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Old August 11th, 2004, 09:07 PM
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Default RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Royal Caribbean International® and Celebrity
Cruises®
Announce Policy Change


"Royal Caribbean has always believed that our agency partners work hard for
their commissions and should keep them", said Jack Williams, President and
COO of Royal Caribbean International and Celebrity Cruises. As part of our
2005 planning process, we are reviewing everything from compensation to
group policies to our new dedicated sales coverage. Rebating is damaging
to our distribution system and by taking these policy actions, we believe
significant improvements for our travel agency partners and our guests will
be achieved".

Effective August 16th, 2004, any agency that advertises either Royal
Caribbean or Celebrity cruises or cruisetours at any price point other than
a published pricing program or contracted promotional fare will be subject
to a reduction in the co-op support provided by the cruise lines and other
effects such as a reduction in the base commission paid on all future
cruises booked by that agency. Advertisements shall include, but not be
limited to, TV, radio, newspaper, catalogs, direct mail, and all on-line
vehicles such as search engines, websites, e-mail, pop ups, and banners.
Our existing marketing policies with respect to group bookings will remain,
for the time being, unchanged.

Q & A (the FAQ's on the sales intranet will be posted early next week)

Are agencies permitted to advertise KAF, EZN and EZA? What about net
fares.


KAF, EZN and EZA are all published pricing programs. The advertisement of
these programs falls under our guidelines for advertising groups, which are
not permitted to be advertised in newspaper, Radio or TV. They are
permitted on-line and in North America. Net fares are contracted and are
already subject to marketing restrictions.

How will we enforce this policy?

We will review all Co op to ensure the prices advertised are published. All
sales personnel should immediately reinforce this policy with their
accounts and report violations of this policy to their Directors. In
addition, agencies will be able to report any violations to a special
e-mail that will be set up early next week.

Enforcement will include going to zero Co op, and 10% base commission, and
potential loss of VVI. In addition, repeated infractions will result in
loss of ability to sell our two brands.

What about cash back offers or upgrades, or if any agency wants to use
their commission for a value add and not lower their rate?


Only promotions that are driven by RCL are permitted to be advertised.
Agencies using commission to fund other offers will be in violation of our
policy. (other than GAP)

What about rebating in the calls centers and over the phone?

We will monitor agencies and will not permit agencies to promote, "Call us
for lower Celebrity or Royal Caribbean rates, or specific sailing's, or
specific categories." We will do mystery calls and police this practice.

Post Edited (08-12-04 03:12)
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Old August 11th, 2004, 09:11 PM
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Default Re: RCI Pricing Policy to Change

I have heard some agents saying this will change nothing except the advertised price of the cruise. But, the way I read this is that all pricing will be the same everywhere because agencies are not even allowed to offer a rebate over the telephone when speaking to a customer. If you cannot offer the rebate, you cannot sell at a lower price, so beginning Monday, all Royal Caribbean and Celebrity Cruises discount pricing will come to an end.

Anyone else see this differently?



Post Edited (08-11-04 21:12)
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Old August 11th, 2004, 11:09 PM
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Default Re: Re: RCI Pricing Policy to Change

Talk about loading the gun and shooting yourself in the foot. Everyone is ALWAYS looking for a deal, we shop for the deal, we buy because of the deal, and the best deal wins. I think this really screws up free trade. Just my opnion! I for one am grateful to already be booked and paid for my next two cruises with RCL and Celebrity.

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Old August 11th, 2004, 11:27 PM
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Default Re: RCI Pricing Policy to Change

Is it just me or is this a roundabout way of "price fixing", seems like a wide open field for law suits. Yes, what about "free trade"? It also reminds me of when the airlines started with a cutback on travel agent commissions, then when people were more used to booking directly, Boom, no more commissions period. I don't think RCI's main interest is in protecting their "agency partners", those agents make the decision to market the product at the price they can handle. Even if they can offer a discount by not allowing them to advertise it seems illegal. Personally, I'm "almost" a Diamond member and have a Celebrity booked for next year but if I read this the way I think I do it will seriously impact my RCI loyalty. We are checking out Princess in November, maybe for more reasons now. Interesting to see what happens next. Cheers!
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Old August 11th, 2004, 11:40 PM
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Default Re: RCI Pricing Policy to Change

The agents who I've spoken with say the restrictions are on the advertising and promoting of lower than "published" or contracted fares.

