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Cruise Roundtable: Learning from the RecessionSeptember 24, 2010 By: Ruthanne Terrero Travel Agent
Travel Agent sat in on an all-star panel of cruise and travel industry executives and is sharing their feedback with you. In this first part of a series, Ruthanne Terrero asks the experts what they have learned from the recession. Here's what they had to say:
Ken Watson, Silversea
When you look back over the last couple of years, it's been an amazing journey, not only for this industry but for others, too. What we have learned really is to be flexible. Silversea might have been a bit more rigid years ago. Now, we believe in flexibility and that we have to service our travel community and the travel agents in particular. During the last year and a half, our senior management looked into almost every single booking to make sure that the travel community and our guests were happy and it worked. We came out of it a lot stronger, so did our relationship with the travel agency community.
Mitch Schlesinger, Voyages to Antiquity:
We have done an interesting thing. We started a cruise line during the worst part of the recession. We also knew we had to come up with this very interesting niche product. On the consumer side, it's about creating a value proposition for the consumer. So we build a product that is as inclusive as it can get, with everything built in. You need to get the consumer to not look at price as much as the value of what they get. The third part of is the travel agent. And because we pay agents commission on all of those elements in a product, it gives us the ability to stand up and say we support you.
Bob Sharak, CLIA:
From CLIA’s perspective, it’s a little different because we are a membership organization, the trade association for the cruise industry. I count as members 25 cruise lines on one hand and 16,000 travel agents and agencies on the other, so we serve different groups.
What we’ve learned is that there are two groups of agents out there—one which was worried and maybe reduced expenditures, didn’t risk marketing and tried to ride it out. The other said, “The situation is what it is but this is my business and I have got to do something for it.” So they continued to market and find new ways to sell. Maybe they embraced social media, maybe they reinvested in themselves and their employees. As a matter of fact, during this period, CLIA had record numbers of agents who enrolled in our certification program. As of today, there are over 12,000 agents who have enrolled for the certification. It’s a record! We haven’t had those numbers for years. So there was an opportunity out there.
Fortunately, for the most part, most agents took up proactive reinvestment and it showed in our numbers. That was an interesting lesson to be learned. We reinvested in ourselves. We refreshed all of our training programs. We introduced new modules such as social media—things that are relevant to agents today.
We continued investing on agents because I hold meetings with the cruise lines on a daily basis and I can tell everybody here that the travel agent community is always No.1. We are always talking about how to support these folks, train them and make them better, smarter or more productive.
Vicki Freed, Royal Caribbean:
The recession brought for our company a lot of opportunities to reevaluate our priorities. With years of experience in our leadership team, we all knew that the recession would be there for a period of time—hopefully a lot shorter than we wanted—but that we would continue to exist as a business. So, we decided to take advantage of the recession by building on our relationships with travel agents and making them even stronger. We created programs like ASAP, which gave every agent at the beginning of the year, as we saw the economy getting soft, an extra point of commission. Our chairman gave the Royal Caribbean brand an additional $3 million to help fuel the agents’ marketing activities. We didn’t want travel agents to shrink in size because we depend so much on them. We had to strengthen our relationship with the trade so that after the recession they are there to support us.
In our company, we did go on a diet. We trimmed some of the flab without touching the product. We realized that touching the product will hurt us in the long run. But there were things we could do with salary freezes and by laying off a few employees.
We also introduced the Oasis of the Seas during the recession. It wasn’t quite planned that way but it did allow us to give travel agents hope, with an exciting new product. It got a lot of consumer press and that allowed us to take advantage of the value proposition of cruising as the best vacation. We said this is the time to bolster our communication with travel agents and consumers. Media was becoming more of a bargain in the recession so we were able to continue with our TV campaign that got us a lot of attention. We feel that 2010 is a good year, although not as good as we’d have wanted it to be, but at least we are heading in the right direction.
Larry Pimentel, Azamara Club Cruises:
The most important thing to have from an agent and personal perspective is being positive in the face of adversity. That’s an important lesson because when fear crept in and expectations fell, people slowed down. Rather, they stopped. [The recession] was a tough time and it reminds me of the Depression era, [which was about setting priorities and being practical]. And corporations did that [in the recession], too, so to use the term that Vicki did, we all went on a diet and learned what we need to do to sustain us.
When our corporation [Royal Caribbean Cruises] was about to invest in the Azamara Club Cruises brand, a lot of people said it wasn’t a good time. So we needed the agent community to communicate to customers in terms of value, which is just not a price point, as a lot of clinical data proves. It's the perception of a client as to what they are about to receive and the ability of an agent to articulate. That’s something we have to learn to do more and more of. And when we do that, we will always overcome things we are fearful of, like the recession.
Terri Haas, Compagnie du Ponant:
We also decided to launch our brand in North America, on the heels of this challenging period, after being in France for 22 years. One of the things we have learned, and rather surprisingly, is that the American public is pretty resilient and gets over things far more quickly than the Europeans. It has reaffirmed this is a good opportunity and place for us to be in right now to promote ourselves as the only French cruise line offering intimate, small ships possessing great value. So again, it’s when people feel they can spend the same amount of money to get something bigger and better than what they could have imagined. It's been a great move and we are starting to get our toe in the water and gain some traction. And it's been very well received.
