Raising the Threshold

Royal Caribbean sent out messages to agents in late May, announcing a rise in thresholds for override commissions for the Royal Caribbean, Celebrity and Azamara brands on bookings in 2009.

A rise in thresholds for override commissions for the Royal Caribbean, Celebrity and Azamara brands on bookings in 2009Royal Caribbean sent out messages to agents in late May, announcing a rise in thresholds for override commissions for the Royal Caribbean, Celebrity and Azamara brands on bookings in 2009.

“For really large agencies who are big producers, the impact will be zero,” said Eric Maryanov, owner of All-Travel in Los Angeles, “the biggest jumps, 100 percent and more, are in the midrange overrides.”

Maryanov said he has no quarrel with raising the thresholds, but he feels that the increases should have been gradual.

“This was too much, too fast,” he said, “and the timing in the middle of the year, when about three quarters of the sales have been made, is unfortunate. The new levels start with bookings made in 2009, but they will be based on 2008 performance, and that’s pretty well established.”

He said his own agency has not sold to the new threshold, which is double the former one, and expects a 1 percent decrease in commissions.

A statement from Vicki Freed, senior vice president of sales for Royal Caribbean, underlines the lighter impact on high producers.

She said, “The unaffiliated (non-consortia) level for 16 percent changed from $1.1 million in revenue (Azamara, Celebrity and Royal brands combined) to $1.5million to maintain the 16 percent base. While the jump sounds high, the reality is that only 472 agencies currently at 16 percent are potentially in jeopardy of dropping from 16 percent.”

Dondra Ritzenthaler, senior vice president, sales for Celebrity and Azamara, said differences in agent statements about the degree of change, which have ranged from a third more to double, are due to the fact that the company has a two-tiered structure, which is now ending. “National account thresholds are lower than those of field accounts,” she said. “The national account threshold for 12 percent, for example, has been $90,000, whereas the field accounts, which are in the majority, were at $125,000. Now they will be the same at $180,000.”

Ritzenthaler said Royal Caribbean has been talking about this move for more than a year, and that there was some discussion earlier with the company’s agent advisory board. She said the move is a response to the 17 new ships brought into the three brands since 2000, which have increased the fleet to four times its former size, and stressed that the threshold levels are combined levels; all three brands feed into the numbers.

“Our competition has raised their thresholds and announced it the day before; we are giving agents half the year so we can help them bring their sales up,” she added. “And our levels are competitive, given that they are drawing from one brand and a smaller number of ships.”

She also said that, although agent commissions may be lowered once a year, they can be raised at any time. “If an agency sells up to the new levels by June next year, the commission level will go up then,” she added.

Paul Halem, owner of Cruise Adeventures Travel Company in San Marcos, Calif., takes issue with the statement that Royal has not raised the thresholds since 2000. He said, “They did, however, institute the bogus non-commission fee that has already lowered commissions by three percent. So now we don't get paid for air, transfers, ncfs, and the overrides.”

Halem added that he intends to boycott Royal Caribbean’s brands and not sell them unless there is no other option.” They might want to remember Renaissance,” he added. “You can only push people so far until they push back.”

Steve Tracas, president and CEO of Vacation.com, also voiced strong opposition to the move.

“The added knowledge, time and education required to sell the ‘values’ of cruising to a consumer market with only a 17 percent penetration rate, coupled with the current economic environment should spur support for the agency community…not the raising of the bar. This is certainly a conflicting message compared to some of their more recent communications to the agency community,” he said.

Tracas added that the differentiation of cruise products takes agent time and resources from knowledgeable, He said raising sales thresholds to earn the same pay is counter productive, adding, “Furthermore, this restructure comes at a time when fuel surcharges and other non-commissionable items are at an all-time high. The bottom line is that agencies that promote and sell the cruise lines to their clients will get a smaller percentage of a continuously shrinking pie.”

Maryanov expressed disappointment in Freed, who has been known for her proactive stance for retailers, and called the move “a step backward.” He added that he can understand that the cruise lines want to be focused on their major sellers and that they should be rewarding those who directionally sell. He said agents, too, need to be promoters of select products.

“Too many retailers try to sell all brands to all people,” he added. “Sell everything, but concentrate on a few.”

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