|Oceania Regatta // Photo courtesy Oceania Cruises|
UPDATE: Agents from Travel Leaders Franchise Group, Travel Leaders Leisure Group and Vacation.com weigh in on the policy, below.
Prestige Cruise Holdings (PCH) is cracking down on rebating. In a letter sent to travel agents this week, the cruise company - parent of Regent Seven Seas Cruises (www.rssc.com) and Oceania Cruises (www.oceaniacruises.com), said it will implement a new anti-rebating policy effective May 1.
The line expressed its understanding of the challenges that travel agents face today in managing the issue of rebating.
"From our perspective, rebating creates confusion in the marketplace as it results in lower margins for agents and leads to a wide spectrum of prices and value-adds being offered for the same stateroom," the line's letter said.
Challenges and Confusion for Agents and Consumers Alike
Prestige acknowledged that travel agents are increasingly faced with the difficult decision of whether to rebate a portion of their commission to protect a booking after investing marketing resources, time and intellectual capital to secure and service that booking. If not, they may risk losing the booking and their hard-earned commission to another agent.
“Many of you have expressed considerable frustration whenever a competing travel agency lures away your customers with discounts or amenities that you refuse to match,” the Prestige policy statement noted.
The cruise company stressed that “an upscale cruise vacation is a product that is sold, not bought,” and that “supporting travel agency economics is as good for our business as it is for yours.”
Prestige said that its success – even more so than some larger lines - is based on the agent’s ability to learn and understand the wants and needs of cruise prospects, to know and articulate the points of product distinction, to match the prospect with the right cruise, and ultimately to close the sale and service the customer over the many months between booking and sailing, and then to begin that process again when the client returns home.
Value Propositions Should Be Understood, Not Discounted
The line’s letter also emphasized that the two brands’ “value propositions need to be understood, not discounted,” and that in recent weeks, it had reached out to many agency partners to solicit opinions on how to address the important subject of rebating.
“What came through loud and clear was that the agency community is looking for more leadership from suppliers to preserve pricing integrity and to reduce the advantage some agencies have over others in being able to compete for business via price once another agency has already invested considerable resources to secure and close a sale,” Prestige said.
Interestingly, Prestige also acknowledged that “it’s not just the “Mom-and Pop” agencies that are adversely impacted by rebating…that many large agencies are reluctant rebaters who would much prefer to reinvest a portion of their commission into servicing their existing business and to actively promote and secure new business rather than giving it away to savvy shoppers in rebating situations.”
New Policies Effective May 1
Based on the feedback received from the agency community, the two brands have introduced the following seven-point program to mitigate rebating.
1. No travel agency or company may advertise or promote to the general public the cruise lines’ products online (including on any Web sites with restricted/ membership-only access), in print, or by any other means, at a price or at a percentage off which is less than the cruise line’s published price or the pricing contained in an active group contract issued to the travel agency. Published price is defined as that which appears on the cruise line’s Web site.
2. Final payments must be in the gross amount due.
3. A travel agency may advertise amenities – over and above approved group-related amenities - provided their total value does not exceed five percent of the cruise fare being advertised.
4. If a reservation is transferred to another travel agency, or is cancelled and rebooked, within 30 days of the reservation date and before final payment, the receiving travel agency will be paid a 10 percent commission.
5. If a reservation is transferred to a travel agency, or is cancelled and rebooked, more than 30 days after the booking was made or anytime inside the final payment window, a 10 percent commission will be paid to the originating travel agency and no commission will be paid to the receiving travel agency.
6. The same policy (mentioned in the two previous paragraphs related to reservation transfers) will also hold for bookings made without an associated travel agency except that when there is a transfer, the receiving travel agency will be paid full commission (instead of 10 percent) for transfers within 30 days of the reservation date and before final payment.
7. The cruise line reserves the right to reduce commissions and/or marketing funds, cancel or deny group contracts or take any other actions it deems appropriate if a travel agency violates this policy.
“We realize that there are many different viewpoints on the issue of rebating and that any cruise line’s policy will be met with praise by some and criticism by others,” said the Prestige letter.
However, it also said that because the policy was developed with input from numerous travel partners, “we’ve found an approach that will significantly reduce rebating and protect the economics of those agencies committed to building their business based on the quality of the service they provide their customers.”
Questions and Answers From Prestige
The line provided agents with a Q&A sheet to address some of the most likely questions agents may have. Travel Agent is reprinting that list below:
Q. May I advertise your cruises at a discount?
No, however, amenities may be advertised. The value of the amenities cannot exceed five percent of the value of the cruise fare.
Q. What if I advertise a discount of no more than five percent of the cruise fare?
This is not permitted.
Q. May I advertise a percentage off of your fares as long as I don’t state an actual discounted price?
No. Neither dollars off nor percentages off of cruise fares may be advertised.
Q. May I advertise my group amenities?
Yes, you may advertise any group amenities reflected in your group contract.
Q. May I advertise amenities included in a special promotion my consortium has with you?
Yes, you may advertise any amenities included in a promotion authorized by Oceania Cruises or Regent Seven Seas Cruises.
Q. If I don’t have a group, am I allowed to advertise a shipboard credit or prepaid gratuities?
Yes, as long as the total value does not exceed five percent of the value of the cruise fare being advertised.
