Norwegian Cruise Line Holdings (NCLH) recently conducted a presentation for investors in New York. In good news for advisors, Frank Del Rio, the company's chairman and CEO, said it will continue to do business with a "market to fill," not "price to fill," philosophy—so the fares advisors sell aren't low ball.
But at the same time, NCLH's presentation showed that bookings made by advisors in 2022 have dropped from 2019 levels, while direct sales are up in the same period. Officials stated that advisors remain the biggest distribution channel and that NCLH does everything possible to generate business through advisors.
Yet, they also acknowledged that—based on pandemic era market trends with consumers becoming accustomed to buying big-ticket items online—direct web sales are growing at the fastest rate. So, the company plans to invest more in time and technology for that online booking engine.
That said, NCLH's presentation also clearly spelled out that "demand-generating marketing investments are focused on diversifying and maximizing potential from all distribution channels." That includes travel advisors.
Still, the company said that by the end of 2023, overall bookings via direct sales—online purchases, guests booking onboard and call center reservations—could exceed the level of sales by travel advisors. Certainly, any discussion of greater direct sales potential generates concern from the travel advisor community.
So, Travel Agent asked three top trade executives for their perspective.
Multiple Channels, Strong Trade Support
“When I first saw the comments in the media, I must admit that I was a little taken aback,” said Jackie Friedman, president of Nexion Travel Group. “However, once I had a chance to think about it, I realized the remarks were taken out of context. The fact that they are investing in their online direct booking engine does not mean that they aren’t investing in the trade.”
She continued: “From a Nexion perspective, we are not overly concerned about the investment in online direct sales. Frankly, in many cases, those are not the customers our advisors want to work with. Many online shoppers are looking for the lowest price, where many of our advisors tend to focus on value and sell higher APD [average per diem] products.”
Friedman, who was sailing aboard the new Norwegian Prima within the past week, said that Nexion has had great support from NCL for its marketing, conferences and events. “They have indicated that they are committed to investing in our efforts to grow our sales with them, and as a result we are seeing solid growth,” she emphasizes.
But she adds: “If we start to see a shift in that support, then we would absolutely be concerned.” So far, though, that’s not the case, she stresses.
While NCLH pointed to consumers learning to book big ticket items online during the pandemic, Friedman said her group is “seeing the opposite in many instances,” as consumers seek to work with travel advisors for the first time, given the travel complexities of today. She also says many consumers are busier than during lockdown and don’t have the time to research online purchases.
So, from Friedman’s perspective, the agency community has significant value for the cruise lines. Yes, she says, “there’s no doubt that they will continue to invest in their online direct channel. It is a low cost of sale for them, albeit likely at a lower APD."
“I will be worried if and when we start seeing a reduction in support and compensation for the trade,” she says, but “the fact is that right now we aren’t seeing that. I do believe that as long as the trade continues to help fill the ships, there is no intent on their part to pull back support. I hope I’m right.”
FCCs and Fewer Advisors Across the Industry
Brad Tolkin, co-chairman/co-CEO, World Travel Holdings, believes that "the professional travel advisor should not be concerned about this," citing strong cruise and resort sales in the CruiseOne and Dream Vacations’ travel advisor network. He says they’re “doing quite well - exceeding the exceptional year of 2019 by double digits over the last 10 weeks.”
Speaking about overall marketplace conditions rather than any one cruise line, Tolkin says that "there has been a confluence of events because of the pandemic that has caused a rise in direct sales. Two big ones are the advent of an incredible number of FCC’s (future cruise credits) and the decrease in the number of travel advisors both selling cruises and being in existence.”
Most importantly, Tolkin points to a number of conversations he's had with cruise line executives from multiple cruise lines: "They are all, without exception, well aware that for the cruise industry to prosper as they continue to build a great product -- with a forecasted 8 percent annual increase in inventory over the next five years -- they need the army of professional travel advisors promoting cruising."
Tolkin also says the lines “have supported this belief in so many incredible ways—both during the height of the pandemic and as we are emerging from this once-in-a-century tragedy."
From one franchise agency group's perspective, Michelle Fee, CEO and founder, Cruise Planners, told Travel Agent: "We've built our business on how important travel advisors are to the industry and we don't think that's changing anytime soon."
Fee continued: "The value they provide beyond just booking is immeasurable." She emphasizes that there will always be a clientele that has need for travel advisors' expertise, guidance and advocacy."
Market to Fill, Not Price to Fill
One positive development from the investor presentation was that the NCLH brands clearly have no intent of slashing pricing in the way some other lines have done since the pandemic began. So, NCLH will continue its "marketing to fill” policy, which involves spending the marketing money to bring more revenue in the door—rather than slashing fares to fill unsold cabins.
As a result, the company projects that it will achieve record pricing and yields for the coming year. In addition, NCLH stresses that its three brands seek a higher level of customer – those with more income who are willing to spend.
"We're different," Del Rio told Investors last week. So, "don’t throw us into pool of the cruise industry because we're different.” NCLH also said that some lines pursuing a "price to fill" philosophy may post higher occupancies but still aren’t back to the level of fares they were getting prior to the 2009 recession.
And for consumers, value awaits. The investment presentation showed a slide that revealed that 85 percent of NCL’s customers are opting for “Free at Sea," which bundles perks and value into the cruise purchase. That's up from 62 percent of guests choosing that bundled option in 2019.
The company said that value-added bundling offers that include such services as shore excursions, Wi-Fi and beverage packages results in bookings that "stick," fewer cancelations and less churn for marketing.
Demand is High, Load Factors Improving
Demand remains high, and NCLH's cumulative booked position (inclusive of a 16 percent capacity increase) is equal to record 2019 levels.
Most notably, pricing continues to be significantly higher and at record levels. The company also said it expects to reach its historical load factors by second quarter 2023.
Here's an audio link to the NCLH Investor Presentation and also a link to the PowerPoint presentation with the Slide 19 graphic about sales channel changes between 2019 and 2022.
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