Pricing travel: Be careful what you ask for

The Price, what we pay for travel, is often a big factor in making a buying decision and rightfully so. If for no other reason, prices can vary a lot between sources. Trying to be sure we have the best price possible for exactly the same fare makes a lot of sense. When we find the price that works with our plans we call it a win and move along. Most of the time. Sometimes that low price can come back to bite us later causing buyers to be a bit more careful when pricing travel.

Gil’s Cruise Center had been a sales leader in the United Kingdom for a long time, offering low fares on major cruise line sailings. In business 55 years, Gil’s Cruise Center is closed now due at least in part to the heavy discounting of fares. Its a topic consumers ask few questions about when booking that can come back to haunt them later.

“They were discounting to unsustainable levels. Customers would ask us to ‘price-match’ the deal Gill’s were offering. When we saw the price, it was clear they were selling loss leaders.” a rival agent told the Independent.

This is a really good example of why, in most cases, we should insist that travel agents make payments directly to cruise lines. One of the most important questions we can ask a travel agent when making a booking is

“What company will the charge on my card statement show?”

If the answer is anything other than the name of the cruise line that booking is with, walk away, hang up the phone, delete the email, do whatever we have to do to avoid doing business with them. That’s not to say any given travel agency, website or other seller of travel is in financial trouble or about to go out of business, there is simply no reason for agencies to hold money these days other than to take advantage of the cash flow opportunities holding payments offer.

But let’s back this up a little bit and talk briefly about how travel agencies make money.

Legitimate income for travel agencies comes in the form of commission on cruises they sell. The services of a travel agent cost consumers nothing. In most cases, working with a good travel agent actually saves consumers money due to the inside information they naturally have by working cruises every day. They will know where the legitimate discounts and sale prices are at the time of booking and on down the line between booking and final payment when other offers or discounts might become available for which consumers qualify.

The problem with that commission income model is that agencies often wait many months to be “paid” for their services, creating a real need to manage incoming cash to fund day-to-day operations, make payroll, etc. A new agency, just starting out, might not see any income from commissions at all for many months even though they are booking guests on cruises.

That commission agencies get varies too. New agencies just starting out get a lower commission than producing agencies with a track record of proven sales. Its an annually-reviewed number with sales goals created by the cruise lines that must be met to retain their current commission level or attain the next higher level available.

What happened several years ago, during the peak of the world-wide recession, was that agencies would give up part of their commission in the form of a discount to consumers. That discount made prices frequently lower than even the cruise lines themselves would charge. Those agencies were surviving by making a small amount on a whole lot of bookings. The result was that those agencies spent most of their time selling new clients which left little time to service existing bookings, a situation the cruise lines did not like one bit.

In the case of Gils Cruise Centre, cruise lines got wise to their heavy discounting and cut their commission rate from 15% to 5%, chewing up that 10% (or more) discount Gils was giving up to get the sale a few months ago. This was after serious warnings were issued by cruise lines industry-wide that discounting outside of approved programming offered by the lines was forbidden.

That situation of heavy-discounting by large, online agencies, wiped out a lot of smaller operators who could not afford to match prices. Due to the lower sales volume of smaller operators, they did not make commission as high as big-volume travel agencies. In an effort to level the playing field and make service, not price, a driving factor in the decision of where to by, cruise lines started cracking down.

Unlike the failure of a US-based travel agency, UK buyers are protected from the closure of a travel agency by ABTA, a UK travel association that backs agencies and protects payments made by consumers to agencies that, as a practice, hold payments rather than sending them directly to cruise lines. In the US, the protection burden falls on the consumers who must buy travel insurance to back their purchase and even then not all travel insurance companies cover default by the agency.

That’s a whole lot of explanation about a problem that is really easy to avoid by just asking that one simple question:

“What company will the charge on my card statement show?”

The odds of your major cruise line going out of business are slim. The cruise industry is a healthy, growing concern that will provide quality vacations of an inclusive-nature for decades to come.

Still “buyer beware” is a good couple of words to keep in our heads when dealing with any seller of travel.

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