11. Tour Operators Cycle

EA MENDOZA

Travel Management DepartmentCollege of Hospitality and Institutional ManagementOur Lady of Fatima University Valenzuela

The Tour Operations Cycle

© Contents are from Chapter VIII of Travel and Tour Operationsin the Philippines, Bienvenido Claravall (2008).

• After studying this chapter, you should be able to:

• Explain the different strategies of the tour operations cycle;

• Understand the components of the planning process;

• Apply the procedures involved in contracting rates from the various suppliers;

• Cost sightseeing tours, ad hoc and regular tours packages and confidential tariffs;

• Explain what proposals and quotations are;

• Process reservations for domestic sea transportation companies, restaurants and other establishments; and

• Accomplish a Booking Card for Tours.

LEARNING OBJECTIVESTour Operators Cycle• Learning Objectives• Definition of Tour

Operator• Tour Operators Cycle• Planning• Contracting• Costing• Quotations and Tariffs• Reservation

Tour operations is defined as the preparation and implementation of all activities within an itinerary, within a given time frame, within the estimated costs, in order to meet the expectations of the paying client.

Definition of tour operationsTour Operators Cycle• Learning Objectives• Definition of Tour


Meeting the expectations of clients is also termed as customer satisfactions. Customer satisfaction, in this case, is the delivery of services requested by the buyer (traveler) form the suppliers (seller), as arranged by the middlemen (TMC/travel agent and tour operator).



What is requested and confirmed varies -it may simply be a one-way transfer from the airport to the place of lodging, or a complex, 14-day itinerary to seven (7) different destinations or locations in one country or different countries, involving hotels, resorts, airplane charters, rail services, cruises, rental of motorized outriggers, cars and tour guide services.



The Tour Operations Cycle shown in the next slide summarizes the different steps in the preparation and operation of tour packages. The eight (8) steps involved in tour operations are: 1) Planning; 2) Contracting; 3) Costing; 4) Quotations and Tariffs; 5) Reservation; 6) Field Operations; 7) Accounting; and 8) Evaluation.

The Tour Operations CycleTour Operators Cycle• Learning Objectives• Definition of Tour

Operator• Tour Operators Cycle

• Overview• Planning• Contracting• Costing• Quotations• Reservations• Field Operations• Accounting• Evaluation

• Planning• Contracting• Costing• Quotations and Tariffs• Reservation

Planning is the process of determining the objective to be achieved, whether these involve customer satisfaction, destination and community endorsement, financial gain, or organizational promotions. Customer satisfaction concerns meeting the expectations of the clients. Destination or community endorsement refers to the marketing of a specific site or sight. Financial objectives are for profit, or recovery of funds already invested. Organizational promotion deals with the enhancement or reinforcement of a corporate image. In the last stage of the tour operation cycle the results are evaluated against the objectives set in the stage.

1. PlanningTour Operators Cycle• Learning Objectives• Definition of Tour




Contracting is the process of negotiating and collating from a set of identified suppliers rates that are below those published. These rates are known as contracted rates. A published rate less commission due to TMC/travel agent is not contracted rates. This is an entitlement. Contracted rates are discounted by as much as 30% to 50% off the published rates. Contracting also includes the negotiation of favorable terms and conditions.

2. ContractingTour Operators Cycle• Learning Objectives• Definition of Tour




Costing is determining the costs of the various components, activities, or services included in the tour package, 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 which is cost + profit. Quotations include prorated cost of concession.

3. CostingTour Operators Cycle• Learning Objectives• Definition of Tour




Quotations are prepared for Ad Hoc Tour Packages. These are prepared based on a required minimum number of participants and in accordance with the specific activities, inclusions and requirements of the client. See Chapter XIII for additional information.

For regular tour packages and other services, quotationsare prepared and compiled in a rate sheet that is commonly known as a Confidential Tariff. A Confidential Tariff is a listing of products offered by the tour operator, with corresponding prorated costs and concessions, based on specific or projected number of participants.

4. QuotationsTour Operators Cycle• Learning Objectives• Definition of Tour




Reservations involve the process of placing advanced requests for available space or services at sometime in the future and obtaining confirmation of these. A confirmation is a written advice by a supplier that reservation has been accepted and will be honored, thus the term “confirmed reservations”.

5. ReservationsTour Operators Cycle• Learning Objectives• Definition of Tour




Field Operations cover the actual delivery of services, and all activities of the travelers from the moment of arrival to the time of departure. Once the procedures of the office are completed, the focus of attention shifts to the field. How well the preparations in the office have been done will definitely reflect on and affect the operations in the field.

