Mark Pestronk
Mark Pestronk

Q: Thanks to a yearlong sales effort, my agency just won a large incentive group contract. The corporation will host its top salespeople at a luxury resort, and we will be in charge of arranging travel, meet-and-greet, local transfers, registration, meetings rooms, audiovisuals, meals and entertainment. Our staff has the experience and knowledge to handle this trip, but we don't have a contract to send to the client. We have our standard corporate account contract, but we assume that an incentive group travel contract would be completely different. What should be in such a contract?

A: A good incentive group contract should actually be very similar to a corporate account contract, both in structure and in legal terms. In both cases, the corporation is paying your agency for expert services that you render largely in your capacity as an agent for travel suppliers.

Under both contracts, you need to: a) establish the form of payment such as credit card or check; b) provide for the corporation to indemnify you against debit memos and other supplier claims; c) require the corporation to use you exclusively and refrain from entering into contracts that bypass you; d) prohibit the corporation from hiring any of your staff; and e) disclaim liability for the acts or omissions of travel suppliers.

Both contracts should have many of the same boilerplate clauses, such as a) no liability for lost profits and the like; b) a cap on liability such as the total of your fees for the program; and c) no liability if you cannot perform your duties due to force majeure such as terrorism or weather disasters.

The latest corporate account and incentive contracts also have data-protection clauses, such as: a) requiring the corporation to obtain employees' consent to disclose their personal information to you; b) your obligation to safeguard personal information; and c) a commitment to observe the requirements of the EU's General Data Protection Regulation for employees coming from Europe.

On the other hand, one key difference is that with incentives, your agency is the party that typically signs supplier contracts after the arrangement has been authorized by the client. In such cases, your contract with the client must provide that the client will pay you whatever you owe the supplier, ideally well in advance of the supplier's deadlines.

Another key difference is this: With corporate account contracts, pricing is fixed right at the start of the contract, but pricing for incentives is variable and usually changes during the course of performing the contract.

Incentive pricing usually has four phases. First, you provide estimates of the various costs based on your industry knowledge. Second, you present a budget based on quotations that you get from suppliers and your best guess as to the number of staff hours that you will need to dedicate to the contract. Third, the parties agree on a fixed schedule of payments based on the supplier quotations and your estimated hours. Fourth, after the trip, you present a final bill covering any additional costs you incurred.

Incentive contracts can be very lucrative for travel advisors, but you need to contract with care.

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