Andrea Zelinski
When
Viking filed an IPO registration form with the SEC this month,
it provided the public with an extensive narrative about its plans in
the cruise industry. But within that 179-page document was a passage that
caught the attention of a key player in the travel advisor community.
"Direct
bookings reduce commissions paid to travel agents, which reduces our
distribution costs and improves our margins,” the company wrote in its filing.
“With a marketing database that includes more than 56 million North American
households, we believe our direct bookings will continue to grow and add value
to our business."
The company
has invested $2.8 billion in marketing since 1997, most of it on direct
marketing. The company said in its filing that more than 50% of clients
booked with Viking directly.
In
a 2013 cover story of Viking founder Torstein Hagen, he said, “We
really don’t care where people book. The main thing is that they
do book.”
But
elsewhere in the document, Viking said that the travel advisor channel was
also important to the brand and generates “a substantial
amount of bookings for our cruises, and we are committed to
maintaining and strengthening this distribution channel.”
Losing
its preferred relationships with large travel agency consortia could hurt the
cruise company’s business, the document said.
However,
the comments about seeking to grow direct business caught the attention of ASTA
president and CEO Zane Kerby. With a keen sense for anything that would
affect the trade, and he quickly issued a statement pointing out research from
a Phocuswright study that found travel advisors booked about 59% of all cruises
in the U.S., with projections that percentage will climb to nearly 71% by 2026
as their influence builds.
"Viking wouldn’t be
the first company to try and have their cake and eat it too when it comes to
guidance regarding their stock price,” Kerby said in his statement. “And, unlike the
U.S. domestic airline industry, there is lots of competition in the river
cruise market, with a dozen or more fantastic options. Viking would be
wise to embrace the U.S.-based travel advisor as their primary
distribution channel, because, quite frankly, they are."
Viking
declined to comment to Travel Weekly, but in an interview with Kerby last week, he said that he had since communicated with Viking about its direct business and the role of travel
advisors. He said the company told him they were “completely
committed to the North American travel advisor market.”
But he’s not
sorry he went public with his concerns.
“When
we see something like this, we’re going to say something because
travel advisors are their largest and growing distribution channel.
To somehow Wall Street-speak this and say, ‘Guess what, our
distribution costs are going to go down,’ it undermines a lot
of things,” he said.
For
instance, Kerby said, if direct bookings grow, the company would likely incur
more internal costs associated with hiring more people and paying more in
salaries and health care benefits to handle that influx in direct business,
even if travel advisor commissions fell.
The cruise
industry needs to attune Wall Street to the reality that the trade is not
paid until something is sold, he said.
“This
is an extremely efficient channel for any supplier, and why suppliers… look at
the third party distribution channel with awe and reverence, as well they
should,” he said.
Having a direct option is important to most cruise lines. Windstar Cruises said Monday that it is building out its direct strategy by rebranding its Guest Services department to Vacation Planning. The rebrand comes as the six-ship line looks to grow its internal team to catch up with its increasing capacity: In addition to stretching its three Star class ships during the pandemic, Windstar plans to add two new ships to the fleet by late 2026.
Windstar emphasized that it is committed to advisors. It said it will load its Vacation Planning department with dedicated teams specializing in outside sales, inbound reservations and a groups team to support the trade and sales department.
"Rather than just managing the guest booking process, the emphasis will now be on proactive sales as well as specialized expertise to craft personalized vacations for Windstar's diverse customers and travel partners," said Janet Bava, Windstar's Chief Commercial Officer.
Kerby told me in our interview that he hasn’t detected
any meaningful movement in favor of direct business, or at least
not any that he is worried about, he said. Direct bookings
tend to ebb and flow over time, he said. “All the advisors that
I know, and I’m not kidding, are snowed in with business.
Their phone is ringing off the hook.
He
added, “Everyone I’ve talked to, no one’s worried about the
phone ringing or clients. Life is good right now. It’s good to
be an advisor.”
Update: This Insight was updated April 24 to add information about Windstar Cruises' program.