NCL Pay Incentive Draws Praise

Non-commissionable cruise fares long a sore spot among travel agents

By: Theresa Norton Masek

Norwegian Cruise Line is drawing high praise for its decision to pay 10 percent commission on total cruise fares to agents who double their production.

“We salute NCL’s leadership in restoring commissions to what the cruise lines call non-commissionable fares,” said John Hawks, ARTA president. “NCL’s proposal is truly a win-win offer that treats travel agents like valued business partners.”

Liz Nixon, president of The Cruise Centre in San Marcos, Calif., said non-commissionable fares (NCFs) materialized after Florida lawsuits ended the practice of levying “port charges” a few years ago.

“NCFs are a sore point with just about anybody with a light bulb on in their head,” Nixon said. “The cruise lines have no problem reducing the price of the cruise, but do they ever reduce the NCFs? No. To me it’s a way for cruise lines to cut commissions.”

She cited an example: The May 17 departure of Royal Caribbean’s Radiance of the Seas from San Diego to Vancouver is priced at $909. Of that, $139 is non-commissionable so an agent’s commission would be based only on the remaining $770.

“You can look at seven-night cruises out of Miami and every one will have a different NCF,” Nixon said.

That said, she called NCL’s pay plan “a big thing. This is a real good move, better than anyone else is doing.”

NCL President Colin Veitch detailed the incentive plan Jan. 28 during a live Webcast.

The additional commission is based on doubling the number of passengers, not dollar sales, so agents won’t be penalized by what Veitch called the “pronounced” discounting in many markets.

“However many passengers you sent us in 2002, double that in 2003 and we will pay 10 percent on the non-commissionable portion of the cruise fare on every single passenger you send us in 2003,” Veitch said.

Veitch also said that agents who double their sales will continue to receive a 10 percent commission on air tickets booked through the cruise line. NCL is cutting its air commission rate to 5 percent as of March 1, a year and a half after most major lines made the reduction.

The 10 percent on air has lost much of its incentive value in recent times. Last year, only 18 percent of NCL’s bookings included air, partly because fares are cheaper elsewhere and partly because more cruises are departing from North American ports that are within driving range for passengers.

“We’ve looked for something that will help on every single booking instead,” Veitch said, “and we’ve listened to the growing concern of agents at the impact NCFs are having on the overall effective commission rates.”

Bill Stephan, chairman and CEO of Luxury Vacation, based in Lake Forest, Calif., called the move “a bright spot.

“Colin Veitch is going against the grain and being innovative. He recognizes the value of travel agents and he’s saying ‘let’s give them commissions on the whole sale’ and tying it to an increase in volume for the year. He should do that, it makes good business sense.”

Nixon agreed.

“He’s trying to move market share, which is fine,” Nixon said. “We’ve always been big with NCL, but little by little things have happened that started to erode our volume.”

To qualify for the higher pay, Nixon’s agency would have to attract another 475 passengers to NCL this year.

“We would really have to pump, not only with marketing but to shift some market share,” she said. “That would be a big hump and we’d have to start now. I’m going to take a look at it, definitely.”