They say they will be allowed to advertise group rates for "specific group sailings".

I think, though the wording is confusing (and probably meant to be), the last paragraph addresses that as well.

It says an agent can not promote by saying... call us for lower rates on specific sailings, or categories.
It doesn't really say they can't quote a lower price to someone who calls cold with a pricing inquiry.

Either way, there's no question they've made it more difficult for the consumer to price shop for lower fares, which is a questionable public relations decision!

I'd speculate that the public backlash to this policy could be strong enough to force the cruise line to rethink the decision.

I'm not sure I even understand the benefit to the cruise line, since the discounting was coming out of the pockets of the TAs, not the cruise line.
Unless they think this will encourage a much higher rate of direct bookings with the cruise line.

Hope they don't think that they can eventually go without the goodwill of TAs. Renaissance Cruise Line found out the hard way , that doesn't work!

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Old August 12th, 2004, 12:21 AM
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Default Re: Re: RCI Pricing Policy to Change

There are a lot more cruise lines out there and maybe when the ships are even more empty........they will get a clue. I for one hope they come to their senses! Don't preach customer care as you reach for my wallet!
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Old August 12th, 2004, 03:04 AM
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Default Re: RCI Pricing Policy to Change

I talked to an agent who told me he spoke to RCI about in great depth, and they told him that it means an agent cannot offer a cruise below published retail even on the telephone. Why else would RCI say they will be "spot-checking" phone calls to monitor this? To check the "on-hold" messages? possibly, but not likely.

Furthermore, the agent tells me that agents are further restricted from using ANYTHING with any dollar value at all, ie: on board credit, transfers, etc, to make the price more like a discount.

Groups are different. If an agent has booked a group then he can advertise the group rate even if the individual (aka FIT) rate goes up, BUT agents are not allowed to figure over-rides (the free cabin credit they get for booking a minimum of berths) into the total price to make it seem lower.

This last policy is still being examined, however, as are a number of possible scenarios they haven't looked into.

Looks to me like Royal Caribbean has really jumped the gun on this one, leaping before they looked. Not a good move as far as public relations go.

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Old August 12th, 2004, 03:11 AM
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Default Re: RCI Pricing Policy to Change

The question is "who does this benefit?"

Someone said "unless they want their own direct prices to be more competitive." Well - BINGO. Maybe they got tired of people who call direct telling them they can get their cruise cheaper from an agent? It looks like a bald attempt to get directly to the consumer with their own prices to me, taking ALL power away from the agent.

Who else will it benefit? Some may think it is the small, retail agents who don't compete online, but the truth is these people often offer other things as booking incentives like champagne, transfers, free upgrades, etc. All that is coming to an end as well.

Whatever the motivation for the move, it isn't apparent on the surface.

The Carnival policy says that it only applies to advertising, but the RCI policy goes all the way to call centers. Only published retail prices at every level of contact with the consumer. I heard someone said, "Carnival dug a hole and Royal Caribbean jumped right in"

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Old August 12th, 2004, 03:37 AM
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Default Re: Re: RCI Pricing Policy to Change

Quote:
Is it just me or is this a roundabout way of "price fixing", seems like a wide open field for law suits.
Price fixing would happen if ALL the cruise lines set the same price for a similar cruise. This is different, just like setting a retail price for a product. However, a lawsuit wouldn't surprise me in the least since agents are "free agents" and can sell a product at any price they want to.

What about Ebay? What about auction sites? What about cruisecompete.com?

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Old August 12th, 2004, 09:16 AM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Good point, Paul, about price fixing only being if multiple cruise lines conspired to set prices. Many TAs are flaming the Internet this week with doom-and-gloom emails, with many exaggerated claims, in that regard. This is no different than any other service provider setting prices for its services, and expecting its sales agents to comply. How many Radio Shack people give rebates out of their own pockets for people buying DirectTV service from them?

In addition to asking who does this benefit, I think we need to ask who does this harm? It harms the new-technology agencies that have been undercutting the prices of the full-service agencies that are the typical entry-point to the market for new customers. Therefore, this move could greatly protect long-term growth of the market.

