Tour Operators and Tour Packages

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

Describe the different types of tour operators and the criteria used to differentiate them;

Understand the different types of tour packages and the components of each types;

Follow the sequence in assembling the different tour packages of each type of tour operator.

Any travel agency that desires to expand its scope of services will undoubtedly branch out to tour packaging and the operation of tours – whether outbound, inbound, domestic or local tours.

In the Philippines, Tour Operators are travel agents who expand their product range by setting up a tours department. This department is tasked to assemble the various travel components into a tour package, and sell the resulting package as one product. It develops and assembles well-made tour packages that are offered to the travelers through other travel agencies.

In order to make these packages attractive to the travelers, a tour operator’s product development sections, is constantly on the look-out for new destinations, attractions and activities. It also conducts research on the travel trends of the market, and often consults the travel agents for relevant in-puts.

As an assembler of services, a tour operator acts as a middleman. It contact transportation services, such as airlines, bus/car operators’, shipping lines; hour for lodging and meals; restaurants and night clubs for entertainment; and guides.

“The tour operator is the “nut” that keeps all the “bolts” (suppliers) together.”

A Tour Operator contacts the separate travel components of transportation, accommodations and their other services, and combines these into a single tour package.

A tour operator has three (3) main functions:

1. Plans and develops tour packages that meet the needs of the various markets.

2. Assembles the various travel components as an integral part or component of a single tour package.

3. Delivers the tour package by operating worry-free and secured programs and/or itineraries that are cheaper than when each service is purchased individually.

The tour operator has five (5) sources of income:

1. Variable mark-up based on contracted rates from the suppliers. It is able to negotiate for lower prices and its profits are adjustable. It restrains profit levels below retailers’ prices. As such its income is variable, but limited.

2. By seeking and negotiating or cost savers and concessions. Some components are given by the suppliers on a complimentary basis, but included as a cost in the package.

3. Through the sales of optional tours, excursions and extensions. This source of revenue is generated after the sale of the basic package.

4. For tour group movements, souvenir shops grant the tour operator shopping commissions on sales generated. This commission is normally shared with the tour guide.

5. Through direct sales to end-users, thus avoiding the payment of commissions to the travel agents. However this is a short-sighted policy that is not accepted by the travel industry at large. Tour operators who condone and practice this policy do not last long as they lose the support and credibility of the retail travel agents.

Restaurants, Clubs, Shopping Malls & other entertainment entities

Air, Sea and Land Transportation

Hotels, Resorts and other lodging establishments

Tour Guides and Service Personnel

TOUR OPERATOR

Occasionally, a tour operator earns or loses money on foreign exchange rate fluctuations. Sometimes it makes use of advance deposits and cancellation fees.

A Tour Operator can therefore be characterized as follows:

1. A wholesaler who transacts business primarily with, and protects the interest of the retail travel agents.

2. Acts as a conduit to and a middleman of suppliers.3. Have variable but limited profit margins. Capitalizes on cost-savers and

concessions.4. Generates additional revenues by selling optional tours, excursions and

extensions.5. Can, but should not, by pass the retailers, and sell direct to the end-users.

TYPES OF TOUR OPERATORS

There are four (4) types of tour operators, namely; Local, Domestic, Inbound and Outbound.

The Local Tour Operator (LTO) services Filipino and/or foreign traffic to national destination by way of regular sightseeing tours or tour package, taking into consideration the popularity of the destination, site or sight.

The Domestic Tour Operator (DTO) services Filipino traffic to national destinations, on an ad-hoc basis, as and when contracted, by providing itineraries/programs tailor-made to the needs of the client.

On Inbound Tour Operator (ITO) services foreign traffic to national destinations, on an ad-hoc and regular packages basis, taking into consideration the specific requirements of the contracting party abroad. Its source of traffic is mainly foreign tour operators.

An Outbound Tour Operator (OTO) designs and assembles tour packages for residents of the Philippines, either foreign or local, to foreign destinations, such as Hong Kong, the U.S.A. or Europe.

They differ based on the following: (1) area of operations, (2) nationality of travelers, (3) market or source of traffic, and (4) type of tour packages offered.

1. Area of Operations. This refers t the geographical area visited in the course of delivering the tour product. It is the physical area, with all attractions (natural or man-made), all activities whether spontaneous or planned, the experience of events, and in some instances, where the tour operator is based. e.g.: Illigan City, Province of Albay, Northern Luzon.

