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View from the Top - Brad Tolkin Briefs CruiseOne and Cruises Inc. AgentsOctober 19, 2012 By: Susan Young
|Brad Tolkin, co-CEO and co-founder, World Travel Holdings // All photos by Susan J. Young|
Giving a “View from the Top” presentation at the annual CruiseOne and Cruises Inc. annual conference this week in Orlando, Brad Tolkin, co-CEO and co-founder, World Travel Holdings (WTH) and parent company of the cruise brands, told the 785 agent attendees that fourth quarter indicators look positive.
Most notably, 2013 advance bookings are robust, the booking window is lengthening into the new year and cruise prices are increasing, Tolkin said.
“We see a lot of strength in Q4,” he told the franchise agency owners and agents who spent four conference nights on land at Disney’s Coronado Springs at Walt Disney World Resort and three nights onboard the Disney Cruise Line (www.disneytravelagents.com).
“The average booking window in the fourth quarter is also longer than in the second and third quarters," said Tolkin. While the company still sees pockets of sluggishness, the strengths surfacing for the fourth quarter are continuing into 2013.
Sales of cruises that depart in the first quarter of 2013 are up more than 8 percent versus those sold for the same quarter of 2012 at this time a year ago.
Second, third and fourth quarter 2013 cruise sales are up nearly 14 percent, 37 percent and nearly 45 percent, respectively, compared with sales on the books for those same 2012 quarters at this same time last year.
Challenging Year, But Improving Fast
What a difference a year makes? Last year at this time, cruise bookings were “off the wall,” and subsequently December 2011 was the best booking month in more than three decades, according to Tolkin.
In late 2011, the Christmas-to-New Year’s period was nearly double the volume of the previous year’s holiday period, it appeared 2012 would be a great year.
But then came the Costa Concordia accident near Giglio, Italy. As first timers, in particular, became skittish, cruise sales had less demand, shorter booking windows and pricing challenges. In the second quarter and third quarter, pricing was really impacted and “we took the hit,” Tolkin said.
But the booking picture is vastly improved in the fourth quarter of 2012 and while World Travel Holdings – including its cruise brands and the agents who sell those products - may not make as much money as they did in 2010 or 2011, “it will come back,” stressed Tolkin.
Beyond the "strength” moving forward in cruise booking windows, sales and average selling price, Tolkin says there has been a drop in the percentage of online bookings at all WTH brands and he believes that’s a good thing for the trade.
Online bookings for all the WTH brands were down 3.83 percent in 2012 versus 2011, and down 4.16 percent in 2011 versus 2010.
A downward trend is good because it shows “cruising is not a commoditized product,” he said. “We’re building bigger ships with more categories and more value adds…” Increasingly, consumers need the advice and counsel of a travel expert to help them sort out the choices.
What kind of accommodations are the company's cruise agents booking? For 2011, 38 percent of all cruise bookings were for balcony cabins, versus 39 percent in 2012. Bookings for outside cabins were 23 percent this year, versus 22 percent last year. Suite bookings remained the same year-over-year at 8 percent.
But while the level of balcony cabins sold improved slightly year-over-year, sales for inside cabins remained steady during 2011 and 2012 at 31 percent, a number Tolkin would like to see reduced. He urged agents to look at their own agency performance numbers and “if you’re leaving more than 31 percent [of bookings for those inside cabins], you’re really leaving money on the table,” he stressed.
Tolkin said while his company expects double-digit land sales growth in 2013, “it’s not a commission chase, it’s a customer chase. While we will never give up our desire to be the preeminent cruise distributor in the world, we do have a land initiative, pouring a lot of resources in it.”
He cited the approach of Dunkin Donuts, which began as a company selling coffee and donuts. The brand recognized that some customers didn’t want a donut every morning; sometimes they wanted a bagel, croissant or egg sandwich. So they started offering these items to keep the customer in the store.
Similarly, Tolkin said not every cruiser takes a cruise vacation every year. “We don’t want to abandon that customer after a cruise,” he said. So the philosophy is to bring the customer in the door, keep them in the store – perhaps sell them a land or villa vacation experience. And, that also helps agencies add new customers who aren’t cruisers right now, but might be in the future.
2013 Cruising Trends
What are the trends impacting cruise sellers for 2013? Tolkin said Norwegian (www.ncl.com) is introducing a cruisetour product in Alaska, others are increasing their cruisetour offerings, more berth capacity is returning to Alaska in 2013, luxury lines are now dipping back into the Alaska marketplace once again, and the West Coast is getting some much needed attention with Alaska prominent once again.
In the Caribbean “short cruise” products, Tolkin cited increases in diversity and price points. He said Royal Caribbean International’s (www.cruisingpower.com) Monarch of the Seas is leaving the Caribbean and being replaced with Enchantment of the Seas, with the benefit of a ship with a significant number of balconies for the short-cruise market. Princess Cruises (www.princess.com) is also entering the short cruise market.
He also sees more capacity growth in Puerto Rico with competitive air lift. For longer Caribbean voyages, more of the space for such lengthier voyages could get sourced locally from North America as fewer Europeans may be available for those long Caribbean voyages due to economic pressures at home.
“But if that occurs, you’ll have more inventory to sell,” he told the CruiseOne franchise owners and Cruises Inc. agents. Pricing could be very competitive.
That could attract first timers, the ones who had cold feet after the Costa Concordia accident. “There are opportunities to reengage with this customer base and get them interested in cruising,” he said.