6. Field OperationsTour Operators Cycle• Learning Objectives• Definition of Tour




Accounting involves the collection of payments due from the clients, preferably prior to the arrival and the payment due to all suppliers.

7. AccountingTour Operators Cycle• Learning Objectives• Definition of Tour




Evaluation involves comparing the performance of the organization with the actual results: (a) Financial results, through gain or loss, and (b) Customer satisfaction by seeking feedback from the clients. Thus a feedback mechanism must provide comments and critics from the visitors regarding the degree their expectations were met. Failure to meet the expectations of the clients means failure of the package. It must be remembered that the best endorsement is the word-of-mouth testimonial. Nothing beats that. The success or failure of destination or community promotions is measured by the increase/decrease of visitor arrivals. And corporate image is enhanced by the awareness and interest in the company’s product and services.

8. EvaluationTour Operators Cycle• Learning Objectives• Definition of Tour




OFFICE OPERATIONS FIELD OPERATIONS

(1) Planning. The objectives to be achieved, customer-focused,destination-oriented, financial or corporate by the TourOperators.

(2) Contracting. Negotiating and collecting from identifiedsuppliers agreed rates and concessions available to TourOperators.

(3) Costing. Putting together the costs of the various activitiesor services included in the itinerary, depending on thenumber of projected travelers availing the tour package.Also the construction of Confidential Tariff.

(4) Quotations. Determining the desired profits (plus cost andprorated concessions) and preparation of proposals. Also,the listing of prices in the Confidential Tariff.

(5) Reservations. Processing the advance requests for the spaceor services with the suppliers.

(6) Passage (air, sea, land)Transfers. Arrival, departure toany other local within thedestination.

Tours. Sightseeing tour orPackaged Tours.Accommodation and Meals.Cruises, Attractions, Activities &Ancillary Services

(7) Accounting. Collecting of payments and payment tosuppliers.

(8) Evaluation. Assessment of the clients’ satisfaction in thepackage or product.

Tour Operators Cycle• Learning Objectives• Definition of Tour




When planning the itinerary of the tour packages, the following information will assist in developing a package that is customer-focused.

1. Client profile. The market variables come into play here. During prelims the various travel motivators and types of travelers were discussed. The more information there is about travelers, the better and more suitable the tour package is.

2. Destinations requested or proposed. The market variable is matched with the destination characteristics in order to suit the product to the market. A destination is requested in an ad hoc package, while a destination is proposed in a regular tour package.

Tour PlanningTour Operators Cycle• Learning Objectives• Definition of Tour


3. Duration. The market variable plays an important role here, as the duration will have to suit the client’s profile. For example, senior citizens do not like to stay away from home too long, while the young prefer to stay away from the routine (school, work, for example) the longer.

4. Category of accommodations. The type of accommodations depends primarily on the client’s budget and social/economic status.

5. Meal plan. The number of meals to be included in the basic package is usually based on what is convenient at the destination, and is always aligned with the sightseeing tours and activities included in the package.



6. Sightseeing or activities requested for suggested. Activities requested are for ad hoc packages, while activities proposed are the regular tour packages. These will depend on the destination characteristics sites and sights, and activities.

7. Mode and class of transportation. This aspect is totally dependent on the destination’s accessibility by the various transportation modes and client’s budget and convenience.

8. Ancillary services. These services refer to needs outside the usual and those extraordinary requirements, such as wheelchairs or dietary requirements. When needed, these items are always extra and will have to be included in the costs.



9. Guide and/or tour escort services. When requested, the costs of these are always prorated. Their conclusion will always depend of the client’s request. Example: a Japanese-speaking tour guide.

10. Number of Free-Of-Charge (FOC) allowed or required. This aspect is always subject to the concession and availability from the suppliers and the entitlement based on number of participants. The present industry practice is one FOC for every fifteen (15) participants, maximum four (4).



For the destination-oriented objectives, the objectives normally evolve around any or all of the following characteristics: 1) accessibility, the cost of accessibility and mobility to and within the destination; 2) accommodations and other facilities, such as the quantity and quality of beds for sale; the variety of food and beverages outlets; and support industries, such as retail sale of souvenir and handicraft items; 3) the degree of development of basic infrastructure such as water, electricity, sewage, and drainage and communications; 4) attractions, sights to view and admire or activities to participate in and experience; and 5) hospitality resources, the community’s attitude rewards visitors and language facilities. All of these combined will enhance the desirability of the destination to the travelers. Services attitudes and the quality of the service staff also play a major role in determining the suitability of the destination.



