Reading

4. Read and translate the text about tour operation management. Tour operation management

Planning, negotiating, contracting, marketing, and successfully administering a package holiday is a complex management task and takes place over a long period of time. Contracting with hoteliers and airlines can begin two years in advance of the holiday.

Hotel costs are a substantial proportion of the brochure price – usually around 40 to 50 per cent for a typical package holiday. There are two types of contract used. With the so-called allocation contract or allotment contract, tour operators only pay the hotelier for the beds they use. For example, they may contract 100 beds another, and 100 the next week.

An alternative is the fixed (guaranteed) contract or commitment contract, where the tour operator pays for a fixed number of beds throughout the peak season, irrespective of how many are sold.

With a fixed contract, the risk to the tour operator is obviously increased. Typically, 50 percent of contracted beds are fixed, but this can rise to 100 per cent when a destination is in very high demand.

The amount of the contracted rooms to be specified in the allotment contract is a result of the estimated, during the negotiation, volume of sales to be realized by the tour operator. Allocation contracts usually include a clause requiring the tour operator to confirm the number of beds sold several weeks before the customers arrive, at which point the hotelier may take some of the rooms back. This is called the release date. This enables the hotelier to sell off any beds not required or to stop sale if the hotel is full which stops that the tour operator from taking late bookings.

The allocation (allotment) contract reduces the risk of any unsold products by the supplier and grants relative price advantage to the travel organizer helping him to stay competitive on the market by offering extra discounts which can vary from 10% to 50% according to the period of the year, the destination, the quantity and quality of services contracted upon. Some big tour operators are able to obtain up to 70% of discount.

Allocation contracts are popular with tour operators from different countries, and usually they contract for slightly more beds than they have available. As tour operators vary in their success in selling an individual hotel, the hotelier is able to have a very high occupancy rate, which keeps prices competitive for the customer.

5. Answer the questions

1. What does tour operation management involve?

2. What types of contracts are usually concluded between hotels and tour companies?

3. What is the difference between an allocation contract and a commitment contract?

4. With which contract the risk is increased for a tour operator/ hotel?

5. What is the release date?

6. What discounts can tour companies receive for selling hotel room blocks?

7. What is the advantage of high occupancy rates for the customer?

6. Here are two operators describing the type of contract they negotiate with principals. Which of these labels would you use to describe them: allocation/ contract or commitment contract (fixed/ guaranteed)? What do you think are the advantages of each contract for tour operators and hoteliers?

1. ‘We take a certain number of rooms and give back those we can’t sell some weeks before the arrival date.’

2. ‘We take a certain number of rooms and have to pay for them all even if we don’t sell them.’