The UK’s Third Largest Cruise Retailer Goes Bust – Other News: Seattle: A New West Coast Cruise Centre – Detroit Opens Its New Cruise Terminal Today
by Kevin Griffin
Last week, Gill’s Cruise Centre, reportedly the third largest cruise retailer in the UK, ceased trading. We have a look at some of the reactions and revisit the failure of Cruise Control, the last major cruise retailer to go bankrupt in the UK. Elsewhere, while Los Angeles has been thought of as the US West Coast’s cruise centre since Princess Cruises was founded there, Seattle now puts up a good argument for taking the lead. And with the first call by Blount’s Grande Mariner, Detroit opens its new cruise terminal today.
THIS WEEK’S STORY
The UK’s Third Largest Cruise Retailer Goes Bust
It was announced on Thursday last week that E & M E Gill Ltd, a Cardiff-based cruise retailer better known as Gill’s Cruise Centre, a firm that booked about 60,000 cruise passengers a year, has gone into receivership. But the explanations behind it seem to vary from spending too much on overheads, travel and advertising to giving away too much commission in rebates to customers –as it offered to price match all its competitors
Earlier this month, Carnival UK (P&O, Princess and Cunard), Royal Caribbean UK (Royal Caribbean, Celebrity and Azamara) and Fred. Olsen Cruise Lines, all of them concerned at the level of the agency’s debts, started to take payments directly from Gill’s customers. Then, last Tuesday, Carnival UK terminated its agency agreement, an action that was quickly followed by Royal Caribbean and Fred. Olsen. This resulted on Thursday in Gill’s announcement that it could no longer take any new bookings.
The Association of British Travel Agents (ABTA) followed up by terminating Gill’s membership on Friday. Customers who booked through Gill’s will be protected by the cruise lines and will be covered either by their ABTA bond or by a Civil Aviation Authority ATOL (Air Travel Organisers License) in the case of fly/cruises, and have been asked to contact the cruise line with whom they are booked.
This sequence of events actually seems to date back some months, as Gill’s had sought to restructure and cut costs in March, when it closed its central London office, which it had opened in 2008, relocating the staff back to its original base in Cardiff. But this appeared to be too little too late. There were suggestions from competitors that not only were Gill’s costs too high but its discounts were too low. Gill’s chairman Alistair Gill described trading as “a challenge” while attaching some blame to a cut in commission to 5% by Carnival UK. However, this cut applies only to 2012 bookings, and not this year’s business.
Gill’s, founded in 1957, nevertheless earned praise from some quarters. Giles Hawke, head of sales at Carnival UK, told Travel Weekly: “We have been trading with Gill’s for over 40 years. They were the top-selling agent for P&O Cruises in 1975. They have been a good partner for many years, had a fairly robust business model and attracted customers to cruising.”
Up to 100 staff are thought to have lost their jobs but the business model at Gill’s has recently involved a lot of deep discounts, which they rebated from commission, and heavy press advertising.
The Saturday Independent had a different view: “While cruise lines were paying commission of 15 per cent or more, the company appeared to be thriving.” But earlier this year, Britain’s biggest cruise firm, Carnival – which owns P&O and Cunard – cut its commission to just 5 per cent. In March, the firm closed its London call centre, blaming the commission cuts and the poor economic outlook. One rival agent said yesterday: “They were discounting to unsustainable levels. Customers would ask us to price-match the deal Gill’s were offering. When we saw the price, it was clear they were selling loss leaders.’”
Despite Gill’s closing, things have moved on very quickly. Today it was announced that P&P Associates, the company behind Asda Travel, had moved to take over Gill’s assets, including its database, and begin a new operation called WeCruises. Other brands in the P&P portfolio include online retailers WeFly and WeHoliday.
P&P chief executive Phil Cook said: “This is a great opportunity for us to incorporate Gill’s long-established cruise business into our travel group. Gill’s fine reputation for excellent service, its knowledgeable staff and its loyal customer base will be enhanced by our cutting edge technological back-up and the broader opportunities offered by our organisation.”
