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2 cruise lines try to simplify rates by halting rebate ads

One company strives for consistency in pricing by banning the deals altogether. But will customers benefit?

September 12, 2004|James Gilden | Special to The Times

Cruise fares, like pricing in much of the travel industry, can be a labyrinth in which consumers often find themselves scurrying like the mouse trying to reach the cheese (read: deal) at the end of the maze.

Two of the major cruise lines, Carnival and Royal Caribbean/Celebrity, last month acted to take at least some of the confusion out of their pricing. Both now restrict travel agents from advertising "rebated" pricing.

Royal Caribbean/Celebrity took its action one step further: It not only doesn't allow advertising of rebates, but it also forbids the practice of rebating altogether.

In cruise parlance, a rebate means that a travel agent gives a customer money if he buys a sea voyage from that agent. In essence, this means the agent is giving back a part of his or her commission in exchange for the customer's business.

"Many times people are rebating half their commission," said Mike Driscoll, editor of the industry newsletter Cruise Week. Repeat cruisers have grown used to shopping for rebates because they can sometimes save hundreds of dollars.

The practice "created a situation whereby you could pick up the travel section of any major newspaper with five different prices in it for the same product," said Jack Williams, president and chief operating officer of Royal Caribbean and Celebrity Cruises. "We don't want agencies to decide what prices are for our products. They're our products."

The American Society of Travel Agents applauded the decision to abolish such advertising. "By ensuring the consistency in Carnival rates advertised, Carnival is giving travel agents the opportunity to emphasize the quality of service and expertise they provide to customers," Richard M. Copland, the society's president and chief executive, said in a press release in response to Carnival's announcement in early August.

Agents who specialize in cruises but do not offer rebates also praised the new policies.

"I think it is way overdue," said Judy Lucas, manager of Concierge Cruises and Tours near Tucson. "It makes it a level playing field."

Some agencies that practice rebating, though abiding by the new policies, predict that consumers will be on the short end of this leveling stick. Driscoll reports in Cruise Week that one such retailer estimated it could cost consumers $400 million per year.

Royal Caribbean's Williams disagrees. "The consumer is going to determine whether they want to pay a price," he said. "If they perceive it to be a good value, they will buy it, and if there are enough people out there not buying, then the price will drop to meet demand."

At least one business that specializes in finding consumers the lowest price sees the policy as a boon. "It's going to be a big help," said Bob Levinstein, chief executive of CruiseCompete.com, a website on which travel agents bid for customers' business. He thinks the new policy will drive rebating underground, making it more difficult for consumers to find rebates except through a site like his.

He notes that other lines still allow rebates and that there are many ways for an agent to give legitimately lower fares, such as group pricing, special coupons or senior discounts. "It's a horribly complicated process," he said of booking a cruise. "Talk to two reps at the cruise line and you'll get two different prices. Smart agents know how to navigate this stuff and can get you better deals."

Eighty-five agencies are active with the year-old CruiseCompete.com. It receives about 10,000 requests for quotes per month and has 70,000 registered users.

But even Levinstein acknowledges that his way may not be the best way for all travelers. CruiseCompete is really for people who know what they want already or who are willing to do the research themselves.

"If you need an agent to spend three hours with you and research a bunch of different options, you should be willing to pay more," he said. "But if you want to do all your own research and just want to book, you should have that option."

The variables involved in a cruise can make booking it on your own a daunting task. In fact, travel agents still sell about 90% of cruises.

"For beginning cruisers and bargain hunters, they won't care if they're going to get a great price if a great price is under the disco," Lucas said. "Savvy travelers will come to somebody they trust."

Some in the industry think cruise lines are tightening up because the soft market for travel after the Sept. 11, 2001, attacks has given way to increasing demand for cruises at a time when fewer new cruise ships will be coming into service.

"Post 9/11 [rebates] made sense," said Cruise Week's Driscoll. "They saw it happening and didn't mind. They just wanted people on board ships."

Now, however, cruisers are back. Since 1980, annual passenger growth has averaged 8% per year; 2002 and 2003 were boom years, recording 10.6% and 7.3% annual growth, and 2004 also is expected to be a record-setter.

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