NCL's new policy has been enthusiastically welcomed by the trade.
Why do it, and why now?
During Norwegian Cruise Line Holdings' third quarter earnings call, an analyst asked about the timing of that decision and said wouldn't it just result in a net-zero if competitors follow NCL's lead?
Del Rio explained the travel agency community isn't fully back to pre-pandemic levels. While cruise lines were shut down for 500 days, advisors sold more resort vacations to make a living.
'We have to find a way to draw them back to the cruise industry and away from land vacations, our No. 1 competitor, as opposed to other cruise brands, and we think this is a way to do it,' Del Rio said.
Test showed subsquent increase in sales
An experiment over the summer using a 'relatively good-sized sample' found that travel advisors paid commissions on NCFs 'increased their business with us significantly, such that the revenue they generated over a long period of time more than offset the increase in commission expense.
'So we think this is an ROI-type of move,' Del Rio said, referring to return on investment.
Del Rio hopes other cruise operators will follow
The NCLH CEO added he hopes competitors do match NCL.
'It would be great overall for the travel agency community, which we all rely on. And at the end of the day, it's not so much about commission savings, it's about generating additional revenue and filling the vessels that are coming on line for us and for the rest of the industry,' Del Rio elaborated.
'No company has ever made their mark by saving and saving and saving. You make your mark in the topline. That's what this move is meant to do: to generate more revenue.'