Caps on commissions for airline tickets, which are even lower for online agencies than they are for their traditional counterparts, have kept revenues low for online agents. Although cruises and tours composed less than 10 percent of all trips last year, their higher cost makes them a more lucrative part of the business.
With $1 of out of every $7 going to distribution costs on systems such as Sabre and Worldspan, the airlines are eager to bypass them if they can, according to Seema Williams, analyst with Forrester. "Suppliers are very happy about the Internet," she said.
The cruise industry, on the other hand, doesn't have a centralized reservation system and depends on agents for 95 percent of its bookings. That has made them reluctant to push agents aside, and most still offer Internet booking only to agents, although Carnival expects to begin direct booking later this year.
"Cruises require more knowledge on the part of the seller," said Martin Charlwood, chief executive of Uniglobe Travel Online.
Because more work goes into selling cruises, and because agents must often call cruise companies directly, commissions average 10 percent to 15 percent, compared to 5 percent to 7 percent for airline, car rental, and hotel reservations. That has attracted the attention of online agencies like Preview Travel, which launched its cruise area in July. The site now has information on more than 100 cruises, though not all can be booked online.
Uniglobe Travel Online, a spin-off of Canadian travel franchise Uniglobe, is a minor player in online travel, with just half a million people visiting its Web site in December, compared to more than 3 million each to Preview Travel, Microsoft's Expedia, and Travelocity, according to Media Metrix. But UTO is counting on the close relationship its parent company enjoys with the cruise industry--its Cruise Ship Centers division purchases inventory in blocks to secure a lower price from cruise line--to vault it to the top of the heap.
Earlier this week, Uniglobe Travel Online acquired InHouse Travel, a Chicago-based travel franchise that also owns a gateway to the Airline Reporting Corporation, which handles ticket processing and financial settlement to all U.S. travel agents and airlines. Uniglobe is also one of two providers of cruise bookings on Expedia.
With the addition of InHouse, CEO Charlwood expects Uniglobe's revenues to jump from less than $10 million last year to more than $100 million this year.
"We expect to become the largest seller of cruises on the Internet within 18 to 24 months," Charlwood said. To get there, UTO plans to move to Nasdaq from the Vancouver Stock Exchange, where its shares currently trade.
But with Carnival opening up its reservation system to consumers, other cruise lines are sure to follow, and that could kill the golden goose that cruise bookings have become for travel agents.
"Uniglobe can't hold a candle to what Carnival spends on marketing," said Nicole Vanderbilt, an analyst with Jupiter Communications.
To combat the rising tide of direct bookings, online travel agents must differentiate themselves from suppliers by specializing in certain types of cruises and providing superior customer service. They may have to charge more, but there is demand for such services.
"You don't see branding in agencies today," Williams said. "In the future, you will see agencies serving needs more specifically."