In December, Travel Weekly reported that, effective Jan. 1, Carnival Cruise Lines would include new language in the sales contracts it offers to agencies selling its products.
Certain large producers were given contracts that included the new language, which would prohibit agencies that wished to sell Carnival products from using any of its trademarked words, phrases or content without permission.
The prohibition included purchasing Carnival-trademarked keywords and phrases on Internet search engines such as Google, Bing, Yahoo and others. Buying keywords, in order to improve placement on search engines, is a primary marketing tool of many large online travel agencies, such as Expedia and Orbitz.
In short order, Princess Cruises and Holland America Line revealed similar contract provisions, also to take effect Jan. 1.
According to Carnival, the intent was to avoid consumer confusion when customers searched the Internet for a Carnival cruise.
A search I ran on Google in early November using several phrases, such as "Carnival cruise" and "Princess cruise," revealed that a handful of national cruise sellers' links appeared at the top of the page in the tinted "sponsored link" box, each appearing in the first spot in rotation in the box. In my search, none of those advertisers was the cruise line I had queried, so indeed it would appear that a consumer might easily be confused and believe that he or she was looking at cruise line content rather than at that of a travel seller.
Not mentioned by Carnival, but almost certainly of equal or greater concern, was the amount of co-op marketing dollars Carnival reimbursed to agencies that bought these keywords. The OTAs that bid on keywords were spending from about $5 per click on a phrase such as "Carnival cruise" to as much as $8 or more on a phrase such as "Royal Caribbean cruise."
Estimates are that the online travel companies that bought keywords were spending hundreds of thousands of dollars a year on Google alone. Cruise lines, in turn, were reimbursing 50% of that cost.
Consumer confusion is a legitimate concern and cannot be discounted for the reasons noted above. However, it is likely that spending hundreds of thousands of dollars to help the OTAs buy keywords that the lines already owned was of equal or greater importance and concern.
Further compounding the issue was that keyword buyers, including the cruise lines themselves, had to bid increasingly higher prices on the same keywords to keep their company on the top of the page. To illustrate the effect of that bidding war, two years ago "Caribbean cruise" had a suggested bid price of about $2.25 per click; in November the suggested bid was more than $5.
At some point, one can imagine a senior cruise line marketing executive insisting that someone explain the rationale for continuing to subsidize the program.
What has been the effect of the ban?
A search in mid-January using keywords for the cruise lines mentioned showed compliance for the most part, with retailers appearing only in the sponsored links on the right side of the page. Interestingly, one prominent advertiser in the sponsored links is a major competitor of two of the lines that announced the ban.
The impact on some large online travel agencies is reportedly negative, with call volume and sales down substantially.
Restraint of trade? Violation of freedom of speech? No. A contract entered into by two informed entities, no matter how onerous one party might view the terms, is neither of these. Each party has the option not to execute the agreement. If one doesn't wish to comply with a contract, one need not sign it, and the other party need not allow the first to sell its products. You don't sign, you don't play.
What does this mean to all the other agencies that didn't, and don't, buy keywords?
It means the playing field is leveled modestly for smaller agencies, and now OTAs must use organic search engine optimization to put their company at the top of a page, just like the mom-and-pop travel agency down the street.
It means the cruise lines just cut their annual advertising expense by hundreds of thousands of dollars.
It means the cruise lines are working harder than ever to drive consumers to buy from them direct.
It means the retail distribution system has been warned to get busy with becoming a better, more service-focused businesses.
And what you felt in December was the ground that is the cruise industry shifting beneath our feet. As surely as aftershocks follow a seismic event, grab the handrail, because it isn't over yet.
Charlie and Sherrie Funk own Just Cruisin' Plus in Nashville. They have written several books on travel agency operations and produce sales, marketing and operations seminars for agency owners and managers. Contact Charlie at charlie@justcruisinplus.com.