Charlie Funk
Last week, I discussed a variety of topics, including my estimate of the size of the North American cruise passenger market, the number of first-time cruise prospects and the rapid increase in direct bookings by cruise lines (up 300% since 2010, according to CLIA).
I concluded that even though the number of new ships on order for delivery in the next seven years or so is quite large, the capacity increase was likely to prove insufficient. I observed that a substantial part of this new capacity would go to the Far East and that when Cuba was opened to U.S.-ported cruise ships, there would be a capacity shortfall in the near term.
In an effort to develop a better picture of the place of the retail channel going forward and to have a clearer picture of growth opportunities, I sent messages to senior executives of many major cruise lines asking if the 300% direct booking statistic was pretty much an average and reflective of their company.
The responses were enlightening and beneficial:
Vicki Freed, Royal Caribbean International's senior vice president for sales and trade support services: "We have always understood the value of the trade and will continue to rely on the trade for the vast majority of our bookings. The trade has access to a larger net of vacationers and therefore is influential in introducing 'cruising' and 'Royal Caribbean' to many people."
Freed continued: "Our success is dependent on the success of the travel agent. Therefore, it is in our best interest to continue to find ways to better support the travel agency community. Travel agents are the 'value interpreters' for the Royal Caribbean brand for the consumer. Therefore, it makes sense that travel agents will continue to see the support and loyalty from Royal Caribbean. ... The take-away by our organization and team is that we really like travel agents and will continue to support them in a huge way."
Lynn Torrent, Carnival Cruise Line's executive vice president for sales and guest services: "As cruise suppliers continue to differentiate and invest in product features, it is critical that travel agents understand all of the various products and brands so that they can help their customers select the best choice for their vacation occasion. The key to our industry's success is getting the right customers on the right products."
Torrent concluded: "We continue to rely on travel professionals and are grateful for their support."
Nikki Upshaw, Oceania Cruises' senior vice president for sales: "We greatly value our relationship with the travel agent community. We have invested in an experienced and successful team of 15 North America regional sales directors in the field and a robust internal team to support those efforts. We would not make this investment if we were not intent on seeking innovative ways to help our travel partners grow their businesses and provide exceptional cruise experiences for their clients."
Gordon Ho, Princess Cruises' senior vice president of marketing: "We believe there is enormous potential with our travel consultant community. Because most Americans have never cruised, cruise represents a unique vacation category with the highest vacation satisfaction levels but relatively low penetration levels. This represents huge upside potential for all travel consultants."
Michelle Saegesser, Viking Cruises' vice president of sales: "Viking River Cruises still remains the leader in direct-to-[travel agent] turnovers" and has a policy that is "more lenient than any other river or ocean line. ... The key to the travel agent community staying relevant is to communicate monthly with their clients."
An official with another cruise line who did not want to be identified: "Our direct [bookings] mix has not substantially changed during the period that you refer to, while our capacity has increased. I feel very strongly that the travel agent has a very positive and healthy future, because I believe a segment of the industry is taking a very positive position toward travel agents and has the view that for a healthy industry, we need every distribution channel to be performing at a very high level. Secondly, not all suppliers are acting in an equal way toward the channel."
Responses from various cruise lines suggested to me that the 300% direct booking CLIA reported does not include incentive and charter bookings, which may account for 10% of the total in some cases. Some segments of the cruise industry are quite a bit lower than the average, suggesting that there are likely one or two lines that are substantially higher.
That's not my point, though.
Direct bookings are a fact of life. Every cruise line I heard from took pains to point out that the retail channel is important to them. But at the same time, they were also spelling out what the retail channel has to do to grow and remain relevant.
Retailers have to be the differentiators. They need to take the time to learn about the prospect and use their vast wealth of knowledge to ensure that the client ends up on the right cruise. This is particularly true for first-time cruisers. It would be interesting to know if there is a client satisfaction difference for first-time cruisers based on booking source.
The challenge the industry faces today is a significant shift in the ratio of past passengers to first-time cruisers. For years, contemporary lines reported one first-timer for each past guest. Today, that ratio has changed to the extent that it might be only one first-timer for every two past guests.
Reversing that trend would seem to be central to continued growth. To expand the universe of first-time cruise prospects beyond my estimate of 30 million or so requires bold action. As I pointed out in a column last year ("For cruising, old news is bad news," Travel Weekly April 21, 2014), far too many people have a negative opinion of taking a cruise vacation.
CLIA has had only modest success in addressing these negative feelings. More needs to be done, and soon, if the number of first-time cruise prospects is ever to grow significantly again.
Such an effort is doubly rewarding because most of those with unfavorable impressions of taking a cruise are millennials and to a lesser degree Gen-Xers. Studies show that, increasingly, millennials are reaching out to retailers for assistance, in contrast with baby boomers who assume they know it all and don't need a travel counselor.
Retailers, having done a good job of getting someone on a ship for the first time and having done the things suggested by suppliers, need an assurance from suppliers of an equitable playing field when the client is next solicited to take another cruise.
A common lament from travel retailers is the frequent, in some cases unrelenting, promotions to past guests by cruise lines that offer many ways to transact with the line but little more than "or see a travel professional" as a way to transact with a retailer.
Technology exists that makes it easy for suppliers to append the name and contact information for the last retailer that booked the target of any promotion. It's time for suppliers to stop soliciting past passengers directly without also including the name of the retailer that made the booking. Don't just tell them to "contact a travel professional." Tell them how to contact the travel professional who last booked them.
Retailers will do well to pay attention to those suppliers that act in accordance with public pronouncements and then book them preferentially. As that one industry source stated, "It is essential that travel agents reward those [suppliers] who invest, support and act as they speak."