Q. May I advertise amenities above and beyond those I’ve been given for my group?
Yes, provided the total value of the additional amenities does not exceed five percent of the value of the cruise fare being advertised.
Q. May I advertise category upgrades?
Only if the value of the upgrade does not exceed five percent of the value of the cruise fare being advertised.
Q. If I move to a different travel agency and want to transfer (or cancel and rebook) clients I booked at my first agency, will I earn a commission for the booking?
If the transfer or rebooking is made within 30 days of the date the original reservation was made and before final payment, then the receiving agency earns a 10 percent commission.
If the transfer or rebooking is made more than 30 days after the date the original reservation was made, then the receiving agency will earn a 10 percent commission only if the originating travel agency agrees to forfeit their 10 percent commission.
Whether you, as the booking agent for the first agency, will receive a portion of this commission will depend on the agreements that you have with the first agency and the receiving agency, as applicable.
Q. If I make a booking and it’s transferred to another travel agency within 30 days of the reservation date, will I receive any commission for it?
No. This new policy provides the clients with a reasonable window of time (30 days) during which they can select another agency to service their needs throughout the often lengthy period between booking and sailing, and the receiving agency will earn a 10 percent commission.
Q. If I make a booking and it’s transferred to another travel agency more than 30 days after the reservation date, will I receive any commission for it?
Yes. Our policy encourages clients to remain with the agency that originally made their booking. The agency that invested the resources to sell and service the client will receive a 10 percent commission for the booking.
Q. If a booking is transferred to another agency more than 30 days after the reservation date, why don’t you pay the second agency any commission?
By paying no commission to the second travel agency, we’re making it very difficult for an agency to lure away clients already booked with another agency. Our policy promotes the likelihood that the clients and the commission will remain with the agency that made the booking.
Q. If Oceania Cruises or Regent Seven Seas Cruises generates a booking that is not affiliated with a travelagency and that customer transfers their booking to my agency for servicing, will I be paid a commission on it?
Yes, you will be paid your full agency commission as long as the booking is transferred within 30 days of the reservation date and before final payment.
Q. Is the 30-day time frame based on the date the reservation is made or the date the deposit is given?
It is based on the date the reservation is made.
Q. If I send a check for final payment, can it be in the net amount due?
No. Final payments made by check or credit card must be for the gross amount due.
Please note that Regent’s policy is to issue commission payments four weeks prior to sail date. Oceania’s current policy is to issue payments two weeks prior to sail date.
Oceania has changed its policy to issue payments four weeks prior to sail date starting with sailings departing after June 1, 2012.
Q. If I see that another agency is violating your rebating policy, may I do the same in order to be competitive?
No. Please advise our Sales Department and we will follow-up with the offending agency and take remedial action.
Feedback from the Trade
Roger Block, president, Travel Leaders Franchise Group, said his group "strongly supports" the new policy noting that rebating "has seriously compromised the integrity of the travel agency industry. We certainly encourage other suppliers that haven’t already adopted similar policies to follow suit."
Tom Baumann, president, Travel Leaders Leisure Group also said he applauded the two brands' effort on the issue.
Ralph Iantosca, owner and founder of www.gogirl.travel, said when he learned about the new policy, he was thrilled. "We work so hard in our industry and for those of us who’ve built a profitable business, it’s those who rebate that ruin our industry," he said.
"Why don’t these agents who rebate 'step up' and become true professionals," Iantosca asks. "There is enough business for all of us in this industry, and if you need to rebate to compete, you either need to leave the business and do something else, or take this opportunity to find your self-worth, invest in an education and do what’s right and ethical."
Iantosca said he's complained to cruise lines' field sales staffers for years about lines supporting this type of bad behavior from other agents. "It’s not fair to us," he said, thanking Prestige for "finally stepping up and taking action to help those who help them."
Also weighing in on the issue was John Lovell, president, Vacation.com, who said his organization salutes the announced steps by Regent and Oceania "because it safeguards the integrity of our travel agencies.
"Rampant rebating on cruise and tour products undermines the travel agency distribution system, placing significant number of agencies that are already operating under a very thin margin of profitability at a disadvantage," Lovell said.
Brad Anderson, co-president, Avoya Travel/American Express, said the changes constituted "a very positive policy for professional sellers." Anderson believes it benefits everyone in the long run because it focuses on selling to new customers instead of shifting share.
Anderson said the change will lead to higher customer satisfaction, which will result in more cruises being sold for the two brands: "Oceania and Regent's policy will promote the growth of business, raise the professionalism of the industry and increase the amount of money available to bring new customers to Oceania and Regent."
Michelle Fee, CEO and co-founder, Cruise Planners, stressed that "unfortunately sometimes our industry has agencies that do not play fair. It’s disheartening when you spend time selling a cruise and then those customers scour the internet and find an agent who is offering a huge rebate, you either have to match the discount or lose the sale."
As a result, "it doesn’t come down to who the best agent, but rather who the cheapest agent," Fee said. "I’m glad to see that Regent and Oceania finally adopted the anti-rebating policy, as most other cruise lines have already put this practice in place. My opinion is that it helps keep everyone honest.”