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Carnival UK chief says cuts of agents’ commissions have hardened prices, reformed “suicidal” business models

Cuts of commissions  paid to travel agents have helped to hardenprices and helped some agents to reform "suicidal" business models, saysDavid Dingle, Chief Executive Officer of Carnival UK, according to a mediareport.

Speaking at the annual Cruise Awardsonboard Cunard Lines Queen Mary 2 y, David Dingle, chief executive of CarnivalUK, admitted that 2011 “had not been for the faint hearted,” Travel Weekly.comreports on its website. The changes Carnival UK have initiated thisyear have included reducing commission from a tiered structure to a 5% flatrate and switching off Amadeus Cruise GDS distribution. However, Dingle was stated as saying the changesbrought in by Carnival UK this year had resulted in a hardening of prices andhe expected this to continue in 2012 when UK capacity was “stable”.

The company that operates Carnival Corporation& plc brands in the UK from its headquarters in Southampton has also movedto demand agents’ customers pay it direct as in the US, to reduce its risk inallowing agents to retain pipeline monies and stop agents bidding on its brandnames on paid search. Dingle told the audience of travel agentsthat Carnival had worked closely with some agents to avoid business models thatwere “tantamount to commercial suicide” favouring volume driven by discountsover profitability.

In a clear reference to Gill’s CruiseCentre which collapsed in June, he said Carnival was too late to help in onecase, but that they had been able to reassure agents that their price was “asgood as any other on the high street”. Indicating Carnival UK was prepared toadapt its approach, he added: “We still do not underestimate the scale of thechange and we are listening and giving advice and support to those agents whoare having to retune their business models.”

Justifying the commission cuts he said:“When an economy gets tough, consumers need price transparency more than ever.But it was hard for us to do this when effectively the last 10% of our pricingwas out of our hands. Now we have that control and higher pricing is comingthrough to the benefit of all of us.” For many agents the decision to getconsumers paying direct was more damaging than the commission cut, but Dinglesaid Carnival UK understood many agents relied on cash flow to run theirbusinesses.

But he said the cruise operator had to protectitself against an unknown level of risk in extending credit to agents. “Most travel agents are private companiesand so do not publicise their accounts. Because it’s hard for us to assess it’sbest for us to minimise the risk. “We need to work together to make sure allour objectives are met in a way that suits everyone. I recognise that 2011 hasbeen a tough year but I am sure that the benefits will start to come through in2012.

“The good news is that capacity across theUK cruise industry is stable, so now is the time to see growing demand acrossfixed capacity to maintain price rather than have more ships and risk downwardprice pressure. This to me is where we are going to getgrowth in 2012 – better pricing. Our booking curve has moved later but we feelconfident that the pricing will hole up even among those later bookers.”

Dingle said the operator’s early year'wave' campaign was designed to offer a better return on investment for theline and its agent partners. “I’m sensing we are reaching the bottom ofthe consumer confidence trough therefore we see perhaps the earliest signs of alift. If that’s true that’s perfect time for the wave,” the Travel Weeklyreport said.

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