Group Contracts: Planning Ahead to Minimize Your Risk
Part One of a two-part series on group travel.
By Marie A. Smith, CTA, KHM Travel Group
Group Travel is a very lucrative market. In fact, it’s an excellent niche, but, like anything else, it requires hard work and a lot of knowledge. Just because you build it, it doesn’t mean they will come. Many agents welcome any group business that comes their way and get wrapped up in the rewards of a big booking without weighing the potential risks. When working with groups, you need to be aware of all the ins-and-outs of your contracts, specifically, the financial ramifications of defaulting on a contract. Here are a few tips to keep in mind when contracting with a supplier.
Read the entire contract. Don’t skim a supplier contract, even if you have booked with that supplier before.
Understanding the full contract is very important. The payment and cancellation schedules are spelled out with their associated attrition and penalty amounts defined. This information must be passed on to the client, and you should strongly consider your review dates to be 7-10 days prior to those listed by the supplier. DO NOT SIGN any contract if you are unclear on the specific details listed, if you have any questions about the content and, most importantly, if the contract omits any negotiated or implied concessions or details.
Use a Group Leader Contract/Agreement for all group bookings.
There should be some form of a written agreement between you (the agent) and your group leader. You can take the supplier contract and make edits to be specific to an agent/client relationship or create a separate document for this specific purpose. Documentation that clearly outlines the expectations and group details will ensure that you and the group leader are on the same page. The document should define your value to the group as its travel advisor, as well as what you expect from the group leader. It also should include all considerations and group specifics, such as group needs and complimentaries.
If possible, you may want to have an attorney draw up an agreement that can be enforceable if the client defaults on the agreement. Having this in place could protect you if the client does not meet the financial totals due to the supplier or if you incur any fees or losses.
Implement review dates and have an underperformance clause.
The cancellation policy and attrition/fees involved with reducing allotment can add up, so it’s imperative to stay in front of those dates and fees. If the group is dependent on a specific number of rooms/cabins sold to facilitate a specific program, it is even more crucial to be upfront and transparent about their pick-up. A consideration for a booking stipulation in the event a change occurs affecting those already booked within the group may be warranted if the program will not proceed as advertised. These can be very difficult conversations to have with your group leader, but, in the end, they are vital for the group, your business, and your relationship with your suppliers.
Ensuring that there are expectations set forth between you and your group leader is key to a smooth-running group. Don’t be afraid to be upfront and honest with a group that is not performing and is nearing crucial dates. Ignoring that contract and hoping that your supplier relationship can nullify or reduce penalties is not a sound business practice.
While issues can arise, your agreement with your group leader should clearly define what steps will be taken and what remedies, penalties, and/or fees will apply. This is a business, and the supplier will hold you and your agency responsible if clients default on a group contract. Having a well-defined plan can help minimize the risk of a group not materializing to the contracted terms.
For more learning, register for the webinar titled Build a Bigger, Better Group Business in 15 Steps, presented by Stuart L. Cohen, MCC on September 16 at 11 am EDT.