2. Nationality of Travelers. The nationality of the travelers, either Filipinos or foreign, examples: Filipinos residing in the Philippines or based overseas as immigrants (balikbayans), or citizens of foreign countries residing in the Philippines as expatriates, or just visiting.

3. Market or Source of Traffic. Refers to the placeof residence of those participating in or availing of a tour package. It does not necessarily mean the nationality of the tourists or excursionists. Examples: expatriates living and working in Hong Kong or in the Philippines.

4. Types of Tour Package Operated. Tour packages are generally divided into two (2) types, namely: regular sightseeing or tour package and packaged-to-specifications, also known as “ad-hoc”, sightseeing and tour package.

Regular Sightseeing or Tour Packages are put together without consideration for the specific and special interest or requirements of a certain traveller or group of travelers. These are pre-packaged for the general, run-of-the-mill traveller and always feature well-known attractions or activities that have a high demand.

Ad Hoc Sightseeing or Tour Packages are sightseeing tours and tour packages that are tailor-made to the requirements and specifications of a particular traveller or group of travelers.

Regular sightseeing tours and tour packages are normally sold over the counter with no need of pre-booking or advanced reservations on the part of the traveller. Ad Hoc tour packages that are packaged to specifications, require pre-notice by the traveller through the travel agent, and advance reservations by the travel agent with the tour operator.

These classifications are not strictly structured. Tour operators more often than not combine two or three types, and in some cases act all four types. The four types are determined by the main function and activity in any of the four classifications.

DOMESTIC LOCAL INBOUND OUTBOUNDArea of Operations

Anywhere in the Philippines

Where the operator is based and the immediate vicinity

Anywhere in the Philippines

Anywhere in the world, except the Philippines

Nationality of Travelers

Filipinos and expatriates living and working in the Philippines

Filipinos, foreigners and expatriates living and working in the Philippines

Foreigners and Balikbayans

Filipinos and expatriates living and working in the Philippines

Market or Source of Traffic

Philippines Philippines and abroad

Abroad Philippines

Type of Tour Packages

Ad Hoc and Regular Package

Regular Package

Ad Hoc and Regular Package

Ad Hoc and Regular Package

WHAT IS TOUR OPERATIONS?

Briefly described, tour operations are the preparation and implementation of all activities within an itinerary, within a given time frame, and within the estimated costs, in order to meet the expectations of the paying clients.

Meeting the expectations of the clients is also termed as customer satisfaction. Customer satisfaction, in the case, is the delivery if what has been requested by the buyer (traveller) and what has been committed by the supplier (seller), through the middleman (travel agent and tour operator).

What is requested and confirmed varies – it may simply be a one-way transfer from the airport to the hotel, or a complex, 14-day itinerary to seven (7) different destinations or locations in any country, involving hotels, resorts, airplane charters, rental of motorized outriggers, cars, and tour guide services.

Before discussing the organizations of a tours department, it is important to first understand the activities involved in tour operations. For the sake of good order, let us divide these into two parts: Quotations & Reservations and Field Operations.

The activities involved in Quotations & Reservations are mainly within the physical confines of the office and take place prior to the actual arrival handling of the travelers and immediately after their departure. Field Operations are always outside the office in the field and take place immediately upon arrival and up to the travelers’ departure from the area of operations.

Let us look at the Quotations & Reservations first. Before Mr. Traveler actually lands at the N.A.I.A. or starts on a tour program or itinerary, quite a number of things happened in between, all of these in the office.

First, somebody has to determine how much it costs to provide Mr. Traveler with what he needs. This activity is called Contracting (1) which is the process of negotiating for rates below those published from the suppliers. These suppliers are hotels, restaurants, tourist sights and sites, and transportation companies, and then collating these. These rates are known as contracted rates. Published rates less commission due travel agents are not contracted rates. Contracted rates are discounted by 30% to 50% off the published rates. These are committed by the suppliers on the basis of the tour operator’s potential to produce business, proven track record and/or its reputation and credibility.

Costing (2) is putting together the costs of the various components, activities or services included in the itinerary, depending on the number of travelers availing of the package. After calculating the approximate desirable profit from each component and adding this to the cost, the result is a Quotation (3) which is cost + profit. It includes costed-in concession.

