Selling Cruises Can Mean Profits

Selling Cruises Can Mean Profits

Experts weigh in on the factors that influence the profitability of selling cruises By: Marilyn Green
Selling group cruises has both its challenges and rewards. // © 2014 Thinkstock
Selling group cruises has both its challenges and rewards. // © 2014 Thinkstock

As every travel agent knows, it takes time, energy and expertise to turn a strong profit from cruise sales. Prompted by the need to balance those requirements against a transaction’s financial return, many agents are focusing their cruise sales on one or more areas of specialization.

In that pursuit, price point alone is not sufficient to identify which cruises are most profitable to sell. In general, transactions based on higher price points — including luxury cruises, long cruises, river cruises and group or charter cruises — yield the best profit levels. But transaction time, an agent’s customer base, commission payment structure through a marketing group affiliation and the cash flow requirements of the business are all factors that can shape cruise sale profitability.

Time is the essential determining factor of cruise sale profitability for Jason Olson, president of Cruise Holidays in Redding, Calif. Olson focuses his sales on luxury lines and all-inclusive lines such as Regent Seven Seas Cruises, which pays agents commission on all aspects of the cruise vacation. Another reason he focuses his cruise sales on luxury lines is that most are not prone to price promotions.

“With luxury lines, I don’t have clients calling every month about a new offer they saw,” Olson says. “There is much less maintenance. If you are giving clients the kind of care and service you should, they are happy. And you aren’t updating their cruise every few weeks because of a new offer, as happens with contemporary lines. That’s like reselling the same cruise over and over.”

Beth Levich, owner of Oregon-based Cruise Holidays of Portland, says she sat down to think about ways to make maximum profit in her business and settled on selling groups, luxury lines and river cruises.

Whenever possible, she combines the three, as she did on a recent sailing on AmaWaterways, where she sold a 65-guest partial group charter following a wedding. Levich says this transaction was ideal as it involved a group leader — a pied piper — who bought space on the sailing then spread the word to fill the cabins. In this case, the group leader was the patriarch of the family, who loves to bring other members along when he travels. He is already working with Levich to book a June 2015 Baltic cruise.

Selling group cruises has its own challenges and rewards.

“The leader has to know that when you buy space, you own it,” Levich says. “I received a wonderful net price from AmaWaterways and was able to give my client a great deal while retaining a good commission. With Ama, if you guarantee 10 or more staterooms, you have a partial charter and can build on that, although I will not build outside the group.”

Cruise Holidays coordinates the whole vacation for group cruise sales, including air, hotels, transfers and the cruise itself. Levich says she often gets grateful emails from the group leaders acknowledging that they couldn’t have done it without her. She does not take the risk of buying blocked space on cruises herself.

“I prefer to use a pied piper who blocks the space without marketing costs for me and has a ready-made group,” she says. “And I’m going with them. I hope that when some of these 65 people make their own travel plans, they will think of me.”

Clients who generate more clients are also central to the successful business run by Anne Halsey-Smith, owner of Halsey-Smith Private Travel in La Jolla, Calif. One of her focuses is on selling world cruises, which intrinsically have higher yields and a strong repeat factor.

“World cruises are the most profitable cruises,” she says. “It takes as much work to sell a two-week cruise as a four-month cruise, and there’s so much more commission.”

Halsey-Smith plans special activities and opportunities for her cruise clients, such as an excursion with lunch on a private Chinese junk (a small boat) in Halong Bay, China.

“Other guests asked how they got that, and you acquire more clients through these arrangements, as well as pleasing the current ones,” she says. “Onboard there are referrals from customers, and you build your clientele.”

Halsey-Smith started selling cruises with the now defunct Royal Viking Line, and generations of loyal clients have followed. She sells younger clients two-week cruises, and as they mature and have more time and financial resources, she moves them into longer sailings or world cruises.

