Cruise lines encourage use of TA's

[MicCanberra]

27 minutes ago, iancal said:

There can be no doubt that some cruise lines encourage people to book through TA's.

 

If you are unsure of this simply spend a few minutes on the HAL website or the Celebrity website.

Yes, most mass market cruise line websites are terrible.

[taglovestocruise]

Cruise lines are very good at controlling costs and cutting out waste.  The fact they use outside TA'S shows that is a profitable form of cutting costs.  Cruise lines will book over 24 million passengers in 2019, it would take multiple 10's of thousands of cubicle dwellers to service that amount..

[iancal]

Ideally, you would think that the cruise lines would like you to book on line.  Just as many people do for air, AI's, hotels, etc.

 

Some might increase their on line booking numbers IF they had well designed and high performing websites.  Sadly, do not appear to be interested enough in this low cost sales channel channel.   

 

If I was given the choice of a ten percent discount provided I booked on line I would probably do so. I would of course avoid the dog websites.  I book everything else on line, why not this. Just make it easy for me and provide me with a financial incentive.

Edited March 25, 2019 by iancal

[MicCanberra]

1 hour ago, taglovestocruise said:

Cruise lines are very good at controlling costs and cutting out waste.  The fact they use outside TA'S shows that is a profitable form of cutting costs.  Cruise lines will book over 24 million passengers in 2019, it would take multiple 10's of thousands of cubicle dwellers to service that amount..

agreed

[MicCanberra]

5 minutes ago, iancal said:

Ideally, you would think that the cruise lines would like you to book on line.  Just as many people do for air, AI's, hotels, etc.

 

Some might increase their on line booking numbers IF they had well designed and high performing websites.  Sadly, do not appear to be interested enough in this low cost sales channel channel.   

 

If I was given the choice of a ten percent discount provided I booked on line I would probably do so. I would of course avoid the dog websites.  I book everything else on line, why not this. Just make it easy for me and provide me with a financial incentive.

I too would book direct more often if their was the incentive to do so.

[ldubs]

14 hours ago, Joebucks said:

Where do you get that they encourage TAs? That would imply that they would prefer you to book with TA at a commission charge to them vs direct. They would prefer you to book direct if you already know what you want.

 

I think what you say here is what the OP intended to say.  Even if the correct number is 16% commission, that is a big number.  

 

Quote

They keep a good partnership with TAs because those are marketing teams fighting to get people aboard for them. Some people are crazy about their TAs and trust them with their lives. If I was a betting man, I would guess the average TA sale is a larger one for the cruise line than booking direct.

 

Another poster says only 25% of fares are booked directly.  I suspect you are correct and that the direct bookings are lower fares in general.  That probably explains why TA's are able to kick back some of the commission.  A TA wouldn't have enough $$ in an inside booking to kick much of anything back.  

 

Quote

I don't buy that it's because "they don't want to pay employees". A cruise line sales person is peanuts compared to a TA fee. With also such a large company, they have economies of scale on their side. I just don't believe the cruise line employees can always connect with the customer on a personal level like their TA can. That can bring in far more to the bottom line that cutting a few line-levels.

 

From an accounting standpoint I wonder if a commission expense is treated differently than a salary expense.  I also wonder if the in-house folks are indeed employees.  I would suspect they are independents.  Don't know.  Just guessing.     

 

Anyway, what you post makes sense to me.  

 

 

Edited March 25, 2019 by ldubs

[MicCanberra]

Both Royal and X have travel consultants on board that are not part of the staff for the Future cruises desk.

[DirtyDawg]

On 3/23/2019 at 10:44 PM, njhorseman said:

I owned a travel agency for a number of years. Typically commissions paid by cruise lines were 10 to 20%. 

Very simply it's cheaper to pay commissions to travel agents than to employ sufficient numbers of in house agents to service all the customers.

 

Hi, is that 10% - 20% the commission paid to the agency? If so, what is the typical payout percentage to the individual TA? And just because I'm curious, what kind of total sales would a typical TA generate in a year, $1million, 2 million? 

Thank You

[njhorseman]

1 hour ago, DirtyDawg said:

 

Hi, is that 10% - 20% the commission paid to the agency? If so, what is the typical payout percentage to the individual TA? And just because I'm curious, what kind of total sales would a typical TA generate in a year, $1million, 2 million? 

