Perspective – November 2012

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Ian McMahon

Carnival, mums and dads

IT’S hardly surprising that Carnival Australia quickly issued a statement affirming its continuing desire to partner with Australian travel agents after its submission on the draft Travel Industry Transition Plan came to light.

In the submission, which was supposed to be kept secret, Carnival raised the spectre of selling direct to the public rather than through travel agents if, as many expect, the Travel Compensation Fund (TCF) is abolished.

Carnival identified the lack of financial oversight for so-called “mum and dad” travel agencies as the key risk it faces if it continues to sell via travel agents in the absence of the TCF.

But, as Carnival’s subsequent statement acknowledges, travel agents have played a crucial role in the spectacular growth of the Australian cruise market from which no company has benefited more than Carnival.

And it is my observation that “mum and dad” agencies have been the creative, innovative force behind this growth. They are the ones that have brought true profession-alism to the marketing of cruises to Australians.

The term “mum and dad” agency has somewhat pejorative overtones suggesting amateurs running businesses on shoe-box account-ing lines by contrast with the MBA-qualified titans who run major corporations (and send numbers of them broke).

But it is worth noting that when the giant Flight Centre decided it was time to get serious about gaining a bigger slice of the Australian cruise market, it did so by acquiring a “mum and dad” operation that had built itself into one of the country’s most respected cruise retailers by dint of deep product knowledge and marketing excellence.

Attend the annual conference of Cruiseco, the nation’s most powerful cruise consortium, and you cannot help but be struck by the fact that it comprises a diverse group of business people who are sophisticated, experienced managers and marketers. Almost all of them could also be described as “mum and dad” agencies.

It is also worth noting that the two most recent high-profile failures to bleed the TCF of funds have been Kumuka and Classic International Cruises. As industry members scratch their heads over what has happened to moneys collected by the Australian offices of these overseas-headquartered operations, the fees contributed to the TCF by “mum and dad” agencies have been used to bail out their Australian (and, in some cases, New Zealand!) clients.

As it happens Carnival Australia is also the Australian office of an overseas-headquartered company. It would be nonsensical for “mum and dad” agencies to claim that, because a couple of others in roughly similar situations have gone to the wall, Carnival represents any sort of real risk to them. But surely the reverse also applies.

One intriguing aspect of all this is how Carnival Corporation handles the perceived credit risk of “mum and dad” agencies in the US where, as far as I know, there is no equivalent of the TCF. Presumably the arrangements that Carnival applies in the US could also be implemented here.

I have contacted Carnival Australia to ask the question. They are getting back to me. I will keep you informed.