Travel affiliates, listen up: according to a new survey, travel agents are increasingly levying client service fees; if this trend continues it may provide the impetus for more cruise lines to set-up travel affiliate programs.  What prompts TravelDividends to make this prediction?  Basically a somewhat ‘throw-away’ line in a survey we recently read about the cruise-only travel agency industry.

Leading cruise-only franchisor CruiseOne, and its sister company, cruise-only specialist Cruises Inc., released the results of their most recent Quarterly Trend Survey, an opinion survey that gauges the prevailing sentiments of more than 1,000 franchise owners and cruise travel agents in their combined networks.  The Quarterly Trend Survey is a relatively new industry market survey (the August 27 release is only the second in this ongoing survey), and to our knowledge, the only one that focuses on operational and competitive issues associated with the cruise-only agency business.

The current survey addressed topics such as customer booking patterns, cruise pricing trends, and the top consumer cruise destinations, among others.  It also sought to assess travel agents’ attitude on customer service fees.

On this topic, agents were asked several questions: “Have you always had a service fee?  Have you added one this year?  If not, are you considering adding one before the end of 2009?”

Here‘s how the agency owners and agents responded:

  • 27.5% of the agents participating in the survey said that they have always had a service fee
  • 43% indicated that they have either added a service fee this year or are considering adding one by the end of the year, while
  • 29.5% noted that they do not have a service fee and will not considering adding one

CruiseOne and Cruise Inc. called the survey participants’ responses to these questions “mixed,” we, on the other hand, found them quite revealing:

If CruiseOne / Cruise Inc franchisees are representative of travel agents in general, then more than 70% of all U.S. agents may be charging their customers some sort of service fee to help plan their cruise vacations by the end of this year.  In our opinion, that’s a very high percentage – and potentially a very dangerous one for the travel agency industry.

In a world where many people are still reeling from the effects of the worst financial crisis since the Great Depression, it’s clear that regardless of the traveler’s socio-economic profile, today, the two principal criteria driving the purchasing decision of most travel consumers are price and value.

Asking these same consumers to pay service fees on top of the cost of their cruise, even if their proposed itinerary has been appreciably discounted by the cruise line (as is the case of most cruise product today), is likely to turn a not insignificant number away from fee-based cruise retailers to either direct-to-supplier or no-fee travel merchants.  Indeed, while cruise-only agents are raising or adding fees, there are other travel retailers who are taking the opposite approach: case in point – online travel agencies (OTAs), they’ve been furiously shedding fees to stay competitive with travel suppliers.

If raising customer services fees this is a growing trend, in TravelDividends’ opinion, travel agents would do well to reflect back on the consequences to their business that some of the customer service fees that were implemented when airlines began their crusade to eliminate travel agency commissions just a short decade ago.   Led by Delta Airlines in 1994, airlines launched a full-fledged assault on travel agencies in an attempt to squeeze commissions out of the travel agency channel.  Starting from a base commission of 10% in 1994, commissions were effectively reduced to 0% in 2002.   To make-up the continually dwindling short-falls in their revenue, travel agents – many reluctantly – imposed service fees on their customers (as an aside, it is interesting to note that today Delta is one of the few U.S. carriers that offers a travel affiliate program).

While that worked to a certain degree for some travel agencies (particularly those focused on business travel), for the vast majority of agents, it was a Pyrrhic victory for most of them.  These fees actually hastened the gutting-out of air sales from the travel agency channel: in 1994, approximately 80% of all domestic and upwards of 95% of international air tickets were issued by travel agencies.  Today, those numbers are closer to 40% and 50%, respectively.

Where did the market share go?  Largely to the airlines themselves, and newly emerged OTAs like Travelocity, Expedia and Orbitz, but also to another new distribution channel – affiliate marketers, as travelers were even then looking for lower cost travel reservation options.  So in a very large way, it was those first rounds of travel agency customer service fees that helped propel affiliate marketing programs in the travel industry.

Currently only Carnival Cruise Lines offers a travel affiliate program; none of the other cruise companies, like Royal Caribbean, Celebrity, NCL, MSC, as well as Carnival’s sister brands like Cunard, Holland America, Costa, Princess, among others, sells its product through travel affiliates.  We think should the fees charged by travel agencies become onerous enough, cruisers will look for alternate booking sources and that will be the ‘tipping point’ that presages a shift in the cruise distribution space similar to that which occurred in airline-travel agency landscape in the mid-1990s.

Many of those disaffected cruisers that shop online will, by default, discover or be attracted to travel affiliates.   Travel affiliates who have studied the cruise industry, invested in their website and marketing campaigns to build their brand and credibility with the consumer, and established a strong relationship with Carnival prior to this ‘sea-change’ will benefit enormously. Are you one of them?

What are your thoughts on this subject? Do you agree with our prognosis? Or, do you think this is a red herring?  We’d appreciate you’re sharing your thoughts and opinions on this matter with us and our other readers…as always, many thanks!