Thank You

Yes, 10 to 20% to the agency. Some agents might work on salary only, some on salary plus a small percentage of the commission, and some...what the industry calls "outside agents" on a large percentage of the commission only. 

 

I don't have the foggiest idea of the sales of a "typical" agency might be. The traditional brick-and-mortar travel agency like I owned is a dinosaur that is rapidly moving toward extinction, replaced by larger operations that are telephone and internet operations. 

[leaveitallbehind]

55 minutes ago, njhorseman said:

Yes, 10 to 20% to the agency. Some agents might work on salary only, some on salary plus a small percentage of the commission, and some...what the industry calls "outside agents" on a large percentage of the commission only. 

 

I don't have the foggiest idea of the sales of a "typical" agency might be. The traditional brick-and-mortar travel agency like I owned is a dinosaur that is rapidly moving toward extinction, replaced by larger operations that are telephone and internet operations. 

And to add to this, the commission rate paid is not based on the full stateroom booking rate of the cruise paid by the customer.  There is a non-commisionable portion of the base rate that is deducted by the cruise lines from the rate prior to commissions calculated, and any fees and taxes are excluded as well.  The net of this would have the commission rate based on about 70%+/- of the total paid $ by the customer - which makes the actual received by the agency / agent even less.

 

So if an agency were to generate $1 million in total revenue, the 10-20% rate would be based on about $700K of that which would equal about $70 - $140K to them.  (And on average it would probably take about 200 - 250 booked double occupancy cruises to = $1 million in revenue.  Not a small amount!).

 

And again, this is what is paid to the agency.  The booking agent would receive a split of that. So maybe the 30% the OP keeps insisting upon would be the split of the total received by the agent.  But it is with certainty that it is NOT the total amount paid by the cruise line.  The 10-20% (or 16%) as reported by njhorseman and myself IS correct.

Edited March 25, 2019 by leaveitallbehind

[Hlitner]

We once had a long chat with a HAL Future Cruise Consultant who we knew before he even got that position with the cruise line.  He explained that approximately 80% of cruise bookings come via cruise/travel agencies.  Not only do these agencies handle sales, they also are very effective at marketing.  It is actually less costly to pay these agencies commissions and overrides then it is to hire additional office staff, train them, pay them, etc.  

 

A few years ago we got into a CC discussion (on these boards) about the benefits of using good cruise agencies (which we have done for over thirty years).  Several folks convinced me that perhaps I was wrong and should be booking direct.  So we looked at a certain Princess cruise and priced it out with Princess and also with several of our favorite agencies.  All of the agencies offered us a lot better deals then the cruise line.  I then telephoned Princess and managed to get a senior supervisor on the phone (no easy task).  I told her that we would love to book direct with Princess and would do so if they would match the best deal offered by a particular major cruise agency (who we still use today).  The Princess rep explained that they would NOT match the offer and Princess (as a matter of policy) did not want to compete with cruise agencies.  

 

To this day it is the same.  Book a cruise onboard Princess, Celebrity, HAL, etc...and they will readily transfer the booking to the cruise/travel agency of your choice.  

 

My question, which has often been asked here on CC, is why on earth does anyone book directly with a cruise line.  By shopping around among high volume reputable cruise/travel agencies you should be able to save 7-10% (sometimes more) as compared to the best deal you get by booking directly with the cruise line.  To this day we have never heard a good reason to book direct.  The most common comment is "we like keeping control"  which somebody else pointed out makes zero sense.  You do not maintain any control when booking direct.....the cruise line has the control.   When you use a good cruise/travel agent they can use their vast experience in dealing with multiple cruise lines and act as your advocate if there is an issue.  High volume agencies have lots of clout with the cruise lines....much more then a single cruiser.

 

Hank

[iancal]

+1.

We also do not understand the ‘keeping control’ argument for booking direct.

 

We essentially get one free cruise for every 12 or so that we book based on the 6-12 percent OBC rebates that we typically get from TAs..  

 

From time to time we read how wonderful people feel when getting so called free optional dining venue meal or a free bag of laundry as a benny.   It seems so inconsequential to the benefit that one can get simply by working price with a good TA.  And you still get that free meal, bag of laundry, and maintain exactly the amount of so called control over the booking.

