Nearly one in five travel agencies say they are selling fewer cruises because of decreased revenue resulting from noncommissionable fares (NCFs), according to a new white paper produced by ASTA.
The survey results show that some 17 years after their creation, NCFs remain a front-burner issue for agents who sell cruise vacations.
Even so, the seven-page analysis found that cruise lines are not about to roll back NCFs.
"They are clear that the NCF is not going away and that agencies would be better off concentrating on selling a high enough volume of cruises to enhance their compensation package," the report said.
That appears to be happening, as well.
According to the survey, 44% of agencies reported selling more cruises in response to NCFs. For many travel sellers, cruises remain a majority of their business, even if they are trying to diversify.
Zane Kerby, ASTA president and CEO, said agencies should set a strategy for coping with NCFs, no matter what it is.
"Ultimately, ASTA urges those agencies heavily dependent on selling cruise to take a few hours and look at their revenue data and make their own determination of whether the NCF is reasonable and if profitability is sustainable."
Although NCFs aren't new, the subject is reluctantly discussed by cruise suppliers and remains confusing to many agents. Kerby said he hopes the white paper will provide some clarity.
It contains several pieces of ASTA research that shed light on how agencies are reacting to NCFs, how much of a cruise sale is sacrificed to the NCFs and how the sale of cruises and tours, which don't carry NCFs, compare over a 12-year timeframe.
The white paper used data from its financial benchmarking survey done in July to explore how agencies are changing their approach to cruises. Agents picked from among eight responses and were allowed to pick as many as applied.
The paper said a majority of those who said they were selling more cruises also said they had made changes, including shifting business to higher-yielding cruise lines and moving business because of client preference.
"Many of those selling more have commented that they have shifted to higher-end products and are selling more river cruises," said Melissa Teates, ASTA's director of research.
Eric Maryanov, president of Los Angeles-based AllTravel.com, said his agency tries to focus its marketing on lines that have lower NCFs on average.
"Certainly it is more encouraging on the river cruise side, and we are really pushing and marketing on the river cruise side," he said.
Shifting among cruise lines to get a better return was cited by 29% of those surveyed.
Another 18% said their agency sells fewer cruises because of revenue lowered by NCFs.
"Those selling fewer cruises said they are selling away from cruises unless the client specifically asks about cruises and are selling more all-inclusive resorts and tours instead of cruises," the white paper reported.
Teates said agents are generally aware of which lines on average have higher or lower NCF structures before they sell a particular cruise. But she said she was surprised at the variability.
An audit of invoices showed most NCFs range from 7% to 15% of the gross fare, which the study says supports agent claims that the way NCFs are calculated is arbitrary.
"They can't explain what it is," said Roy Anderson, owner of 7 Seas Cruises, in Atwater, Calif. "It doesn't make sense."
Anderson said he has adapted by selling more all-inclusives and tours, although a majority of his revenue remains cruise related. "We've been doing it for so long people come to us," he said. "They don't realize that we're not just a cruise company anymore."
Some agencies have systems that calculate the NCF prior to sale. At Cruise Planners in Coral Springs, Fla., the system generates a client-facing bill of sale without the NCF information, and an internal one that shows the NCF and prospective commission, said spokeswoman Caitlin Murphy.
It gives agents some power to choose a higher commission, if two cruises equally benefit a client.
ASTA's white paper gives a sampling of itineraries, showing, for example, that selected seven-night Alaska cruises departing from Seward, Seattle and Vancouver each have a different NCF-to-fare ratio.
The NCF on the Seward itinerary would amount to 13% of the base fare, while that on the Vancouver itinerary would be 17%.
The white paper traces the origin of NCFs to the 1997 deal with Florida's attorney general that stopped cruise lines from lumping port costs with "government taxes and fees," thereby lowering advertised fares. Cruise lines then created NCFs to avoid paying additional commission on those costs, the paper said.
"Basically it was a very clever commission cut," said Al Ferguson, owner of Legendary Journeys of Sarasota, Fla.
Ferguson said the fallout is that he's forced to pick and choose lines more often based on how they contribute to agency profits, then to bundle other features with the cruise to increase earnings.
"You can no longer sell a cruise for the sake of selling a cruise," Ferguson said.