The Marketing & Sales people will determine the market demands and on this basis quotations (3) can be prepared. These quotations are compiled in a rate sheet which is commonly known as a Confidential Tariff. A Confidential Tariff is a listing of products offered by the tour operator, with corresponding pre-costed rates and concessions, based on specific or projected number of participants.

Special Quotations (3) are prepared for Ad Hoc Tour packages. These are costed based on a required minimum number of participants and in accordance with the specific activities, inclusions and requirements of the client.

QUOTATIONS & RESERVATIONS FIELD OPERATIONS(1)Contracting. Negotiating and

collecting from suppliers the contracted rates and concessions available to Tour Operators.

(2)Costing. Putting together the costs of the various activities or services included in the itinerary, depending on the number of projected travelers availing of the tour package. Also a Confidential Tariff construction.

(3)Quotation. Desired profit plus cost and pro-rated concessions. Listing of prices in the Confidential Tariff. (cost + profit = quotation).

(4)Reservations. Processing the advance requests for the space or services with the suppliers.

(6)Accounting. Collection of payments and payment to suppliers.

(7)Evaluation. Assessment of the clients’ satisfaction in the package or product.

(5)Transfers Arrival or Departure Tours Sightseeing or Packaged Accommodations and Meals Passage, air, sea, land Ancillary Services

ORGANIZATION OF A TOURS DEPARTMENT

The ideal organizational set-up of the tours department must be developed along the concept that operation involves both office activities and field operations – one should complement the other in a manner that the areas of responsibility are clearly defined.

The Tours Department Manager overseas both activities, but the respective supervisions are responsible for each activity.

On the office side, (1) Contracting and (2) Tariff Costing are yearly activities, which the Manager normally handles. Quotations (3), including Ad Hoc requests and

TOURS DEPARTMENT MANAGER

OPERATIONS SUPERVISOR FIELD SUPERVISOR

QUOTATIONS RESERVATIONS

MESSENGER

TOUR COORDINATOR

COURIER

TOUR GUIDES/ESCORTS

costing are one activity, while Reservations (4) is the other. The messenger provides support to the office operations staff.

On the field side, the Tour Coordinator/Airport Rep handles the Transfers (5) and overseas the actual delivery of Accommodations and Meals (5), while the Courier reconfirms Passage (5) requirements. These functions are interchangeable, in order to economize.

The tour guide is responsible for the delivery of the sightseeing tour or tour package (5). The tour guide is normally a free-lance and is not an employee of the tour operator. The Tour Guide’s functions and responsibilities will be taken up in deal in Chapter X.

The chart below provides a description of the job summary and duties and responsibilities of each position in the Tour Department of a travel agency.

POSITION REPORTS TO JOB SUMMARY DUTIES AND RESPONSIBILITIES

QUOTATIONS OFFICER Operations Supervisor

Services all quotation requests and reconfirms these when all acceptances are received; prepares support documents like itinerary sheets, maps and brochures.

1. Receives, logs and actions all request;

2. Prepares correct quotations;

3. Acts as back-up to the Operations Supervisor

4. Performs other duties as required.

RESERVATIONS OFFICER

Operations Supervisor

Processes all reservations requests promptly and efficiently; follow-up wait-listed requests;Looks for alternative suppliers when the need arises; and supports all these actions with proper documentation.

1. Acts on all reservations for transportation companies, hotels, airlines, tour guides, restaurants;

2. Acts on wait-listed all alternate reservations as required;

3. Acts as back-up to the Operations Supervisor

4. Performs other duties as required.

MESSENGER Operations Supervisor through the Reservations & Quotations Officers

Efficiently and reliably provides delivery services for the department.

1. Delivers company correspondence in the shortest possible time;

2. Performs other duties as required.

TOUR COORDINATOR (also designated as AIRPORT REPRESENTATIVE

Field Supervisor Assists and facilitates the arrival and departure transfers; overseas the operation of tours and tour packages; and insures that the hotel and restaurant arrangements are properly coordinated

1. Coordinates check-in/and check-out, and arrival and departure transfers;

2. Generates additional revenues by the sale of optional tours to the clients through the tour guide;

3. Reconfirms

and delivered. connecting/onward reservations on domestic/international flights and other transportation companies;

4. Performs other tasks os required.

COURIER Field Supervisor Efficiently provides support services for all field activities.