[DirtyDawg]

3 hours ago, leaveitallbehind said:

So if an agency were to generate $1 million in total revenue, the 10-20% rate would be based on about $700K of that which would equal about $70 - $140K to them.  (And on average it would probably take about 200 - 250 booked double occupancy cruises to = $1 million in revenue.  Not a small amount!).

 

 

3 hours ago, leaveitallbehind said:

And again, this is what is paid to the agency.  The booking agent would receive a split of that. So maybe the 30% the OP keeps insisting upon would be the split of the total received by the agent.  But it is with certainty that it is NOT the total amount paid by the cruise line.  The 10-20% (or 16%) as reported by njhorseman and myself IS correct.

 

So to make a $100K income at 16% commision rate, an individual commissioned agent would need to generate about $3 miilion in cruise fares just by themselves. ($3M X. 7= $2.1M X16% = 336K to agency  X 30% = 100K to agent) 

 

Tough gig!

Edited March 25, 2019 by DirtyDawg

[Flatbush Flyer]

4 hours ago, leaveitallbehind said:

And to add to this, the commission rate paid is not based on the full stateroom booking rate of the cruise paid by the customer.  There is a non-commisionable portion of the base rate that is deducted by the cruise lines from the rate prior to commissions calculated, and any fees and taxes are excluded as well.  The net of this would have the commission rate based on about 70%+/- of the total paid $ by the customer - which makes the actual received by the agency / agent even less.....

 

.......And again, this is what is paid to the agency.  The booking agent would receive a split of that. So maybe the 30% the OP keeps insisting upon would be the split of the total received by the agent.  But it is with certainty that it is NOT the total amount paid by the cruise line.  The 10-20% (or 16%) as reported by njhorseman and myself IS correct.

Every once in a rare while I'll get the TA's version of my Oceania invoice (someone forgets to remove that doc from all the booking attachments forwarded by O), which shows the commission calculation.

 

With the understanding that the itinerary (e.g., port fees, taxes et al.) is a major factor in how much of the cruise fare is commissionable, I took a look at a recently completed cruise and found the commissionable fare to be approx. 85% of our paid fare. That particular travel agency received 17% of that amount (on that cruise) as a commission and we received approx 50% of that commission (as refundable SBC), which I consider to be a fair and reasonable ideal for me to pursue in each TA negotiation. 

 

Using the above example, my 50/50 split of the Travel Agency's commission netted approx 7.5% of my total fare.

 

Of course, all of this is a moving target since, in some instances (beyond the already variable itinerary factors), the possible addition of gratuities or other perks with monetary value (directly from the Travel Agency [or its Consortium] or as pass through incentive funds from Oceania) also affects the bottom line savings to us. (Note that your O Club loyalty level could add an "in lieu" gratuities credit if the TA is covering them - usually $250/cabin in non-refundable SBC).

 

How much of the Travel Agency commission goes to the actual TA, before or after my piece is carved out, is really not my concern.

Edited March 25, 2019 by Flatbush Flyer

[iancal]

We do not really care what the agency or the TA earns.

 

We only care about what we pay, net of any OBC's.  The rest is noise level to us.

[leaveitallbehind]

2 hours ago, DirtyDawg said:

 

 

So to make a $100K income at 16% commision rate, an individual commissioned agent would need to generate about $3 miilion in cruise fares just by themselves. ($3M X. 7= $2.1M X16% = 336K to agency  X 30% = 100K to agent) 

 

Tough gig!

You are pretty accurate directionally but maybe not in the true math as the 30% I was referencing as the split to the agent was only commenting to that which was being touted by the OP as the commission level paid in total - about which they are incorrect.  Sorry if that was misleading.

 

The true split is determined by the agency and the agent and typically is 50% or greater to the agent.  So with (as a simple example) $1M revenue x 70% x 16% x 50% =$56K to the agent.  To get to your $100K would require about $1.75M in revenue.  And again, these are all approximations.  

 

The point being that the OP is totally incorrect in their presumption of a 30% commission paid to TA's by the cruise lines.  It is more along the 10 - perhaps 20% on the commissionable portion of the cruise fare (not the full amount) to the Agency, with a split to the Agent from there. 

 

But yeah, a fairly tough gig.

Edited March 25, 2019 by leaveitallbehind

[Toofarfromthesea]

1 hour ago, iancal said:

We do not really care what the agency or the TA earns.