It isn't clear, yet, whether this policy limits just advertising, or goes broader. There could be significant benefits to consumers if it goes broader. For example, there are many (about half, according to one poll I've seen) people who prefer to have a level of assurance that they are definitely getting the best price available.
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Old August 12th, 2004, 10:45 AM
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Default Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Interesting reply, Bicker...

Yours is absolutely the first positive statement about this turn of events that I have seen.

Quote:
In addition to asking who does this benefit, I think we need to ask who does this harm? It harms the new-technology agencies that have been undercutting the prices of the full-service agencies that are the typical entry-point to the market for new customers. Therefore, this move could greatly protect long-term growth of the market.
After talking to several travel agents I believe that even the small Mom & Pop stores who were being damaged by the big online wholesalers (who I believe provide a great service to consumers) are going to suffer because they also offer incentives to book in other ways such as champagne in the cabin, onboard credit, etc. Yes, they will be on a level playing field for the short term, but the big online agncies will figure out other ways to offer discounts with non-RCI travel products such as air, hotel and car rentals.

Quote:
It isn't clear, yet, whether this policy limits just advertising, or goes broader. There could be significant benefits to consumers if it goes broader. For example, there are many (about half, according to one poll I've seen) people who prefer to have a level of assurance that they are definitely getting the best price available.
It has been verified by our editor, Anne Campbell. Absolutely no rebates on the phone or anywhere else. Prices are fixed at the retail level by RCI. The poll you refer to is a moot point. RCI has eliminated the possibility of getting the best price available by mandating that all agents sell cruises at the the company price. Prices are going UP. No consumer likes that.

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Old August 12th, 2004, 11:10 AM
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Default Re: Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Royal Caribbeans 2 Qtr was one of the best......that wasn't due to "company prices" selling cruises, that was due to cruisers getting a deal and taking the trip. Guess the investors could be surprised at 4 Qtr profits eh?
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Old August 12th, 2004, 11:17 AM
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Default Re: Re: Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

I am sure the analysts are scratching their heads this morning trying to figure out what is going to happen. Royal Caribbean CAN'T lower their rates to stay competitive because they still have to pay the commission. Their yields are not going to change because of this policy - it just means the prices are going to go up for the consumer.

The only ones who are going to benefit are the travel agents - IF the consumer still wants to book Royal Caribbean at the full price. That is the question.

We know RCI's big ships are popular, but they are not cheap. At full price they are even more expensive. It's like car shopping. You know what you want to buy, but the car you end up with is the one you can afford.

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Old August 12th, 2004, 11:23 AM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

This is an amazing turn of events and I agree that you may be looking at some lawsuits. I cannot see how legally anyone can tell anyone else what they have to sell their product for. If this stands and goes into service then why would anyone bother to shop around for a better deal? The agent has to sell the cruise for a certain price. I think it is a bad move for the cruiseline and a bad move for customers. Just a really strange way to conduct business and against the free market IMHO.
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Old August 12th, 2004, 11:53 AM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

I am not worried. Do you actually think that RCI will allow their ships to go out only half full? RCI already steeply discounts the ships depending on the demand. As a consumer, I want good value and good customer service. I am flexible enough to go with the flow. And, if cruising is out of my price range, I will find other ways to enjoy my vacation and spend my hard earned money. jmo Truthfully, the way you need to search around for the best price on a cruise, makes it as bad as shopping for a new car. I feel sorry for people who are not sophisticated about travel issues, and spend their life savings on a once in a life time vacation, when they could have had the same exact cruise for half of what they spent.
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Old August 12th, 2004, 11:58 AM
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Default Re: Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Actually, Paul, from what you're saying, the consumer IS now going to be assured they're getting the best available price. They won't have to worry about if they applied more or less pressure to a TA that they could have possibly gotten a better price.

I don't agree that prices must go up due to this. I've seen enough industries go through this kind of structural change in pricing to know that any prognostications at this point are indefensible.

Regarding lawsuits, there is again a lot of misinformation floating around. There is nothing illegal about a supplier setting minimum pricing restrictions. The FTC is concerned about multiple suppliers conspiring on price -- not one supplier setting its own price.
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Old August 12th, 2004, 12:03 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Well, the more information that comes out about this, the more it seems like it is so!

