TORONTO — What’s all the fuss about NCFs anyway?

In the midst of Norwegian Cruise Line’s bold move earlier this month to start paying commission on non-commissionable fares, the long-contested policy that has denied travel agents of additional earnings is being put under renewed scrutiny, with many agents wondering whether other cruise lines will follow suit.

In this follow up to our interview last week with Virgin Voyages, which has never implemented NCFs since its launch in 2020, we asked ACTA president Wendy Paradis why NCFs – the portion of a cruise fare that doesn’t pay commission to agents – continue to be a significant concern to travel agencies and independent travel agents, particularly now as they work to recoup losses brought on by the pandemic.

“When fares are overwhelmed by ‘surcharges’ beyond taxes and real port fees, the consumer is irritated and it makes selling the travel product more difficult,” she says. “In ACTA’s view, all travel suppliers should rethink these surcharges and return to a simple price, plus actual taxes. NCFs also diminish our industry’s ability to effectively lobby governments against excessive taxation.”

Paradis adds that ACTA “strongly believes that all revenue earned by cruise lines from travel agent bookings should be appropriately compensated,” and that NCFs diminish the contributions made by agents towards a cruise line’s success.

“Their continued use serves only to erode that vital relationship between travel agents and cruise lines,” says Paradis.

When asked what her thoughts are on NCL’s announcement, Paradis is quick to note that ACTA publicly applauded the line across its social platforms.

“NCL is taking steps to do the right thing and should be recognized for it. We strongly support NCL’s decision to remove NCFs and appropriately compensate travel agents. No doubt, NCL will see improved travel agent relationships and stronger bookings,” she says.

Richard Vanderlubbe, ACTA Director and President of tripcentral.ca, also applauds NCL for leading the way but adds that the cruise line can go one step further by expunging the term ‘NCF’ entirely from its corporate lexicon and stop line-iteming it out separately. Only then will he be able to trust that they have truly been eliminated.

“Each supplier has to figure out its compensation policies, and it would be nice to have an honest dialogue rather than starting with deception,” he tells Travelweek. “The term ‘NCF’ and ‘non-commissionable fares’ itself being used publicly and disclosed directly to customers on cruise line websites, reservation confirmations and price summaries is disrespectful and offensive to the retail travel industry. Why should a consumer know what is commissionable and what is not? If a consumer is buying direct from a cruise line, it is meaningless. If they are buying from a travel retailer, it has meaning and creates unnecessary challenges for travel agents.”

We asked Vanderlubbe about the history of NCFs, why cruise lines continue to implement them, and what it would take to be rid of them for good. Here’s what he said:

What do you know about the history of NCFs? How did they first come about?

“NCFs first appeared after the term ‘port taxes’ or ‘port taxes and surcharges’ became problematic. This stemmed from advertising regulations in Florida that no longer permitted low-ball base fares and ‘port taxes and surcharges,’ the most problematic being that these port taxes were lumped together and not transparent. The all-in advertising brought in the concept of a non-commissionable fare. This was to sustain the deceptive premise of a high commission on a lower base price, rather than having an honest commission on the full fare.

“Perception is reality. Since agents were getting a higher commission on a lower fare, when port taxes were eliminated and NCFs came in, there was no real economic change but the amount was even more opaque and arbitrary. My objection is using the term ‘commissionable’ in any way with consumers.”

If NCFs are so unpopular among both consumers and travel agents, why do you think cruise lines continue to have them?

“Consumers don’t care because the advertising regulations require all-in pricing for advertising. So they show up occasionally on breakdowns of pricing, sometimes on websites and confirmations actually line-iteming the amount. Agents care because they don’t earn commission on them, and on very low cruise fares it makes selling distressed inventory simply not worth the effort. A low cruise fare could be 75% NCFs. It’s not uncommon to see extremely low base fares of $99 or $199, plus hundreds in NCFs.

“The cruise lines shoot themselves in the foot by making such distressed cabins unpalatable for agents to sell, and it works against them because of the opportunity to earn onboard revenue. I think this is one of these things were ‘everyone does it, everyone’s always done it, we can’t pay the higher commission on the NCFs,’ and so it persists. Stupidity abounds – cruise lines for not seeing how this disincentivizes agents selling their distressed inventory and soft dates, and agents for not realizing that the perceived higher commission is not really a higher commission at all when factoring the total price.”

How are NCFs being justified by suppliers?

“Where do you draw the line? Part of the cruising experience include facilities to board and disembark, and customs inspections in ports of call. Why exactly should that be ‘an extra’? It’s the same logic with airlines: lowball base fare, a fuel surcharge that never goes away – even when the price of fuel was at record lows in the middle of the pandemic – and ‘taxes’ that are often padded or created into per person charges when they are not.

“When travel suppliers pad taxes and invent surcharges just for the purpose of duping agents into thinking that they are earning a commission rate that they used to in the past, it’s all about a psychologically higher commission rate. ‘I’m not cutting your commission rate but I am lowering the base fare and including a non-commissionable surcharge.’

“So, if port taxes and surcharges are not commissionable, why not a ‘food surcharge’ or ‘staff surcharge.’ Arbitrarily taking expenses that we don’t like and separating them in the price is just pig-headed, stupid 1990s mentality that just doesn’t seem to go away.”

“Well, there’s that little problem of competition legislation. I think eliminating NCFs as an industry decision would be a good thing. Coordinating commission changes together would be collusion. This is entirely a decision for each business. WestJet Vacations pays commission on the full base price without taxes. Others pad the taxes. It makes a difference on the total compensation. Most of us are smart enough to figure that out.”

Do you think NCL has opened the floodgates for other cruise lines to follow its example?

“I see no flood of announcements. My guess is that they realized there was little incentive to sell lower base prices and distressed inventory, and sanity prevailed. If you are dumping space and want passengers onboard, distribution policies like this matter. If agents are indifferent or reticent to sell low cruise prices that stem from this silly policy being continued ‘just because that’s how it’s always been,’ well, this is a good solution.

“For cruise lines selling at a much higher price where the NCFs are a low percentage of the price, it probably has less impact. There is value in separating out true tax amounts in pricing to draw attention to governments for overtaxing our industry. If these are transparent and not padded or manipulated, an industry coalition of unity can lobby governments to lower taxes. If they are hidden like gas taxes, it is rife for governments to raise them.

“I think the balance is to disclose them somewhere so consumers know exactly what amount each government and port authority is taking from them. Maybe that was harder in the 1980s and 1990s, but with today’s technology I think it makes sense to disclose to consumers the true taxes, include them in an all-in price for advertising, and keep them out of base fares. Commissioning taxes worsens the problem.

“My beef is the naked term ‘non-commission fare’ and any deception in padding them or taking non-tax cost lines and making them non-commissionable. Whatever advantage might be gained on a financial side is a façade, and it brings dishonesty to the point where lobbying governments is not credible or taken seriously.”

Got a story idea? Reach out to Deputy Editor Cindy Sosroutomo at cindys@travelweek.ca.