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.

Hotels, Resorts and

other lodging
Air, Sea and Land
establishments
Transportation

TOUR
OPERATOR

Restaurants, Clubs,
Shopping Malls &
Tour Guides and Service
other entertainment
Personnel
entities

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.

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 OUTBOUND
Area of Anywhere in Where the Anywhere in Anywhere in
Operations the operator is the the world,
Philippines based and the Philippines except the
immediate Philippines
vicinity
Nationality of Filipinos and Filipinos, Foreigners Filipinos and
Travelers expatriates foreigners and expatriates
living and and Balikbayans living and
working in expatriates working in
the living and the
Philippines working in Philippines
the
Philippines
Market or Philippines Philippines Abroad Philippines
Source of and abroad
Traffic
Type of Tour Ad Hoc and Regular Ad Hoc and Ad Hoc and
Packages Regular Package Regular Regular
Package Package 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 kn own
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.
(5) Transfers Arrival or Departure
Tours Sightseeing or Packaged
Accommodations and Meals
Passage, air, sea, land Ancillary
Services
(6) Accounting. Collection of
payments and payment to
suppliers.
(7) Evaluation. Assessment of the
clients’ satisfaction in the
package or product.
 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.

TOURS DEPARTMENT MANAGER

OPERATIONS SUPERVISOR FIELD SUPERVISOR

QUOTATIONS RESERVATIONS
TOUR COURIER
COORDINATOR
MESSENGER

TOUR GUIDES/ESCORTS

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 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 Operations Services all quotation
OFFICER Supervisor requests and
reconfirms these
when all acceptances
are received; prepares
support documents
like itinerary sheets,
maps and brochures.
RESERVATIONS Operations Processes all
OFFICER Supervisor 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.
MESSENGER Operations Efficiently and reliably
Supervisor provides delivery
through the services for the
Reservations & department.
Quotations
Officers
TOUR COORDINATOR Field Supervisor Assists and facilitates
(also designated as the arrival and
AIRPORT departure transfers;
REPRESENTATIVE overseas the
operation of tours and
tour packages; and
insures that the hotel
and restaurant
arrangements are
properly coordinated
and delivered.
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.
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.
1. Delivers company
correspondence in
the shortest
possible time;
2. Performs other
duties as required.
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
connecting/onward
reservations on
domestic/internatio
nal flights and
other
transportation
companies;
4. Performs other
tasks os required.
COURIER Field Supervisor Efficiently provides 1. Backs up the Tour
support services for Coordinator/Airport
all field activities. 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

Transportation

Walk-in & over

Hotels
the counter sales
LOCAL TOUR OPERATOR
Entertainment
Other Tour
Establishments
Operators

Tour Guide

>>>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.
 SUPPLIERS MIDDLEMAN BUYERS

Rotary
Transportation

Fuji Films DOMESTIC TOUR Hotels

OPERATOR
Entertainment
Ayala Land Establishments

>>>A>>> >>>B>>>
Tour Guide

Actual Operations <<<C<<<

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.
 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.

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

Origin Country Philippines

Mr. “T” Foreign Foreign

Retail Tour Hotels
Travel Operator Inbound
Agent Tour Transportation
Operator
International Entertainment
Airlines Establishments

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

Actual Operations <<<C<<<

OUTBOUND TOUR OPERATOR

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 Destination Country

Inbound
Retail Tour
Mr. “T” International
Travel Operator
Airlines
Agent
Hotels

Outbound
Transportation
Tour
Operation Entertainment
Establishments

Tour Guide
<<<<MIDDLEMAN>>>>

<<<C<<<
Actual Operations

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.

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 & Reservations

LEARNING 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, acco rding 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.