Jack E. Mannix, Jack E. Mannix & Associates:
From the retail perspective, there have been a number of lessons learned. Certainly, one of them is that having a business based solely on being an expert on one destination or a product is over. [Travel agents] have to be businesspeople today, possessing sophisticated skills that relate to their marketing. They have to be their own CEO, vice president of sales, chief technology officer, etc. So, those who have survived, and will continue to survive and prosper, are the ones who understand that this is a business and that they have to be better at business than they ever have been. Unfortunately, not all have learned that message and I am sorry to say that I think some will not. But I am encouraged by seeing people emerge stronger than ever.
Those [travel agents] who have had some challenges over the last 10 years have become more resilient and I think there is a sentiment out there that there is light at the end of the tunnel. It's not that people are not traveling—you have to be the one selling them. You have to give them a reason to buy from you. Every supplier who can sell directly, for example, is going to, and that’s okay. But the retailer today brings to the table an expertise that can't be matched. Therefore, they need to focus on those consumers who are interested in buying a product and gaining from the expertise the retailer brings. So in many respects, I was bullish on this industry as I have been, maybe more so. [Travel agents] have to be better marketers because they have to find the needles in the haystack, to find the customer who does need that expertise, who is interested in fairly uncommoditized type of product. If anything, I think those who have made it this far will surely see a more prosperous and bright future.
Chris Austin, Starwood:
One of the most important things Starwood has been focusing on is getting our company in order, just as the rest of the companies in the room. But there are strategies that can be emulated by the retail travel professionals as well and I hope they are able to get their companies back in order as well. One of the big decisions Starwood made moving into 2009 was to continue investing in our products. So, when others were cutting back on product, we continued to invest. And over the last two years, we have spent over $6 billion on Sheraton as a brand to increase [the scope of] that brand. We continued to open hotels. In fact, Starwood is the largest player in the luxury hotel space with over 300 properties in the pipeline, and we continued to sign new hotels. And to avoid retrenching, not go deeper into that hole, we continued to lead our business with vision, innovation and differentiation. Those are the three words that any retail travel professional can use to look at their own business and say, “How am I being a visionary, innovator and differentiating myself against competitor agencies in the community or country?”
The other point is that we have ramped up focus on the retail travel professional. Building trust with us is the most important factor. If we have no trust with the agency community, we wouldn’t have that business.
Maurice Zarmati, Costa Cruises:
At Costa, we needed to figure out what we did best and where. In the early days, the Caribbean used to be the destination of choice from the U.S. It was much later that Europe came into the marketplace and Americans started flying to the continent to cruise from there. But the reverse was the case at Costa Cruises because we were not well-known in the U.S. but had a formidable market share in Europe. We decided to do what we do best—to specialize in our departures points from the U.S. to Europe using the core markets that are best known to us, understanding that market place really well and then expanding it to expose it to the U.S.
Rick Sasso, MSC Cruises:
Like everybody else, we have to learn to be more efficient. In fall 2008, we were doing well, everybody was building ships and all of a sudden it just dropped off and though we could manage it, we weren’t in control. We put our thinking caps on and found more ways to be efficient without cutting service and quality. We knew we already had the fastest-growing brand but we just couldn’t say, “Okay, let’s stop now and wait.” We had to keep the momentum going. While in Europe, we are a household name, in North America we were an unknown brand. But we needed to continue to market and define a more efficient way to do so. We had to use the cleverness of online and partners to create partnerships with travel agents that helped us spread our brand name.
We knew that service was going to be a defining fact. We knew we all had great ships. This industry is built on great ships by so many brands it’s hard to differentiate sometimes. But certainly, customer service is a philosophy that some companies either adapt to and go aggressively with or they just take it for granted.
We thought like our customer base—our travel agent partners and our customers who sail with us—to make sure we excelled in our service. When our people answered the phones, and the clients sought group space, we made it our practice to never keep them on hold. We kept going, and we invested well. We have the best support for the travel agent community in terms of compensation and commercial arrangement. And I think our management team is quite sensitive to the fact that the travel agent is the primary source of our success. We’ve put a lot of eggs in that basket.
The last piece is for all of us, that has been played by CLIA, ICCL and FCCA. There needs to be a central place where we can do the right thing together—be more safety- and environment-conscious and everything else that make us a better industry because yes, it is about independent companies, but it's also about our industry. And I give a lot of credit to the leadership at CLIA, ICCL and FCCA for the way they’ve managed us in these areas, because of the kind of signups we have for the training, the stuff in Washington we need to combat all the time. That’s been a major factor in our industry surviving an adverse time.
Roundtable participants included:
John McMahon, vice president/group publisher of The Travel Group; Ken Watson, COO, Silversea; Terri Haas, chief commercial officer for Compagnie du Ponant in North America; Rick Sasso, president and CEO of MSC Cruises in North America; Maurice Zarmati, president & CEO, Costa Cruises; Mitchell Schlesinger, vice president, sales & marketing, Voyages to Antiquity; Vicki Freed, senior vice president of sales, Royal Caribbean; Larry Pimentel, president and CEO of Azamara Club Cruises; Jack E. Mannix, Jack E. Mannix & Associates; Chris Austin, vice president of global retail, leisure and luxury sales for Starwood Hotels & Resorts; Bob Sharak, executive vice president, marketing and distribution for CLIA; and Ruthanne Terrero, vice president and editorial director for The Travel Group.