 

We only care about what we pay, net of any OBC's.  The rest is noise level to us.

 

Exactly.  There is no 'control' of my booking that is worth giving up over 1,000 dollars in refundable OBC on a 10,000 total fare - actual recent occurrence,

[LHT28]

Just now, leaveitallbehind said:

The true split is determined by the agency and the agent and typically is 50% or greater to the agent.  So with (as a simple example) $1M revenue x 70% x 16% x 50% =$56K to the agent.  To get to your $100K would require about $1.75M in revenue.  And again, these are all approximations.  

 

Looks good on paper  but reality is a lot different

Let's  not forget the agency  has expenses  to stay in business  & the agent  themselves may have expenses if they work from home

 

being a  TA  is  not all it is cracked up to be 😉

JMO

[leaveitallbehind]

40 minutes ago, LHT28 said:

Looks good on paper  but reality is a lot different

Let's  not forget the agency  has expenses  to stay in business  & the agent  themselves may have expenses if they work from home

 

being a  TA  is  not all it is cracked up to be 😉

JMO

You are correct and believe me - I understand.....

But that is why the agency takes their split to cover their end.

 

Just providing the raw math.

[LHT28]

Just now, leaveitallbehind said:

You are correct and believe me - I understand.....

But that is why the agency takes their split to cover their end.

 

Just providing the raw math.

just adding to your  raw math

people may think  that split is all profit  😉

 

[MicCanberra]

taxes, overheads, etc.

[iancal]

I do not envy TA's.  They are working harder for less money.  Just take a look at how many B&M agencies have folded over the past few years.   Technology has made a fair portion of their business disappear.

 

 People are more internet savvy than ever, they know how to shop for product and price.   Travel information is easy to find on the web.  Not just in their home county, but internationally as well.   TA's in North America, on line or otherwise, could not compete with a few out of country bookings that we have made from time to time-cruises, air, AI's.

Edited March 25, 2019 by iancal

[DirtyDawg]

3 hours ago, leaveitallbehind said:

You are pretty accurate directionally but maybe not in the true math as the 30% I was referencing as the split to the agent was only commenting to that which was being touted by the OP as the commission level paid in total - about which they are incorrect.  Sorry if that was misleading.

 

The true split is determined by the agency and the agent and typically is 50% or greater to the agent.  So with (as a simple example) $1M revenue x 70% x 16% x 50% =$56K to the agent.  To get to your $100K would require about $1.75M in revenue.  And again, these are all approximations.  

 

The point being that the OP is totally incorrect in their presumption of a 30% commission paid to TA's by the cruise lines.  It is more along the 10 - perhaps 20% on the commissionable portion of the cruise fare (not the full amount) to the Agency, with a split to the Agent from there. 

 

But yeah, a fairly tough gig.

 

Thanks for the raw math!

I asked because I know a fair bit about the inner working of many industries for my years being an investment analyst and portfolio manager, but the TA industry is one industry I know very little about as I never covered it or invested in it. 

Edited March 25, 2019 by DirtyDawg

[LHT28]

Just now, DirtyDawg said:

 

but the TA industry is one industry I know very little about as I never covered it or invested in it. 

You could  google TICO  & IATA  to get some insights

[Joebucks]

9 hours ago, Hlitner said:

My question, which has often been asked here on CC, is why on earth does anyone book directly with a cruise line.  By shopping around among high volume reputable cruise/travel agencies you should be able to save 7-10% (sometimes more) as compared to the best deal you get by booking directly with the cruise line.  To this day we have never heard a good reason to book direct.  The most common comment is "we like keeping control"  which somebody else pointed out makes zero sense.  You do not maintain any control when booking direct.....the cruise line has the control.   When you use a good cruise/travel agent they can use their vast experience in dealing with multiple cruise lines and act as your advocate if there is an issue.  High volume agencies have lots of clout with the cruise lines....much more then a single cruiser.

 

For me, I've never had a good reason to book with a TA so I just haven't. Out of every time I have tried, the best I ever got was once an extra $25 OBC. To be fair, I tend to book interior rooms, off-peak season, on budget lines. The TAs aren't giving me anything, because they aren't making much on it either. There is a big difference between a summer suite and an off-peak interior. I'll try again, but they haven't given me a reason.

 

I'd rather book through my credit card's rewards points, and pay no fare out of pocket.