American to boost
UBS reports ‘share shift’ among
cruise lines to smaller agencies
By Donna Tunney
hotel in Ethiopia
American filed plans at the Transportation Department to boost its
U.S.-Brazil service by 17 weekly
flights this fall. Nonstop routes
from New York to Sao Paulo and
Miami to Rio would get a second
daily flight on Oct. 1 and Dec. 15,
respectively, while service from
Miami to Recife and Salvador
would be restructured to provide
five weekly nonstops on each
route, beginning Nov. 15.
Sugarloaf Mountain, Rio de Janeiro.
The major cruise lines are broadening the base of
their agent distribution systems in an effort to sell
more cruises through smaller agencies that are less
likely to reach override volume targets, according
to a UBS Investment Research report.
“Cruise lines benefit from selling through
smaller agents who have lower commission costs
if volume override targets are not hit, and cruise
lines have meaningfully shifted share to lower-cost
distributors in the past few years,” wrote UBS ana-
lyst Robin Farley in the report titled “Cruise Lines
In terms of “share shift” in the distribution
channel, the report stated that in the past, 20%
of agents did roughly 80% of bookings. However,
as recently as a few years ago, Royal Caribbean
Cruises Ltd. noted that 40% to 50% of agents
were booking 80% of the business, according to
Farley’s report, which was issued May 14.
“So sales are less concentrated in the distribution channel,” Farley said.
The report said that in the past, “Many have argued the way to reduce distribution expense is to
increase direct sales and disintermediate the travel
agent, but that may not have gained much traction.”
Farley said she estimates that between 70%
and 80% of all cruise vacations are still booked
through agents. The new approach, she said, is to
reduce distribution costs by making agent sales
more efficient through automated — e.g., on-line
— bookings rather than using call centers.
“We believe 90% of Carnival brand bookings
and 75% of companywide bookings [already] are
automated,” she said.
The UBS report provides an overview of recent
events, such as the bookings fallout after the Costa
Concordia shipwreck in January, and looks ahead
to next year.
“While Concordia and macro issues may combine for a soft  in Europe, we believe Europe over the long term has been a high growth
market and will continue to be, with relatively low
penetration rates and subdued supply growth,”
UBS, she said, believes 2013 will be a “year of yield
recovery for pricing momentum lost during 2012.”
The firm estimated that Carnival Corp.’s 2013
constant currency net yield growth will reach
about 4% and Royal Caribbean Cruise Ltd.’s will
be about 3.5%.
Marriott International is continuing its expansion in Africa with
a plan to debut its first two operations in Ethiopia, with the 2014
opening of a Marriott Executive
Apartments followed by a 209-
room Courtyard by Marriott in
2015, both in Addis Ababa.
Marriott said it will engage a local training provider to help recruit
and train local residents for the estimated 200 jobs the two properties will create.
New Orleans hotel
The 254-room Hyatt French Quar-
ter opened in New Orleans in a
former Wyndham,which was re-
American said its plan is con-
sistent with the cap on U.S.-Brazil
flights because not all of the allow-
able weekly frequencies have been
claimed by other carriers.
for Reagan National
New Orleans’ French Quarter.
The Transportation Department
authorized four U.S. airlines to
launch new long-haul routes from
Washington’s Reagan National
Airport to points beyond the airport’s traditional 1,250-mile perimeter.
The routings are: Alaska Airlines
to Portland, Ore.; JetBlue to San
Juan; Southwest to Austin; and
Virgin America to San Francisco.
Each carrier received slots for one
daily roundtrip and must start service by Sept. 8.
flagged after an $18 million renovation. A Hard Rock Cafe will open
at the hotel early next year.
Sheraton to open
in Iraq in 2015
Starwood plans to return to Iraq
in 2015 with the planned opening
of a 260-room Sheraton in Erbil,
Iraq’s fourth-largest city and capital of its Kurdistan region. Hilton
and Marriott also have developments under way in Erbil.
Allegiant adds Maui
to Hawaii plan
‘Effective commission rates’ down
“Both Royal Caribbean’s and Carnival’s effective
commission rates have come down without the
companies having to resort to commission cuts as
a result of this share shift to selling through lower-
cost agents,” she said, adding,“Carnival noted that
in FY2011 no controlled group of travel agencies
accounted for 10% or more of their revenues.”
Carnival Corp. and Royal Caribbean Cruises
Ltd. together account for 80% of North American
capacity, Farley said.
A Carnival Corp. spokeswoman declined to comment on Farley’s observations, explaining that since
each Carnival brand sets its own commission structures, she couldn’t offer a companywide perspective.
Vicki Freed, Royal Caribbean International’s se-
nior vice president of sales, trade support and ser-
vices, said the line is “dedicated to working with
all travel agencies, big and small.”
“It does not have to do with overrides or com-
missions being lower, but rather, many new travel
agents are entering the business as encore careers,”
she said in response to Farley’s report. “Therefore,
when rookies start out, they have to grow their
overall volume to obtain higher commissions and/
Carnival a ‘solid long-term story’
In the report’s “Investment Thesis” section, Farley said UBS favors Carnival Corp. over RCCL:
“We believe Carnival is a solid long-term story
given its strong balance sheet, operational efficiency and brand positioning. We view Carnival
as the lower-risk, longer-term, more core holding.
“Additionally, because of its size, Carnival has
more buying power when ordering ships, and its
greater exposure to European brands acts as a natural hedge to the dollar,” Farley wrote.
She said that she expects Carnival to generate
$1.5 billion of free cash flow in 2013 and $1.9 billion in 2014.
Looking ahead industrywide, she said, positive
longer-term trends include below-average capacity growth, international source marketing of passengers, a high repeat cruiser rate and the ability
to tap into new passenger bases through increased
homeporting in the U.S.
RCCL to swap ships
in Baltimore lineup
Allegiant Air, which is breaking
into the Hawaii market in late June
with Honolulu service from Fresno, Calif., and Las Vegas, will add
five more routes, including a Maui
segment, in mid-November.
From Bellingham, Wash., the
discount line will launch service to
Maui on Nov. 14 and to Honolulu
the following day. Later that week
it plans to add Honolulu nonstops
from Eugene, Ore., and Stockton
and Santa Maria, Calif., which is
on the Central Coast some 150
miles north of Los Angeles.
YTB Int’l CEO out; third of staff laid off
YTB International, parent company of the YTB
Travel Network, laid off one-third of its staff and
will replace its CEO as part of a major company
shake-up that it says is part of “restoring the com-
pany’s profitability and focusing its strategy on
its core business of Web-based travel-related ser-
YTB said that Robert van Patten, YTB’s presi-
dent, CEO and CFO, resigned from the company.
While the board looks to replace him, a manage-
ment committee will guide daily operations.
YTB co-founder J. Scott Tomer will continue
in his roles as CEO of YTB Travel Network and
chairman of YTB International.
Royal Caribbean International will
deploy the 1,950-passenger Grandeur of the Seas to Baltimore for
the spring, summer and fall/win-ter seasons of 2013, replacing the
2,252-passenger Enchantment of
the Seas, which will reposition to
Cape Canaveral, Fla.
The Enchantment will offer year-round three- and four-day Bahamas itineraries from Port Canaveral, replacing the Monarch of the
Seas, which is being reassigned
to the line’s Spanish affiliate, Pull-mantur.