Which is really quite a bizarre turn! Why RCI/Celeb would take it a "step beyond" Carnival, and make their pricing totally restricted is beyond me!!

This policy seems that it certainly wasn't very well thought out as to all the ramifications.... and hopefully someone at RCI will come to their senses!!!!

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Old August 12th, 2004, 12:05 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

There may be lawsuits, but I doubt they'll go anywhere. Jim said: "I cannot see how legally anyone can tell anyone else what they have to sell their product for." I'm no attorney, but I think the answer to that is in that the travel agents are not like "normal" retailers -- they do not own the product before they sell it.

The cruise lines have a product, and they wan to maintain control over the price at which that product is sold!

Currently this affects Royal Caribbean and Celebrity, and Carnival has announced a similar policy. Will it be long before the rest of the cruise lines in Carnival's "family" fall in line?

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Old August 12th, 2004, 12:10 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Got2Cruise

I agree with you. I'm sure plenty of research went into this decision. I've booked my first cruise for Dec. on the Grandeur and have had several second thoughts as to how great my deal was. I would be sickened to find out I over paid. The security of knowing it's the best deal is woth something. The car industry took this approach with lowering prices a few years ago with no haggle pricing.

You're right those ships won't sail half empty. The price will be competetive without incentives or strings attached. I am all for straight foward bottom line pricing!
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Old August 12th, 2004, 12:36 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

I just received this same notice from a top online agency. I have been thinking of booking something with RCI as I have a $200 cruise certificate from them that I need to book before mid-Oct. We haven't been on a cruise since 9/02 so I guess we can at least consider that being a discount! But this announcement does take the joy out of using RCI. Considering booking with Princess since our last Princess cruise was on Regal in 1994; perhaps we would get a better deal with them, anyway???
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Old August 12th, 2004, 12:42 PM
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Default Re: Re: Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

You wrote "Actually, Paul, from what you're saying, the consumer IS now going to be assured they're getting the best available price."

I absolutely agree with you. They will get the best price available, which starting on Monday is going to be as much as 14% higher than it was the day before. That means a cruise that cost $2000 on Sunday could cost you $280 more per person on Monday. For double capacity - $560 higher.

But you feel better knowing you got the best price possible?

I have a lot of respect for your ability to make lemonade out of lemons.

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Old August 12th, 2004, 12:48 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

i guess the question would be, is the brochure price going to change(lower) or will everybode be paying "list" price for a cruise?....if everybody has to pay list, i would think this will hirt rccl bisiness.....
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Old August 12th, 2004, 12:51 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

"which starting on Monday is going to be as much as 14% higher than it was the day before"

what is this based on?
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Old August 12th, 2004, 12:52 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Paul, thanks *so* much for all the details. Much appreciated!

Harry

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Old August 12th, 2004, 01:01 PM
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Default Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

"You're right those ships won't sail half empty. The price will be competetive without incentives or strings attached. I am all for straight foward bottom line pricing!"

I don't understand why you believe it is going to be bottom line pricing. They still have to pay the same commission to the agents as they did before. This policy gives them absolutely no ability to lower prices.

If anything, it will probably mean higher prices because they will now be able to compete directly with travel agents when consumers call to book directly with the cruise line. They don't have to worry about independent agents selling cruisers cheaper than RCI can directly.

This is simple economics. It costs RCI a certain amount of money per cruise to run a call center. Right now, they are probably losing money with their direct bookings because they have to compete with travel agents who are willing to discount their product to levels that are below what RCI needs to charge to make their call center cost effective. The key to making their own call center cost effective is to increase the number of sales.

Now that they are controlling prices it eliminates the consumer incentive to book with a travel agent - they can go directly because they are assured of getting the same price no matter where they go. RCI now has free reign to raise prices as much as it wants to because there is no downward pressure on the retail prices coming from agents who discount.

As time goes on - as the number of direct bookings increases they will be able to raise prices even more. Anyone who thinks that the added profit from direct bookings will lead to altruistic lowering of prices by RCI is dreaming. Their goal is profits.

The perfect example is the airlines. They no longer pay travel agents any commissions, but years ago travel agents used to rebate air ticket commissions just like they do cruise commissions today. The airlines stopped that practice by setting retail prices, just like RCI is doing on Monday. Step 2 for the airlines, a few years later, was ending travel agent commissions all together. Don't you think RCI has the same plan?