According to Cook, Gill’s had “been a victim of over-rapid expansion in recent years, with management structures and technology struggling to keep pace with growth.”
So just how did a company that has been selling cruises for fifty years go bankrupt? We could look at the UK’s Review Centre web site, where Gill’s scored a 3.1 out of 5 for service from 88 reviews, perhaps the sign of a company that sacrificed too much on price. One anonymous guest, who gave Gill’s one star out of five, had the following to say on May 18:
“I booked a cruise for 8 people using Gill’s cruise centre. The whole experience was, and continues to be horrendous. Booking confirmations were not dealt with correctly. Numerous members of admin staff seemed clueless as to what to do re enquiries. Numerous telephone calls and e-mail s … not replied to. Letter regarding move to London of admin team, then all correspondence from Cardiff. 8 days prior to sailing, we had received no tickets, boarding cards, coach transfers … a complete shambles. Cruise (MSC Opera) then cancelled … not Gill’s fault, but now worried about having to deal with them all over for refunds etc. I’ve cruised 12 times…never use this company again, and strongly advise you not to.”
Two days later, another anonymous guest, who gave Gill’s five stars out of five, and one that sounded suspiciously like a representative or employee of Gill’s, had this to say:
“I have never booked a holiday on the internet before however after booking with Gills cruises I will book with them again the staff couldn’t have been more helpful well done gills well done to everyone I dealt with you all made it very easy for me who isn’t very competent on the internet I am still learning I hope the holiday goes as well as your efficiency and friendliness.”
On the very day they went under, Mabel Ward posted this under “very poor customer service”.
“This company made a hash of my booking, failed to give any information, no receipt of money paid. They cost me £200 the day before my cruise. I had to go to a local travel agent to find out which dock the ship would be sailing from. I have complained to the company and never got a reply. This matter is now in the hands of my solicitor. No wonder they are going under according to today’s paper.“
But poor service, sacrificed to rebates, is only part of the story. Ironically, another seems to be overspending. Almost six years ago, in October 2005, the similarly-sized Romford-based agency Cruise Control went out of business after Carnival UK put them on “stop sell,” a move prompted by delayed bill payments. Cruise Control was reported at the time to have had an annual turnover of about £90 million.
Some say that Cruise Control got into trouble because of too much rebating while others say they spent too much on advertising. More than two years after they closed, it was revealed that creditors who were owed £18.5 million would probably not see a penny. On December 3, 2007, Travelmole carried the sorry story:
“Liquidators PricewaterhouseCoopers revealed that a figure of £18.5 million in potential claims had been identified. This was £12 million more than had been originally estimated. So far only £515,743-worth of assets has been recovered, including the sale of the Cruise Control database for £405,000. Estimated total assets are £1.1 million. Cruise Control customers have received almost £78,000 in refunds to those who paid by credit card for their holidays from £117,140 held in the company’s bank accounts at Barclays. Tangible assets recovered amounted to just £31,626 including the sale of a BMW for £12,000, computer equipment for £19,506 and general office equipment for £120.”
This report also stated that following a review of the affairs of the Essex-based company prior to its failure and points raised by creditors, a report had gone to the disqualification unit of the Department for Business, Enterprise and Regulatory Reform.
Part of Cruise Control’s business was absorbed by retailer 1st4cruising, which by the end of the month had snapped up its 226,000-name database. When this happened on November 1, 2005, 1st4cruising’s new owner Harry Goodman claimed his agency was now the largest independent cruise specialist after fighting off stiff competition to acquire Cruise Control‘s customer database. Goodman said it contained 236,000 names and addresses, 100,000 of whom have previously booked a cruise. Combined with the existing 1st4cruising list, Goodman claims his new database numbered about 600,000.
The difference between Gill’s and Cruise Control was basically that Gill’s was an old established family company, while Cruise Control was a brash upstart. But both gave away too much commission to “buy” the business and both were said to have spent too much money on advertising. Neither supplies us with a good business model.
