Rebate Crackdowns

Carnival Cruise Lines and Royal Caribbean International are cracking down on travel agents that pass their commissions on to customers in the form of a rebate.

The objective of the cruise lines is to have flat pricing across the board - an even playing field for all agents - with a focus on quality marketing and customer service as opposed to solely price.

"Agents will be forbidden to advertise cruises lower than the official rates set by us," stated Lisa Bauer, senior vice president of sales for Royal Caribbean. "Agencies that rebate egregiously - mostly bigger agencies that can afford to take the cut - make it hard for everyone else to compete. We have the right to decide what we want our cruise to be sold at, and we are exercising that right"

As of August 16, weekly reports are being submitted to Royal Caribbean teams dedicated to monitoring the most relentless rebators, Bauer explained.

"There will be a no tolerance policy for rebators," she continued. "If they are caught, their commission will first be reduced by 10 percent; and if they continue, they will be placed on 'no book' status."

Bauer said the new crackdown will be advantageous in the long run, as agents selling at the same price will allow for a better read on consumer demand "and what is really happening in the marketplace."

It will also eliminate ample confusion, she added. "I have seen some cruise agent websites featuring two different prices for our cruises - one for customer service, and one without," Bauer pointed out. "And customers end up calling us to provide service for them - what we are paying the agents a commission to do. Those are the types of things we are trying to avoid."

Bauer insisted that with the advent of this crackdown, passengers will not lose out on good cruise deals.

"The main difference will be that we will now drive the good deals, as opposed to having the agencies drive them," she added.

On Jan. 1, Carnival is implementing a similar policy: Phase II of its level pricing strategy, with a plan to ensure consistency in all advertised Carnival pricing. Any agencies that advertise non-Carnival approved rates and promotions in any publicly accessible advertising medium, including the Internet, will receive a reduction in their agency compensation, according to the line.

Phase I, introduced last summer, was created to make certain that all travel agencies have access to the same pricing from Carnival. Phase II ensures that Carnival's level pricing policy is clearly and consistently communicated to consumers.

Said Carnival President and CEO Bob Dickinson: "Our travel agent partners should emphasize the service and expertise that they provide to consumers by marketing and promoting, rather than just focusing on price. This new policy will help assure that Carnival and its travel partners are presenting a consistent image."

Added a Carnival spokesperson: "While we will enforce this by routinely monitoring how our product is advertised, what agents do when someone is in their office we cannot control."

Travel Agent Reactions

David Lucas, president and CEO of Pennsylvaniabased, an internet travel company with cruise sales of more than $30 million in 2003, considers his company to be one of the larger players in the industry.

"I can see both sides," Lucas said. "In a way it's helping us, as we will not be price competing any more. But if my business is more efficient than others, and I can pass on a discount to a customer, then why shouldn't I? That is one of the ways in which we build loyalty. But there are other ways to earn business."

Dianne Moore, executive vice president of Virtuoso Travel in Seattle, noted that the new policy will be very hard to police - especially for those that don't advertise.

"It doesn't mean that rebates will go away," Moore pointed out. "There are agents that will work for little commission just to get the sale. But this has been an issue for a long time, and I applaud what Carnival and Royal Caribbean are doing; it's long overdue, and things have gotten out of control. With the influx of all these online agencies, rebating has become more visible. Looking ahead, I'm curious to see how these agencies that have relied on rebating will be competing."

Said Larry Seigel, owner of Larry Seigel Travel, in California: ''This is a great thing for guys like me. I'm a small agency and have to go up against these giants that are always rebating; it's a killer. Nothing can truly stop an agent, but if they feel they will be penalized, they may stop. Large agencies that can afford to take the cuts concentrate on volume and neglect customer service. Now they will have no choice but to focus on another aspect of selling."  

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