Have cruise sales shifted to direct? CEOs say yes, advisors ponder why

CEOs of two of the world's largest cruise companies recently said that travel advisors have been losing market share to direct bookings.

The industry wonders: Why? 

In a video message to travel advisors in October, Royal Caribbean Group CEO Richard Fain said that while the trend was understandable in the short-term, given agency cutbacks during the shutdown and increased consumer propensity to buy online, it was important for agents to get back to doing "what you all do so well."

Richard Fain

And during a third-quarter call with analysts on Nov. 3, Norwegian Cruise Line Holdings CEO Frank Del Rio said that his company had also seen an increase in direct bookings over the agency channel, something he said was starting to change.

"We're hoping that the travel agent community comes back in full force," Del Rio said. "We prefer the travel agency channel. It is our biggest channel. It is coming back: We've seen improvement sequentially quarter by quarter in terms of the percentage of our business that is being booked by travel agents. And I do believe that once our fleet is back in operation along with that of our peers, they will come back."

Frank Del Rio

Like Fain, Del Rio said the trend is understandable.

"They've also been out of work. And unlike the big public cruise companies that can go to Wall Street and raise billions of dollars, these are mostly smaller businesses and can't," he said.

Pandemic disrupted agent-client relationships

Signature Travel Network CEO Alex Sharpe said Fain's comments "don't surprise me."

"I think he really wants to get back to a better balance of agency versus direct bookings," Sharpe said. "He sees the value of travel advisors, whose bookings have traditionally had a higher average daily rate and who are critical to attracting new-to-cruise and new-to-brand customers."

Sharpe cited a number of factors that may have contributed to Fain's observations, beginning with the disruption of some agent-client relationships that may have resulted in clients calling the cruise line directly.

Alex Sharpe

"Nearly 3,000 advisors were laid off in the first half of 2020, and while many have been hired back, there are fewer than there used to be," he said. "So, often when customers with future cruise credits called and their agent wasn't there to answer, they just called the cruise line.

"And if they did reach their travel advisor, they were likely to step up to a more luxury brand."

Throughout the pandemic, Sharpe said, many struggling travel agencies felt their time was better spent focusing on higher-end cruises with their higher commissions. In this regard, Royal Caribbean International bookings may have been disproportionately hurt by agency furloughs, which often targeted young and less experienced agents who were more likely to focus on contemporary than upscale cruise lines.

Indeed, Signature data indicate that, looking at Royal Caribbean Group brands, although its agents have a solid number of bookings with Royal Caribbean International, it is "certainly even better on Celebrity, and with Silversea, even better than that."

Travel advisors, meanwhile, said any change in market share toward direct booking is a loss for the cruise line, the agency and the customer.

"Is there a place for booking online? Absolutely," said Avril Winkle, owner of Destinations Travel Services in Sterling, Ill. "But then they come to us and we tie it all together. It's tedious at the moment because even the clients who used to not need much hand-holding, where we'd maybe talk three or four times before they sailed, now call me every day because they are nervous and just want someone to say yes, you have followed the guidelines. We all know if you book online you don't have that." 

Consortia marketing: NCL versus Royal Caribbean 

Signature said that while Royal Caribbean "did some wonderful things with commission protection," they stopped marketing through the consortia for a year during the heart of the pandemic. Norwegian Cruise Line, on the other hand, stayed "very aggressive and in many cases propped up the consortia and the agencies and created override opportunities."

Norwegian Cruise Line senior vice president of sales Todd Hamilton said that since May, the line had seen business from the agency channel increase "as opposed to direct."

"We've had five straight months where trade has gone up month after month, from May through September," he said. "I see this as affirmation that we're doing the right thing, and I'm really proud."

NCL said it has supported travel advisors by changing commission policy, staffing a full call center for them and "trying to do everything we can to increase their business," Hamilton said. "We are heavily dependent on the trade; we are not successful if they are not successful."

A mutual benefit

World Travel Holdings co-CEO Brad Tolkin pointed out that Royal Caribbean has supported the agency community in many ways during the pandemic.  

Brad Tolkin

"What is very clear is that for the cruise industry to recover, the cruise lines need the army of travel advisors in the United States," he said. "Just last week, Royal Caribbean International gave away more than 1,000 free cruises at the Travel Leaders Network conference. This was on top of tens of millions of dollars they loaned to the professional travel agent community."

Signature's Sharpe agreed that the cruise lines' "need for our business has not diminished."

"I'd argue that through Covid, it's increased," Sharpe said. "So I think Richard wants to push the trade harder."

Indeed, Sharpe added that "there's a lot to sell out there, and we're going to sell a lot more in '22 than we did in 2019," projecting Signature sales of more than a $1 billion.

In the end, he said that Fain "needs us, and we need him."

"It's a great relationship, and collectively, as we come back, I think the future is bright," Sharpe said.

"It'd better be," he added. "I'm sick of the crap."