1. Backs up the Tour Coordinator/Airport Rep, in particular in luggage handling;

2. Insures that land transportation equipment is on time and in working order;

3. Performs other duties as required.

TOUR PACKAGES

The product of Tour Operators is the Tour Package, a combination of two or more travel components. The basic components of a tour package are:

*Transportation by air, sea or land, to and from a point of origin to a destination, or destinations and back to the point of origin.

*Transfers refer to transportation to and from a destination’s gateway such as an airport, pier or bus station to the place of lodging, and vice-versa.

*Tours or Sightseeing tour, are a combination of transportation within the destination to a sights and sites of interest, tour guide’s services, entrance fees, entertainment or activities and sometimes, snacks and meals.

*Hotel and Resort Accommodations refer to lodging and meals within the lodging establishment.

*Tour Escort an individual who travels with the clients from the point of origin and back, and acts as the manager of the tour group, also known as Tour Leader.

A combination of two or more of these components is a tour package.

Tour guide’s services are provided in connection with sightseeing in a locality, and sometimes during transfer services. Tour Escorts are individuals who travel with the clients from the point of origin and back. They normally manage all activities of the tour’s itinerary and insure the client well-being.

Depending on the number of components tour packages have different labels:

*If only tours and transfers are included, it is called ground arrangements package.

*If tours, transfers and hotel accommodations with some meals are included this called land arrangements package.

*If tours, transfers, hotel accommodations and some meals, plus transportation to and from the destination(s) are included, this is called inclusive tour package.

*If all components are included, including a tour escort, this is called an inclusive escorted tour package.

TYPES OF PACKAGES PER TYPE OF TOUR OPERATOR

As discussed, there are four (4) types of Tour Operators, each with different areas of operations, nationality of travelers, market of source of traffic and type of package/s offered/operated.

LOCAL TOUR OPERATOR

The local tour operator’s (LTO) source of business comes from both local and foreign travelers, visiting the destination where the tour operator is based. Its source of traffic is generally off-the-street or over-the-counter sales and sometimes other tour operators in the country. It operates regular sightseeing tours or tour packages, taking into consideration the popularity of the destination, site or sight. The LTO is primarily a retailer but occasionally acts as wholesaler.

GENERAL SEQUENCE OF EVENTS

A –The LTO determines the popularity and demand of a given destination, site or sight, and prepares a package by contracting suppliers capable of providing the different components.

B –Markets, promotes and sells its package directly to the end-user in the locality and occasionally to other tour operators based elsewhere.

C –actually delivers/operates the package to the specific popular destination.

SUPPLIERS MIDDLEMAN BUYERS

LOCAL TOUR OPERATOR

Transportation

Hotels

Entertainment Establishments

Tour Guide

Walk-in & over the counter sales

Other Tour Operators

>>>A>>>

>>>B>>>

<<<C<<<

Actual Operations

DOMESTIC TOUR OPERATOR

The Domestic Tour Operator’s (DTO) sources of business are the local associations, schools, companies and corporation and, occasionally, individual travelers who organize summer outings, out-of-town meets, incentive trips to national destinations. The packages they prepare are on an ad-hoc basis, as and when contracted, and tailor-made to the needs of the clients.

GENERAL SEQUENCE OF EVENTS

A –The DTO seeks/solicits business from established organizations, schools.

B –Contracts suppliers capable of delivering the specific requirements of the clients.

C –Actually delivers/operates the program/itinerary requested and contracted. The DTO is primarily a retailer, since it trades with end-users, such as Fuji Films, Rotary and Ayala Land.

INBOUND TOUR OPERATOR

The Inbound Tour Operator’s (ITO) source of business are mainly foreign tour operators who send traffic to national destinations, on regular or ad-hoc packages, based on the specific requirements of the contracting party abroad.

GENERAL SEQUENCE OF EVENTS

AD-HOC TOUR PACAGES

A retail travel agent abroad has a specific request (A) for services in the Philippines.

SUPPLIERS MIDDLEMAN BUYERS

DOMESTIC TOUR OPERATOR

Rotary

Fuji Films

Ayala Land

Transportation

Hotels

Entertainment Establishments

Tour Guide>>>A>>>

>>>B>>>

<<<C<<<

Actual Operations

It either seeks the assistance of an outbound tour operator in his country or contacts directly an inbound tour operator (B) in the destination country.

