactly drawing rave reviews from some travel agents. While Carnival says the revisions won’t change most agencies’ commission levels, some agents say it seems to benefit those who live close to homeports with a healthy drive-to market.
With its new plan Carnival is changing the way it calculates each agency’s volume, from a confusing seven-day equivalent system to a net cabin basis. For example, under the old structure, which remains in effect until Jan. 1, an agent had to sell the equivalent of 600 “guests” on a seven-night cruise -- in most cases, 300 cabins -- to get the top 16 percent commission rate. The new system will require a minimum of 1,000 cabins booked, regardless of length of cruise, to reach 16 percent commission. The old system weighted the “guests” booked by length of cruise. Each guest booking a cruise of five or fewer days was counted as a “half guest,” one booking a six- to nine-night cruise counted as one guest, while someone buying a cruise of 17 days or longer counted as 2.5 guests. Under the new system, volume will be counted purely by cabins booked and sailed.
Lynn Torrent, executive vice president of sales and guest services for Carnival Cruise Lines, said the change will probably not impact most agencies commission levels. She noted that Carnival has not changed its commission tiers since 2003, while the line has increased capacity by 50 percent. “It’s typical for most cruise lines to modify commission tiers as they add capacity,” Torrent said. “As you’re bringing in new ships with more cabins to sell, if you’re a travel agent earning 12 percent, you can still earn 12 percent but you’re going to need to sell more cabins or produce more revenue to get to the same level. We need each travel agent to do a little bit more. That’s pretty much the theory why cruise lines adjust tiers.”
Torrent said Carnival considered basing commission levels on revenue, rather than cabins, as is done by most cruise lines. “We thought long and hard about it, but we chose to go with cabins versus dollars,” she said. “In times when the market is challenged and there’s pressure on pricing, if we were to base tiers on revenue, agents would be penalized for that. We didn’t feel comfortable holding travel agents responsible for pricing actions. There’s upside potential there as well, but most agents like the protection from the downside.”
But that means a three-day cruise from Miami counts the same as a 12-day Mediterranean cruise. “This may be more favorable to agents who live near homeports and sell more three-, four- and five-night cruises,” said Steve Cosgrove, owner of Dynamic Travel in Southlake, Texas.
Bill Knight, owner of All Cruise Travel in San Jose, Calif., believes the changes will probably reduce his commission. “It’s not going to impact my business greatly because we don’t market Carnival very much and in fact we try to sell away from it,” he said. “But this new pricing structure will definitely lower our commission, probably by 2 or 3 percent.”
Both Knight and Cosgrove said they have difficulty keeping a close relationship with Carnival because the line requires so much to be done online. Still, Cosgrove said he was meeting with his Carnival rep today to determine how the change will affect his business. He does agree with Torrent, however, that commission tiers should be raised when capacity grows. “It is appropriate to adjust goals based on more product to sell and more opportunities. I can buy into that,” he said. “All the cruise lines have done that for years. Whether it’s a fair increase or not is another question.”
For his part, Knight wonders what Carnival’s end goal is. “I think they’ve created a commodity product that they think they can market direct and not use the agent distribution system, which they aren’t willing to pay for,” Knight said.