Fred Olsen Cruise Lines has confirmed Travel Weekly’s exclusive disclosure last November that agent commissions are to be overhauled on 2013 bookings.
Sales and marketing director Nathan Philpot is imposing a commission cap of 10% with a bonus of 5% at the end of the year for agents who do not discount.
Commissions generally hit 15% or more when override arrangements are included.
One of Philpot’s first tasks on taking the Fred Olsen job last autumn was to review the company’s cost of sale.
At the time he described rival Complete Cruise Solution’s attempt to abolish retail discounting of cruises by cutting commission to 5% last year as “absolute logic”.
While declining to go into the specifics of commercial deals, Philpot said: “Our aim is to help eradicate a culture where agents are using their own commission and discounting by up to 10%.
“If the price needs to be lowered to drive demand and get a sale then we as the cruise line are responsible for pricing and we will do what is needed to stimulate demand – allowing the agent to retain their full earnings.
“We have had many conversations with agents and have listened and amended our proposed terms as a consequence. It is our firm belief that the vast majority of agents will be more profitable under the new programme.
Fred Olsen has told agents that it is maintaining 15% earnings on brochure fares but these will be split 10% on invoice and 5% bonus commission at end of year providing agents do not discount.
“We are pleased to say that the reaction from our partners have been generally supportive – appreciating that agent discounting has been eroding their profits for some time,” said Philpot.
“I am also delighted to report that bookings are up 20% since we announced these changes.”
He added that the move would remove much of the responsibility placed on agents to create demand with the company increasing its marketing for all agents through activity such as national TV advertising.
Additionally, the line is responding to an ‘offer driven’ market – representing more than half of its business – by:
* Increasing earnings on special offers from current 10% on 2012 departures to 15% on 2013 departures – with 5% being paid at end of year.
* Increasing earnings on late deals from the current 7.5% on 2012 departures to 12.5% on 2013 departures – with 5% being paid at the end of year.
Philpot said he believed the new structure would increase agent’s cash earnings by ensuring all commission is retained and raise sales from agents that do not discount by removing the price advantage used by rivals who may have taken sales by discounting.
He claimed that agents costs would be lowered by improving efficiency and conversion “as there is no benefit to the customer going from agent to agent to keep getting quotes and negotiating prices”.
The action comes two weeks after the line put out pre-launch offers for summer 2013 itineraries with special prices available until April 26.
The trade represents 90% of Fred Olsen’s annual sales of almost 100,000 passengers.
Fred Olsen’s four ships are to operate an increased range of ex-UK itineraries in summer 2013 form eight UK ports, including Harwich and Belfast for the first time and a return to Liverpool.
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