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

The cruise-only travel agency may be on its way out.

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.”