Today Halsey-Smith places most of her clients on Seabourn. She has one repeat Seabourn client who has sailed more than 1,000 days on the line and spent additional time on Silversea sailings. Besides the high profit margin on world cruise bookings, Halsey-Smith says world cruisers often repeat. A world cruise is not a once-in-a-lifetime experience for most, which further enhances the profitability factor of the segment.

Adrienne Forst, a travel advisor with Protravel International in Beverly Hills, Calif., says 90 percent of her business is upscale travel. She approaches profitability on cruise sales from a broader perspective.

“Protravel was big, but now that we are owned by Travel Leaders, we are enormous, and they negotiate for us,” Forst says. “My commission is based on overall revenue, not on individual sales.”

While group cruise sales are big-ticket items that can and do yield healthy profits, Brad Anderson, co-president of Avoya Travel in San Diego, says group sales have a number of inherent risks.

“We would all like to go for the big kill and sell top penthouse suites for a full world cruise, or sell a large group or a full-ship charter, but there’s a real cash-flow issue there,” Anderson says. “There’s nothing worse than having lots of business on your books and not getting paid for it for six months. You can starve waiting for the commission for your group unless you have plenty of cash flow. Unless you have excellent cash flow, be leery of groups.”

Anderson advises that agents focus on finding a cruise niche where they have a lot of prospects and making it their passion. They should then ask for referrals and build a prospective customer list.

“Getting the leads is the No. 1 issue for any agency, and agencies are generally not good at marketing in today’s world,” he adds. “Sure, the most profitable cruises on paper are high-priced cruises with no NCFs, but that’s only true if you are able to sell them. Be realistic about what you are going to sell and how you will connect with the prospect. Some agents make a lot of money selling contemporary seven-night cruises in the Caribbean. You may be able to sell two to four of them in the same amount of time it would take you to sell one luxury cruise.”

The bottom line: What constitutes a profitable cruise sale varies from agent to agent and is likely to change several times during a travel agent’s career as outside forces reshape product and consumer expectations.

Economic conditions influence cruise sales and profitability. The cruise industry itself is constantly evolving — nobody would have guessed 20 years ago that river cruising would be such a hot segment. At the same time, consumer tastes shift and change, and each new generation of travelers brings a new set of desires to the cruise experience.

There is one constant that has a direct link to profitability, according to agents. Superior customer service will always ensure that agents attract and keep whatever segment of the buying public they have identified as their prime cruise buying market.

A Luxury Cruise Line for 30-Somethings
Travel agents say the cruise industry needs a product designed for the 30-something upscale demographic. Contemporary ships are being designed with features for all age groups and tastes, but upscale lines still cater primarily to an older demographic. That’s a missed opportunity, according to travel agents: The industry needs a luxury cruise product designed specifically for a younger, upscale client base.

“The young and successful group is here, and they travel,” says Anne Halsey-Smith, owner of Halsey-Smith Private Travel in La Jolla, Calif. “I hear from them all the time. They want something for their generation and have the money to pay for it.”

She says the upscale segment of the 77-million-member millennial generation wants to pay one fee for an all-inclusive cruise product and then forget about money matters and simply enjoy the vacation.

“They would go if the product was there,” she adds. “They are so well-traveled. Going long distances, even for a short trip, is nothing to them.”

Several agents mentioned that Royal Caribbean International’s introduction of high-speed onboard Internet service at reasonable rates could change the game for millennial cruisers; it would open up the market to taking longer cruises if luxury lines offer similar connectivity. They contend that younger, working travelers would feel much freer to sail away, even on longer cruises, if they had a reliable way to keep in touch.

“Luxury and river cruise lines are designing their product for the boomers and beyond, but they are missing the market of 30-something people, which would be huge if the product and marketing were aimed at them,” says Mary Lynn Klein, cruise and vacation specialist with Ticket to Travel in San Jose, Calif. “In the San Francisco Bay Area, we have all these younger affluent people who work for eBay, Yahoo, LinkedIn and so forth, and there’s  really nothing designed for them.”