Agencies on the cruise-only model: That ship has sailed

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Article from Travel Weekly: Once viewed as a logical and useful niche within the agency landscape, the cruise-only model is increasingly seen as overly narrow and no longer suited to the times.

While cruise remains the mainstay of many agencies, few want to be limited to just learning about and selling cruises. With other sources of revenue growing faster than cruise, the cruise-only networks are emphasizing land as never before.

The latest sign of this change is CruiseOne’s decision to create a brand, Dream Vacations, and offer its 1,000-plus franchisees their choice of which banner to operate under.

The move follows last year’s decision by Travel Leaders Group to make Cruise Holidays, another cruise-only icon, a division of its Vacation.com brand and to stop selling new Cruise Holidays franchises.

Other cruise-only agencies haven’t yet changed their names, but many are changing their business mix. Land vacations are up to 22% of revenue this year at Cruise Planners, which changed the name of its signature magazine from Cruise Planner to Travel Planner this year.

The shift is happening for several reasons. The cruise-only networks have become much larger and need more diverse sources of revenue, and they are looking to capture more of the vacation spending that would otherwise go elsewhere when clients choose not to cruise in a given year.

Also, the rise of noncommissionable fees (NCF) has reduced commissions on lower-cost cruises. Over time, this has prompted leisure agents to move toward tours and all-inclusive products that don’t exclude part of the sale from commission.

“When you can go sell a river cruise or a $2,500 per-person all-inclusive resort, and you’re getting full commission on that money, you just need to think about what makes sense,” said Tom Baumann, owner of Cruise& Travel Experts in Spring Lake, Mich. He supervised the Cruise Holidays brand at Travel Leaders until 2013.

Cruise Holidays, founded in 1984, was one of the original cruise-only models. Back then, Baumann said, not many travel agencies even sold cruises or really knew how to sell cruises.

“I remember when a cruise-only agency opened in Michigan it was a big deal,” Baumann recalled. But that was nearly three decades ago, he added, “when Sovereign of the Seas was the ship to sail.”

The model got a big boost in the 1990s when airlines phased out base commissions on air tickets and cruising suddenly became the obvious source of replacement income for many agents.

The cruise-only model had a simplicity that made it easy to franchise.

“We focused on the dealership model,” said Bob Schaffer, a former SeaMasters franchisee now with Baumann at Cruise & Travel Experts. Schaffer’s SeaMasters agency sold only Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises until clients asked for something else.

“It’s a great way to start in the business,” he said.

Schaffer said the model began to unravel when the 2008 economic downturn led to overcapacity.

“Prices were next to nothing, and the NCFs got larger,” he said. “It just wasn’t worth the time and effort.”

The creation of Dream Vacations means a decision for CruiseOne’s existing agents. Over time, many have built equity in the CruiseOne name. Darci Upham, a franchisee for 10 years in Hampstead, N.C., said her business is about 90% cruise, most from repeat and referral customers.

“So many people in my town know me as CruiseOne. I don’t think it would benefit me to start over with a new name,” Upham said.

Gary Smith, a franchisee in Springfield, Ore., is making the jump. An 11-year agent who gets about 75% of his revenue from cruise, Smith said the upside outweighs the downside.

“It will make it easier to promote and advertise land vacations, as there is always a little disconnect when you advertise a resort vacation in Cancun and tell them to call CruiseOne to do it,” Smith said.

CruiseOne, which announced the Dream Vacations brand at its annual conference aboard the Norwegian Escape earlier this month, said 175 agents made the change immediately, while another 32 agencies have done so since then.

Vicki Freed, senior vice president of sales, trade support and service at Royal Caribbean International, said she views the decline of the cruise-only model as a plus for suppliers, even cruise lines.

“I think if the cruise industry is trying to circle the wagons and introduce cruising to new people, by being a vacation agency, it really resonates with a much broader audience,” Freed said.

Likewise for cruise sellers.

“With so many great vacation options out there, it really does make sense for retailers to incorporate vacation into their names,” Freed said. “It can be ‘Cathy’s Cruises and Vacation Store,’ but I do think it makes sense.”

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