Inbound Tour Operator contracts supplier capable of delivering all services requested, and prepares/arranges a package for the end-user.

The ITO actually delivers/operates the program/itinerary requested.

REGULAR TOUR PACKAGES

Foreign Tour Operator abroad (A) determines the popularity/demand for a specific destination in the Philippines.

It contacts an Inbound Tour Operator in the Philippines (B) to arrange for a tour package that will sell the destination in the origin country.

Inbound Tour Operator contracts suppliers capable of delivering all service requested, and prepare a package for the Foreign Tour Operator (FTO).

The FTO sells/markets this package through retail travel agents. The ITO actually delivers/prepares the package.

The ITO is primarily a wholesaler, since he never deals/sales directly with the end-user.

OUTBOUND TOUR OPERATOR

END USER <<<< A BUYER >>>> <<<<<<< B SELLERS >>>>>>>

Mr. “T”

Origin Country

Foreign Retail Travel Agent

Foreign Tour

Operator

International Airlines

Philippines

Inbound Tour Operator

Hotels

Transportation

Entertainment Establishments

Tour Guide <<<<<<< MIDDLEMAN >>>>>>>

Actual Operations <<<C<<<

An Outbound Tour Operator (OTO) designs and assembles tour packages for residents of the Philippines, either foreign or local, to foreign destinations.

These packages may be designed for either groups or individuals, to popular destinations abroad, or tailor-made to the specification of the traveller. For example: a tour package with specific request to include visits to Lourdes in France and Fatima in Portugal.

GENERAL SEQUENCE OF EVENTS

AD-HOC TOUR PACKAGES

A retail travel agent in the Philippines has a specific request (A) for services in, for example, Europe.

It either seeks the assistance of an Outbound Tour Operator on the Philippines or contracts directly an Inbound Tour Operator (B) in Europe.

Inbound Tour Operator in Europe provides a proposal for the services requested, and prepares/arranges the package upon acceptance.

The Philippine OTO forwards the proposal to the Retail Agent. The European ITO actually delivers/operates the

program/itinerary requested.

REGULAR TOUR PACKAGES

A Philippine Outbound Tour Operator (A) determines the popularity/demand for a specific country/destination, such as Lourdes.

It contracts an Inbound Tour Operator in France (B) to arrange for a tour package to Lourdes that will sell to the Filipino travelers.

Inbound Tour Operator in France contact suppliers capable of delivering all services requested, and prepares a package for the Philippine Outbound Tour Operator (OTO).

Philippine OTO sells/markets this package to the traveller through retail the travel agents.

The French Inbound Tour Operator actually delivers/operates the package.

END USER < A BUYER > <<<<<<<< B SELLERS >>>>>>>

Philippines

Inbound

Destination Country

The OTO in this case is primarily a wholesaler, since he never deals/trades directly with the end-user, but rather with the retail travel agents.

VARIATIONS OF TOUR PACKAGES

Tour packages vary according to any of the following:

1. Duration – Refers to the number of days and nights included in the package. Normally three days would mean two nights. However, when a package crosses the international dateline or spends an overnight inside an aircraft, the number of nights in the package is the same as the number of days.

2. Destination(s) – A package may be for a single destination, or for multiple destinations, i.e. two or more.

3. Category of Accommodations – The category of accommodation establishment may vary, from a five-star De Luxe (DLX) hotel, to four-star First Class (FST), to a three-star Standard (STD), to a two-star Economy (ECO), to a one-star Budget Hotel (BUD). Pension Houses and Inns are normally not categorized.

4. Meal Plan – Refer to the number of meals per day included in the package, whether served in the place of lodging or outside in a restaurant. If all meals are included, this is a Full-Board Basis, Full Pension or American Plan. If only Breakfast and Lunch or Dinner is included this is a Half-Board Basis, Demi-Pension or Modified American Plan. If only Full Breakfast included, this is a Bed-and-Breakfast Basis. If the Breakfast is Continental Breakfast this is a Continental Plan. If no meals are included in the package, this is a European Plan tour package.

Inbound

Breakfast contents vary. Coffee or tea with rolls, jam and butter is a Continental Breakfast. If eggs and bacon or ham plus toast are added, it is an American Breakfast. If the toast is change to fried or plain rice and the ham or bacon changed to “tapa” or “daing”, it is Filipino Breakfast. Any breakfast with rice porridge (“lugaw”) and a number of side condiments is an Oriental Breakfast. A table laden with breakfast food and self-service is a Buffet Breakfast.

