Mark Pestronk
Mark Pestronk

Q: A multinational company with offices in the U.S. and six other countries has advised us that we have won their business. They understand that we cannot effectively arrange travel for employees in those countries unless we affiliate with local travel agencies there. Are such networking arrangements common these days? How would we find such agencies, and how would the billing process work? Finally, would we be legally responsible for errors committed by the local agencies?

A: Such networking arrangements have existed for more than 30 years, but they seem to be proliferating today as corporate travel managers have seen the benefits of contracting with one travel agency for worldwide service. By now, most U.S.-headquartered multinational companies have consolidated their travel this way.

Most of the time, when these accounts go out for bid, mega-agencies with offices in many countries, such as American Express and Carlson Wagonlit, win the contract. It is fairly unusual for a U.S. agency with no offices abroad to win such an account, and you should be congratulated.

The best way to find capable travel management companies abroad is to join a consortium of travel agencies that has such members. The most prominent of these are Radius, which is based in Bethesda, Md., and GlobalStar, which is headquartered in London.

Another way is to join a franchise or similar organization, such as Travel Leaders, that has franchisees or members abroad specializing in business travel. They will have programs in place for just this sort of networking arrangement.

The consortium or franchise will not only provide you with contacts for capable members abroad, but it will also advise you about how to set up your network. In some cases, you may be able to contract with the consortium itself, which in turn will do the work of selecting the local agencies and implementing the account abroad.

The billing process is typically localized. Your agency negotiates its own payment terms and invoices for itself at the fees set forth in your contract with the account. Each local agency then does the same with the local office of the account.

However, it is certainly possible to arrange a global billing arrangement, with each local agency charging point-of-sale fees to the same credit card account that you charge. Such arrangements are rare because less developed countries often insist on paying on invoice every 30 days or so.

It is also theoretically possible for your agency or the consortium to administer all billing and keep a percentage of the fees that are paid out to the local agencies. You or the consortium would need the consent of all parties to be able to get a cut of the fees.

Whether your agency would be liable for local agencies' acts or omissions depends on the contract terms, which are negotiable. If the contract characterizes the local agencies as your subcontractors (which would be typical), then you would be liable, unless the contract expressly stated otherwise.

If you have such liability, then make sure that you have a contract with each local agency indemnifying you against claims arising out of the agency's acts or omissions. For example, if the local agency overcharged the account and you had to pay a refund to the account, then the local agency would have to reimburse you.

On the other hand, if each local agency had its own contract with the account, or if the consortium contracted with the account on behalf of the local agencies, you would have no such liability, unless the contract provided otherwise.

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