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Old August 12th, 2004, 01:14 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

While I understand your point, I feel that not only do they have to equal their own playing field as an agency, they aslo will have to compete with other cruise lines. This competition is simple economics. Price wars for business helps the consumer. By bottom line pricing I mean the price is the price, no negotiations or rebates.

I also agree that this will hurt the travel agents because they make their money by adding to the price of the cruise. No agent can sell the cruise for cheaper than they paid. RCI has no investment or personal interest to keep TA's a float.

My opinion- sorry TA's your getting run out because this one helps the consumer!

Yes RCI can set their price but they have to make me want to PAY for RCI and not another liner! Best deal still wins out in the end.
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Old August 12th, 2004, 01:15 PM
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Default Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

""which starting on Monday is going to be as much as 14% higher than it was the day before" -- what is this based on?"

The average cruise agent commission is anywhere from 7% to 15% of retail. Some agencies who only charge a booking fee (some are as low as $25 per berth) are rebating almost their entire commission. So there is a potential for the price difference between what these agencies charge and the full retail price to be as much as 14%.

On average, the usual rebating agent only rebates about 1/2 of his total commission, but some rebate as much as 10% of retail regularly. RCI is ending this practice as of Monday, so unless they drop their retail prices on Monday (and no indication has been given that they will) then the average price charged by many large volume cruise agents is going to go up by the amount they usually rebate - as I said, usually around 8 to 10% of retail, but conceivably as much as 14%.



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Old August 12th, 2004, 01:51 PM
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Default Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Cru...

I am sorry, but you are making an incorrect assumption when you write "I also agree that this will hurt the travel agents because they make their money by adding to the price of the cruise."

Travel agents do not add to the price of the cruise. Their commission is paid to them by the cruise line, not the consumer.

Not allowing cruise agents to rebate will "help" the travel agent because they will receive the full commission whenever they book an RCI cruise. It hurts the consumer because it does not allow the travel agent to "rebate" any of their commission back to the consumer.

It is complicated, but that is how it works.

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Old August 12th, 2004, 01:55 PM
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Default Re: Re: Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

RANDOM THOUGHTS:

The problem with this policy for travel agents is that it takes away their ability to compete for your business. Some of the biggest travel agents have built their business on doing high volume for educated consumers at reduced rates. RCI has now taken away all price differentiation between cruise agents so consumers can now go to full service agencies and pay the same price as non-service oriented discounters. Anyone who pays full price for an RCI cruise on a site that doesn't offer fantastic customer service is a fool now.

SO HERE IS ANOTHER WRINKLE I JUST THOUGHT OF - if there is any potential for a "black market" of rebating, isn't it is going to come from small agencies because they can do a face-to-face wink? A rebate based on a handshake is impossible to monitor.

As consumers catch on to this - sales of RCI with the cruise line and on sites like Expedia will dry up in favor of smaller agencies that do face to face business and are impossible to monitor. (-- don't blame me, I am just the messenger. If I thought of it everyone else will, too.)

So, RCI has now enabled the small guys to compete better than the big discounters and they will need to spend more money supporting all the mom & pop agencies because that is where all the business is going to come from.

On the other hand, the big agents will still figure out ways to "rebate" by cutting other travel services - hotels and rental cars, by applying the commission towards other travel services which they can now do because RCI is paying them a full commission.

Only the people who want to pay full retail for a cruise will book directly with RCI.

Anyone else foresee these things happening?

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Old August 12th, 2004, 02:24 PM
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Default Re: RCI SAYS - NO MORE DISCOUNTS FOR ANYONE!

Paul,

Om my YES, I see this happening! Why on earth would you pay full price from RCI when you can pay the same price and have a TA and all the back-up and services they can provide. And, of course, the rebating from the TA's will come in the form of discounts on hotels, airfare, etc.

It seems such a strange business decision if you ask me.

I know I'm only one customer, but for me, it will probably mean that the cruise I was planning for RCI (we've only sailed Carnival, but really wanted to branch out to other lines and RCI was first on the list) in the winter won't happen!

I cruise on a budget and knowing there is no "wiggle room" when I book isn't very appealing. Do I think this decision will keep some customers away from RCI? Absolutely!

dorothy

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