So what caused these two large companies to go out of business? Sebastian Ahrens, commenting on the British disease of rebating from commission to buy cruise bookings, made his own comments ” in an interview in the latest edition of “Cruise Trade News.”
Talking about higher levels of commission before the demise of Gill’s, he said “that shouldn’t mislead a travel agent into thinking they can hand back money because that’s a dead end road and one person’s going to be dead, and that’s the travel agent. The thing to do is to be convincing in terms of the service, the attentiveness and the customer loyalty management, after the cruise in particular, rather than thinking about how much of that commission I can hand on.”
Seattle: A New West Coast Cruise Centre
There was a time when Los Angeles was considered the centre of cruising on the US West Coast, with Stan McDonald’s Princess Cruises based there, and from 1990, Crystal; Cruises. But San Francisco was always a competitor, especially in the days of famous Royal Viking Line, which was based at One Embarcadero Center.
Today, however, Seattle is coming to the fore. Holland America has of course been based in Seattle since 1978, and the city was also the home of small ship line Cruise West until last September. But that is slowly changing, and while Seattle’s cruise business has been growing, largely at the expense of the Alaska trade that used to use Vancouver, Los Angeles’ business has also been diminishing because of a slump in bookings to Mexico.
The latest recruit to Seattle is of course Seabourn, which is now housed in separate space in the Holland America Line headquarters building in Elliott Avenue. Holland America already employs 1,139 people in Seattle but the move by Seabourn from Miami bringing about another fifty, compared to the 116 employees it had in Florida. It is said that the move of Seabourn into Holland America headquarters will save the line up to $25 million a year.
Two more cruise lines can also be counted. A year before Seabourn arrived, Paul Gauguin Cruises established themselves at nearby Bellevue. And the newly-independent Windstar Cruises, once operated by Holland America Line, still maintains its base in Seattle.
And even if Cruise West is gone, American Safari Cruises and its newly-formed InnerSea Discoveries division, which operates two small ships in Alaska, have filled part of that void. Lindblad National Geographic also maintains an office in Seattle to oversee its two Alaska small ships, the Sea Bird and Sea Lion, while Zegrahm Expeditions and its Eco Tours are Seattle-based as well.
That makes a total of seven cruise operations running about thirty ships based in Seattle compared with two lines and nineteen ships based in Los Angeles.
Detroit Opens Its New Cruise Terminal Today
With the arrival of the 100-passenger Grande Mariner, the Detroit-Wayne County Port Authority will open its new Public Dock and Terminal today. The Grande Mariner, which is operated by Blount Small Ship Adventures, arrived from Cleveland on Sunday and will sail for Windsor after the ceremony today.
This new $22 million facility will be available for use by cruise ships, visiting naval vessels, tall ships and perhaps even by a new ferry service to Windsor, Ontario, across the Detroit River in Canada. The last ferries disappeared with the opening of the present bridge.
Part of a 5&1/2-mile redevelopment of the whole Detroit waterfront, called River Walk, in addition to customs and border patrol facilities for the clearance of incoming cruise ships the 30,000-square foot Public Dock and Terminal will house new offices for the port authority.
Blount have introduced two new itineraries recently, between New York and Toronto and between Toronto and Georgian Bay. Another cruise line newcomer, yet to be announced, is planning six departures and six arrivals from Detroit between June and September of 2012, handling a dozen passenger loads to and from Chicago, Duluth and Quebec City.
Meanwhile, Hapag-Lloyd Cruises’ 14,903-ton Columbus, a candidate for which the terminal was originally developed, is to become Plantours’ Hamburg in the spring of 2012. The largest ship to cruise the Great Lakes in recent years, she first came into the Great Lakes in 1997. Nevertheless, while she will change operators, it is hoped to attract her back to the Great Lakes under her new name in 2013.
(Kevin Griffin is managing director of specialist cruise agency The Cruise People Ltd in London, England. For further information concerning cruises mentioned in this article readers can visit his blog)