V.Com Says Cruise/Retail Relationship Strong, Despite Low Margins
Cruise Week

Many agents interviewed by Cruise Week are reporting a recovery in bookings, but any joy is being tempered by narrowing profit margins per sale. Vacation.com V.P. Marketing Stephen McGillivray was asked if he sees any foreseeable relief from the trend.

"I hope the Regent experiment of eliminating non-commissionables works, but at this point other lines are not letting up on NCFs," McGillivray said. The V.Com executive confirmed that passenger counts are up but revenues down for many retailers in the network.

What's needed, says McGillivray, is for more lines to develop compensation formulas that aren’t completely based on revenue: "Why not have compensation programs based on a mix of revenue and passenger count?"

Despite reports of recovery there has been little slowdown in discounting. The good news, says McGillivray, is that sometimes the discount-oriented sales are panning out. "We’re very happy with our network booking results on Royal’s WOW sale. We try to fire up the network to get behind such sales because things like reduced deposits add value for the consumer, giving agents a reason to re-contact their customers."

McGillivray sees an ongoing reliance on close-in bookings for 2010. For instance, early booking patterns for 2010 Alaska indicate a repeat of this year's situation. "When we look at the 2009 Alaska performance of our network, our biggest number of passengers was booked in March, April and May. All the promotions have trained the consumers to wait."

Regarding the Caribbean, McGillivray has higher hopes for yield improvement thanks to the addition of Oasis and Norwegian Epic in particular. "With new ships creating buzz, we’re hoping prices hold better," he says. "Hopefully, the new hardware creates new customers." If it doesn't however, McGillivray fears that the Caribbean faces significant capacity growth challenges, resulting in another year of narrow margins without a change in commission structure.

NCFs and narrow margins aside, McGillivray notes that cruise support of the trade is strong, including putting the bulk of marketing money behind the traditional agent distribution system. Comparatively speaking, there’s even support in keeping direct bookings from mushrooming.

"The lines have gone out of their way to protect the retailer in terms of direct bookings. They’ll solicit the past guest but they do a better job than other channels in protecting the retailers.

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