5. Mode and Class of Transportation – Mode of transportation refers to air, sea or land travel and type of equipment. Class is the quality of the transportation equipment, facility and amenities offered the passengers. In air travel, the class divisions are First, Business and Economy. In sea travel, they are Suite, Stateroom, Cabin, First Class, Business Class, Tourist and Economy. In land travel, it is Air-Conditioned or Ordinary service.

TYPES OF SIGHTSEEING TOUR

Tours or sightseeing tours, are a combination of transportation within the destination to sights and sites if interest, tour guide’s services, entrance fees, entertainment or activities and sometimes, snacks and meals. These are classified as follows:

Half-day Sightseeing - Operated mornings or afternoons. Normally includes a snack.

Full-day Sightseeing - Eight to ten hours with lunch.

Evening Tours - Operates after six in the evening. Normally includes dinner and a drink.

Optional Tours - Tours that are not included in the Tour Package, for which the client pays extra.

Quotations & ReservationsLEARNING OBJECTIVES

After studying this chapter, you should be able to:

Understand the objectives of the contracting progress; Apply the procedures involved on contracting rates from the various

suppliers; Assemble and cost sightseeing tours, ad hoc regular tours packages and

confidential tariffs; Prepare proposals and quotations; Process reservations for domestic air and sea transportation companies,

accommodations and lodging places, restaurants and other establishments;

Properly accomplish an Inbound Booking Card.

The Cycle of Tour Operations Figure 34, summarizes the different steps in the preparation and operation of tour packages, namely: (1) Contracting; (2) Costing; (3) Quotations and Tariffs; (4) Reservations; (5) Operations; (6) Accounting; and (7) Evaluation.

This Chapter discusses the office activities, prior to the operation of the tour package, and limits itself to steps one the Contracting through to step four Reservations.

CONTRACTING

Contracting is the process of negotiating with suppliers for the most favourable rates, terms and concessions.

When negotiating with suppliers, the tour operator has one single objective: to get the best available rate, with the most concessions, at the most favourable terms.

More often than not, suppliers will assess the tour operator’s credibility, potential, track record and credit worthiness before committing any contracted rate. The tour operator on the other hand, will assess the supplier’s ability to provide the services contracted reliably and within specified standards.

The following must be clearly spelled out in the agreement for contracted rates:

CLASS AND/OR TYPE OF SERVICE/CATEGORY AND/OR TYPE OF ROOM

For land transportation, equipment may be contracted from either tourist transportation companies or commuter bus companies. The former have more comfortable configuration and are equipped with a public address system, sometimes with TV-VCR for long trips. The drivers are service oriented and familiar with the sightseeing routes and sites. While the latter are geared to service commuter passengers. In either cases the type and capacity of equipment to be contracted is essential.

Contracted rates for land transportation equipment may be obtained on a per-hour, per-trip, per-sector basis, and either on a per-person or per-equipment type and size basis, subject to the commuter bus company or tourist transport operator’s franchise, insurance, drivers’ training and the like.

In air travel, class-first, business, or economy – has to be specified, as well as the carrier’s frequency and schedule. In some cases, contracting for air travel consists of chartering aircraft of specified configuration and range.

In cases of sea travel, the class of passage – with or without cabin, for example – and the number of meals included, must be indicated.

In the hospitality industry, the room category is matched with a contracted room rate. The same applies to contracted meal rates. Negotiations may extend to other

business and leisure facilities available at the hotel, resort and similar accommodations suppliers.

For suppliers of entertainment and administrators of tourist attractions, negotiated rates are for entrance fees to special shows and/or full use of a special venue.

TAXES, INSURANCE FEES, SERVICE CHARGE

Contracted rates must indicate whether fees, taxes, and any other charged are included. The commonly used term for a rate that includes all charges is “net inclusive.” Contracted rates that do not include these charges are commonly referred to as “plus-plus” (Net ++), the first “plus” being the taxes due, and the second “plus” being the service charge. These are normally a percentage of the base rate.

BOOKING AND RESERVATION PROCEDURES AND CONDITIONS

Each supplier has its own reservations policies and procedures. These must be and are usually clearly spelled out in the contract agreement. The conditions to keep in mind are: option dates, cancellation penalties, amendment policies, cut-off period, deposit payments and revisions.