For Europe, Tolkin expects more “interporting,” the effective marketing of one ship with multiple embarkation points. Costa is among the lines that has effectively had this policy for years. So customers, for example, might board at Barcelona one day, or alternatively, on the next day in St. Tropez, or the following day at Livorno, Italy.
The Baltic was a huge success for cruising in 2012, he said, noting that the region was almost unaffected by the Costa Concordia aftermath or the woes of the European Union. He believes there is a strong opportunity for Baltic Region growth in 2013.
Lines sourced more from North America to fill their ships in 2012 than in 2011 and that trend could continue next year, he said. In addressing the airlift situation to Europe, Tolkin urged agents to advise clients to book early to get the best air seats and pricing.
He described the 2013 European cruising landscape as a chess match, with Royal Caribbean decreasing its stake, Norwegian growing in the region, and Carnival putting about the same capacity in the market.
As ships shift around, agents can expect even more repositioning and transatlantic voyages to sell in 2013, with a lot of competitive pricing, Tolkin said. Panama Canal voyages are coming back again in greater numbers after two years of declining inventory; the canal is being widened as well and can handle larger ships starting in 2014.
He reminded agents that Hawaii has two distinct products, the seven-night inter-island product – with Norwegian investing $30 million in Pride of America - and the long-haul, roundtrip West Coast to Hawaii product. He said Hawaii tourism is recovering after a few difficult years.
As for Australia, New Zealand and exotic voyages including Antarctica, agents can expect heavy sourcing of guests from overseas in 2013. Large capacity increases are raising global awareness of cruising.
What North American ports are booming? Which are competitive battlegrounds? Miami will receive the lion’s share of Florida growth in 2013 with 8 percent increase in capacity. Galveston, TX, is seeing strong, continuous growth that Tolkin said will make it the fifth largest cruise port in the country for 2013, based on total bed days. Today, it’s the sixth largest.
On the West Coast, he cited both San Francisco and Whittier as up-and-comers. New York City is seeing nearly a 12 percent capacity increase with an additional homeported ship, and Boston and other northeastern ports in New England and Canada are also booming.
Overall, cruise bookings look promising for 2013, with booking windows lengthening. But there is still opportunity for close-in departures, which are very good tools for home-based agents to utilize.
Look for strong growth in river cruising for the coming year, likely around 10 percent, Tolkin said. River lines are adding products, competition is increasing on most rivers (except in Portugal), and new ships with cutting edge designs are adding berths to build awareness.
Luxury, which has seen sizable growth in the past few years, is still growing although at a bit slower pace. Still, there is lots of opportunity and higher yields, so larger commissions. Shorter, bite-sized alternatives to full World Cruise products are also giving on-the-go affluent customers a taste of the worldwide experience.
Connecting with Customers
No matter the cruise product sold, Tolkin urged agents to connect with their customers in a strong, deep and meaningful way. What does loyalty mean to a customer?: “They desire to repeat an experience and will pay a premium for it,” Tolkin said. “That’s my definition of loyalty.”
How can agents generate more revenue? WTH’s direct-to-consumer brands charge an online or off-line service fee. On every single CheapCruises.com booking, customers are assessed a $24.99 service fee.
Tolkin told the CruiseOne and Cruises Inc. agents that “because of our conversations, [some of] you have now started charging service fees and you are amazed at the amount of money that you’re making.” He urged agents to “please think about a service fee if you’re not doing it,” as customers are willing to pay a premium for a high level of service.
In 2012, the two brands’ re-engagement program to connect, engage and solidify those customer relationships is working well. The repeat rate has increased 20 percent. “This is how we know we are doing something right,” he said.
Insight about WTH
Tolkin was adamant on one point, just in case any agents had concerns or questions. “WTH is not for sale...We have no vision for selling WTH,” he stressed emphatically.
He and his brother Jeff, co-CEO, love what they do. “It’s the only business we’ve ever been in," Tolkin said "and we cannot be successful unless you are successful.”
He stressed that WTH has made all its acquisitions with cash. “WDT is debt free – not that debt is bad, but in these uncertain times, it’s nice to go to sleep at night and know that no one is looking over their shoulder." He said he and his brother are pouring their own money back into an organization they deeply care about.
WTH will continue to grow on the cruise side and continue to strive to be the preeminent cruise distributor in the world, Tolkin said. In July 2010, WTH acquired a company within the U.K with six cruise brands, and today, “we’re very, very close to another acquisition of a cruise entity in another country,” Tolkin told the agent audience. “We hope to announce that by the end of the year.”
“Surround yourself with very talented people, pay them well, let them execute and don’t micro-manage.” Tolkin counseled conference attendees. He also told them to “connect” and “get personal” with their customers and stressed that “loyalty is not a fad.”
And, he had a word for the suppliers attending the conference. He said WTH has excellent relationships with vendors and thanked them for those partnerships.
However, he recently went on a cruise with several groups of couples and was surprised to find a cruise line letter in his stateroom suggesting his group book their next cruise onboard – with only very fine print mentioning use of a travel agent. With today's technology, suppliers have the capability of providing a customized type of letter in the stateroom for those clients who booked their cruise through a travel agent.
Here’s what Tolkin told the suppliers in attendance he’d like to see in a prominent letter left for those customers: “You booked your trip through your travel agent. Most of our business is from travel agents and we love our travel agent partners. Please call your travel professional to book your next vacation.”