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Tour & Activity Industry Terms

What is an 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:

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.

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.

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.

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2 thoughts on “Agency Agreement

  1. This definition is specific to tour and activity operators, so the contracting is a bit different. When selling tours and activities, the reseller is generally the primary merchant of record, which means they are the one taking full payment for the purchase of the activity. If there is a customer service issue, the reseller is primarily on the hook for the refund. Most resellers will have a terms of service or agreement which outlines the limitations of their liability in order to ensure they are not held responsible for service related issues on the part of the operator.

    In the case of flights, the contract for the flight is always between the traveller and the airline. The agent generally only charges a service fee or booking fee to do the booking on your behalf. If paying by credit card, for example, your statement will almost always show the airline’s descriptor for the ticket purchase not the agent’s. This may be different for certain cases where the agency has chartered a flight or has purchased bulk allocations, but these are becoming rare.

  2. Did not really answer my question. I want to know if a customer books with a travel agent/tour operator to book a flight, is the contract between the customer and agent/tour op or the airline operating the flight?

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