An option date is a date preset by the supplier, by which time the tour operator must firm up or cancel a confirmed reservation.

Cancellation penalties are levied by the supplier when confirmed reservations are cancelled.

Amendments refer to a change of dates for a specific reservation. Some suppliers consider amendments as cancellations and levy penalties accordingly.

CUT-OFF PERIOD

Some suppliers grant tour operators free sale facilities. Free sale means that a number of seats, beds, rooms and the like are allocated to a particular tour operator to sell within a period of time leading to a cut-off date. Upon reaching the cut-off date, the unsold seats, beds, rooms and the like automatically revert to the control of the supplier. The tour operator may no longer sell these after the cut-off date. Unlike an option date/time which is given at the time of booking, the cut-off date is preset when the negotiations for allocations are undertaken.

DEPOSIT PAYMENTS

Most suppliers will require a deposit payment to confirm reservations. If no credit facilities exist between the supplier and the operator, the contract agreement must specify this, including the refund policy and conditions in case of non-utilization of confirmed reservations, subject to cut-off period agreements.

Revisions refer to changes in number of seats, beds, rooms reserved or changes in passenger’s names. Unlike amendments which refer to change of date(s) for the delivery of a particular product or service, revisions maintain the basic date(s) but the number of names of participants are revised.

FORM OF PAYMENT/CREDIT LINE

The contract agreement specifies the form of payment (e.g. cash, company check, bank draft) and currency. It also specifies when payment is due (e.g. “upon check-out”) and if credit lines are extended, the amount and time limit to pay up is spelled out (e.g. P1000,000 or thirty days, whichever comes first.)

When chartering equipment from transportations companies, the insurance fee are normally included. However, in some instances, this fee appears separately. The same applies to toll fees. Rates for passage on a per-person, per-sector basis always include the insurance fees. Terminal fees are taxes, however, are reflected separately. The insurance fees and corresponding coverage are more comprehensive for tourist vehicles than other commercial vehicles.

It is very important to note here that violating the conditions of an insurance policy, such as loading more passengers than those allowed by the nsurance policy, or operating in sectors and areas not covered by the policy, renders the insurance coverage null and void.

Cover charges in restaurants and discos are inclusive of tax. The minimum charge policies of some disco houses, and pubs are subject to tax and, in most cases, service charge.

APPLICABLE CONCESSIONS

Suppliers normally grant concessions to tour operators. Tour operators in turn, pass these on to their clients. Transportation companies would normally grant and free ticket for a specified number of full-paying tickets issued, if these are travelling together on the same sector, flight and date. Concessions when chartering transportation equipment may extend to one hour of usage free, for every five full hours of usage.

In the hospitality industry concessions range from one (1) free bed for every fifteen (15) paying beds, up to maximum four (4) beds, to free welcome drink or breakfast included in room rate. As a rule of thumb, free meals are not granted as concessions.

Each supplier will grant concessions in accordance to the perceived potential or actual track record of the tour operator.

VALIDITY OF CONTRACTED RATES

Suppliers of services and products must indicate the validity of the contracted rates, both in terms of time-year-round with peak/lean or high/low seasons and markets.

Some suppliers have different rates for different markets. As a rule of thumb, rates are valid either 01 January through 31 December or 01 April through 31 March. For some European operators, the season may be from 01 October through to 30 September. The following are always considered peak seasons in the Philippines: Christmas, New Year, Chinese New Year and Holy Week.

COSTINGS

Costing refers to the process of determining the actual cost of a tour package by detailing the various components of the package, and attaching the specific cost represented by the contracted rate to each, according to the costing methods detailed in this section. Costing can be done for specific sightseeing tours, Ad Hoc or Regular tour packages and for a Confidential Tariff.

COSTING AN AD HOC OR REGULAR TOUR PACKAGES

A tour package, whether Ad Hoc or Regular, is best illustrated in an itinerary.

An itinerary is a schedule of activities and destination arranged in a chronological order, these are three (3) types of itinerary namely:

Skeletal is a proposed, preliminary itinerary.

Technical is an itinerary that specifies the details like scheduled transportation, arrival/departure times, duration of sightseeing, travel time, type of accommodation and the like.

Descriptive is includes a description of the planned activities and destinations visited.