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Cruise Lines up Commissions to Travel Agents; Should Airlines Re-Embrace the Agent Community?

Cruise lines, seeing their bookings fall with the slowing economy, have taken a unique (and old school) approach to turning the tide (so to speak):  they are increasing commissions to travel agents.  Royal Caribbean has upped commissions by 1% and increased co-op marketing funds, while Silversea has raised commissions to an impressive 25%.

I mention this here because it’s a full 180 degree difference from the approach taken by airlines over the past 10 years.  The airline community has shunned travel agents at nearly every turn, looking at the distribution channel as a way to cut their own costs.  And that’s worked – eliminating base commissions has significantly reduced distribution costs.

But according to data I’ve seen from several airlines and a GDS, the average fare sold through travel agents is so much higher than the average online fare that it more than makes up for increased commissions.  I’m not suggesting airlines will change their strategy – shifting their low fare sales to their own website is a smart idea.  But I think the cruise lines are on to something:  with the correct incentives to travel agents, everyone can win.  Airlines can get higher average fares and travel agents can collect their service fees from customers who choose to use them (primarily business travelers these days).

The airline focus on reducing costs at the expense of revenues has not worked as a long-term solution.  Airlines have been willing to try radical approaches to fixing their business (flights to Equitorial Guinea; merging; charging for bags), but for some reason the distribution channel strategy has remained focused on shunning travel agents.  I just don’t get it.

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