View From the Bridge - BOB LEVINSTEIN
BOB LEVINSTEIN
CEO
Cruise Compete
Bob Levinstein shares his view from the bridge and talks about a different way to book a cruise.ONE STOP SHOPPING FOR THE BEST DEAL
By Bob LevinsteinWe launched CruiseCompete.com on September 15, 2003 based on a simple idea: help cruise travelers get the best price by allowing them to enter a single quote request, then get competing price quotes from multiple, independent travel agencies.
The response has been overwhelming. Despite limiting promotion as we tweak the service, more than 10,000 people have registered to request quotes from more than 25 travel agencies. The key to this great reception has been providing a service that's easy for both users and agents, and provides an advantage over other ways of shopping for a cruise or attracting cruise buyers.
Both agencies and customers have taught us a tremendous amount in our first couple of months of existence. We've made some major changes already, and we have a number of projects underway to continue to improve the service for both groups. The main issue we’re working on is getting more agent quotes in response to each request. We have a very solid solution we're working on that we hope to have in place by the end of the year or early in the first quarter of 2004.
Now, I have my doubts that this experience qualifies me to give a real “view from the bridge” as the others who contribute here can no doubt deliver. But perhaps maybe I can give you a more narrow view of the cruise industry – from a porthole cabin just above the water line, so to speak – that may be of some interest just the same.
Cruise industry pricing is also based on simple idea: fill every cabin every sailing.
An empty cabin doesn't save the line any money – the same amount of food is laid out at the buffets; the same crew works the same number of hours; and the ship burns the same amount of fuel. But empty cabins don't gamble in the casino or bid at art auctions, and absent passengers don't buy drinks or purchase excursions. A cabin on a cruise ship is ?perishable inventory? – an item that has to be sold by its expiration date, or it becomes worthless. That empty cabin doesn't contribute to the cruise line's future business, either: while 71% of people who cruise plan to become repeat cruisers, only 41% of people who have never cruised plan to cruise in the next three years.
Booking four million cabins per year is a daunting task, and the cruise lines have two main strategies to accomplish it: they price appropriate to the demand, and they reward the agencies who can fill the most cabins. Anyone can see “pricing to match demand” in action just by comparing cruise prices over the holidays to the weeks just before or after. New Year's is a very popular time to cruise, so the same cabin is very expensive compared to other times of the year. But how relationships between cruise lines and travel agencies operate is perhaps a lesser-known dynamic among cruisers.
Travel agencies have a choice of which cruise lines to focus their sales efforts on, so the lines woo them in a number of ways. Among these are:
• offering higher commission rates;
• giving annual bonuses (known as “overrides”) for meeting certain sales goals; and
• allowing preferred high-volume to reserve more ?group space? – cabins discounted when purchased in advance – on selected sailings.
This gives these high-volume agencies a considerable cost advantage over the local travel agency on the corner. These agencies can choose to pass this savings on to their customers – or not.
Many agencies choose to pass at least some of the savings on. Advertising is expensive, and if they can advertise a lower price, they get more people responding and a higher yield per advertising dollar. As they become known as low-cost agencies, they can more attract word-of-mouth referrals – “Call Mary – she gave me a great deal on my last cruise” and so they make up in volume what they might lose in margin.
But that referral from your friend won't necessarily get you the best deal or even come close.
No single agency always has the best price on every line or on every sailing. Deals with the cruise lines vary from agency to agency. Some have unsold group space on a particular sailing they need to unload. Others have quotas to meet that create situations where they can lose money selling particular cabins yet come out ahead in the long run by making quota and getting a large bonus. So you never know who is going to have the best price on the sailing you want.
To get the best deal, you can identify seven or eight of the top high-volume agencies; contact each one; and see who offers you the best price. It's this time and effort that CruiseCompete endeavors to replace by giving you a single point of contact to get all of this pricing from competing agencies.
CruiseCompete's mission is to provide one-stop shopping where you can be confident that you got a great deal. Our early success shows we're on the right track, and we look forward to helping you save money on your next cruise.
