Mark Pestronk
Q: Our agency is starting to operate its own tours, and other agencies may want to sell our tours in return for a commission. I know that I would need an agreement with those agencies, but I am not sure what should be in it. Can you give me a guide for drafting a fair agreement between an operator and a retail travel agency? Would the same guidelines be good for an agreement between an agency and another middleman like a consolidator or wholesaler? And to operate tours, do we need any state or federal license or registration?
A: Here are 10 points to put in such an agreement. They are based on my experience with what can go wrong or be misunderstood in the operator-agency relationship.
1. You must state that the agency is your authorized agent to sell your tours to the agency’s clients. If you want to prohibit discounting or rebating by the agency, you can do so because such price control is legal in a principal-agent relationship.
2. The agency should agree to promote your tours. If you are going to pay a higher than usual commission, the agency should agree to treat you as a preferred supplier and feature your tours in its marketing efforts.
3. Speaking of commissions, whatever commission you pay needs to be specified in the agreement, along with whether the agency is authorized to withhold commission from final payment by check. In the case of credit card payments, you need to specify how and when you will pay the commission to the agency.
4. You also need to specify what happens to the commission if the participant or you cancel the tour. Typically, the commission must be refunded, but it is fairer to let the agency keep either the entire commission or a percentage of any cancellation fee.
5. If the name of your company or the name of your tours is distinctive, you should prohibit the agency from paying for search-engine results that direct to the agency and not to your company. All major travel suppliers have such clauses in their agency agreements today.
6. If you want or will permit the agency to feature your tours on its website, you should require advance approval for all website wording and images about your tours.
7. For credit card sales, you should require the agency to get a signed credit card charge form and a copy of the card. If the agency fails to do so, you can specify that the agency must indemnify you against chargebacks due to that failure. However, it would be unfair for you to require the agency to indemnify against chargebacks for other reasons such as anything that happens on the tour.
8. You should require the agency to get each participant to sign your tour participant agreement (also known as booking terms and conditions) or other document stating that the participant agrees to your terms and conditions. If you operate only online, you should require the agency to get the participant to click “I agree” to the participant agreement on your website.
9. You need to require the agency to communicate with the participant about any tour changes that you need to make, and to communicate with you about any complaints before, during or after the tour.
10. Both parties should have the right to terminate the agreement at any time and for any reason, but termination should not apply to bookings made before termination.
The same guidelines can indeed be used for agreements with consolidators and wholesalers.
If you are already compliant with the state seller of travel laws, no further licensing or the like is needed to operate tours, as long as you aren’t using charter flights.