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Travel & Tourism Industry Glossary  :  Agency Agreement

A contract between a travel agent and a tour or activity operator setting out the terms and conditions for the transaction of business by the travel agent with and on behalf of the tour operator.
The agency agreement usually takes one of three forms:
  1. Net rate agreement: This type of agreement involves the tour operator selling their tours or activities to the agent at a discounted net rate (or wholesale rate) based on the rack rate or retail rate.  The agent sells the tours to their customers at the retail rate and keeps the difference as their margin.  The agent pays the tour operator for all tours sold during a specific period.
  2. Commission agreement: This type of agreement involves the agent selling the tours or activities offered by the tour operator at the rack rate or retail rate directly to customers.  The operator calculates a commission for sales made by the agent during a specific period and pays them an agreed upon commission.
  3. Deposit as commission agreement: This type of agreement involves the agent taking a deposit when they sell the tour to a customer.  The deposit, which is usually between 10-30% is the agent commission.  The remainder is paid to the tour operator by the customer at the time they take the tour with the operator.  In this agreement, the operator does not need to pay the agent as they have received their commission directly from the customer at the time of booking.

For an example of an agency agreement, take a look at the Rezgo Distribution Service Agreement.

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