The ultimate financial objective in tour planning is profit. Adding markup to the actual costs is called pricing. Pricing of the tourism product is an exact science since the tour product is made up of various components (suppliers). The amount of profit is therefore dependent on the defined financial objectives. Remember however that in the tourism industry a “cheap holiday” means a cheap product. The price must reflect and be seen by the buyer as truly reflective of the open-market value. If only for this reason, the various sellers of the tourism product most often agree to an equitable share of the costs and profits.



• Corporate goals or objectives involve the enhancement of the company’s “distinct image”. This is often considered to be perceived image of the company in the market that aims: 1) attract clients; 2) make it stand out among its competitors; 3) increase returns by building up communication of the message; and 6) entice new staff members.

• When the answers to most of the questions above are on hand, the contracting and costing process can begin.



• Contracting is the process of negotiating with suppliers for the most favorable 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 favorable terms and conditions.

ContractingTour Operators Cycle• Learning Objectives• Definition of Tour

Operator• Tour Operators Cycle• Planning• Contracting

• Rooms• Tax & Other

Charges• Concessions• Validity• Procedure and

Condition• Cut-off• Deposit• Form of Payment

• Costing• Quotations and Tariffs• Reservation

• 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:

ContractingTour Operators Cycle• Learning Objectives• Definition of Tour






• 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.

• For land transportation, equipment may be contracted form either tourist transportation companies or commuter bus companies. The former have a more comfortable configuration and are equipped with a public address system, sometimes with the TV-VCD for long trips. Drivers are service-oriented and familiar with the sightseeing routes and sites. The latter are geared to service commuter passengers. In both cases the type and capacity of equipment to be contracted is essential.

• Contracted rates for land transportation equipment may obtained on a per-hour, per-trip, per-sectors 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, driver’s training and the like.

Class and/or Type of Service / Category and/or Type of Room







• In cases of sea travel, the class of passage – with or without private facilities, for example – and with or without meals must be indicated.

• In the lodging industry, the room category is matched with a contracted room rates. Negotiations may extend to other business and leisure facilities available at the hotel, resort and similar accommodations establishment.

• For suppliers of entertainment and administrators of tourist attractions, negotiated rates are the entrance fees to special shows and/or full use of a special venue.

Class and/or Type of Service / Category and/or Type of Room







• Contracted rates must indicate whether fees, taxes, and any other charges 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.

• When chartering equipment from transportation companies, the insurance fees are normally included. However, in some instances, this fee appears separately. The same applies to toll fees. Rates for passage on a per-person, pre-sector basis always include the insurance fees. Terminal fees or taxes, however, are reflected separately. The insurance fees and corresponding coverage are more comprehensive for tourist vehicle than other commercial vehicles.

Taxes, Insurance Fees, Service Charge







• 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 insurance policy, or operating 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. Minimum-charge policies of some disco houses and pubs are subjected to tax and in most cases, service charge.

Taxes, Insurance Fees, Service Charge







• Suppliers normally grant concessions to tour operators. Tour operators, in turn, pass these on to their clients. Transportation companies would normally grant a free ticket for a specified number of full-paying tickets issued if these are traveling together on the same sectors, flight and date. Concessions when chartering transportation equipment may extend to one-hour free use for every five full hours of use.

• In the lodging 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.

Applicable ConcessionsTour Operators Cycle• Learning Objectives• Definition of Tour






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 form 01 January through 31 December or 01 April through 31 March of the following year. For some European operators, the season may be from 01 October through to 30 September of the following year. The peculiarities of the destination determine the peak/lean season. The following are always considered peak seasons on the Philippines: Christmas-New Year, Chinese New Year and Holy Week.

Validity of Contracted RatesTour Operators Cycle• Learning Objectives• Definition of Tour






• Suppliers have their respective 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 (to cancel, to provide rooming list, to issue tickets), cancellation penalties, amendment policies, cutoff 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.

• The supplier levies cancellation penalties 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.

Booking and Reservation Procedures and Conditions







Some suppliers grant tour operators free sale facilities. Free sales 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 cutoff date. Upon reaching the cutoff 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 cutoff date. Unlike an option date/time that is given at the time of booking, the cutoff date is preset when the negotiations for allocations are undertaken.

Cutoff PeriodTour Operators Cycle• Learning Objectives• Definition of Tour






• Most suppliers will acquire 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 cutoff period agreements.

• Revisions refer to changes in number of seats, beds, rooms reserved or changes in passenger’s names. Unlike amendments that 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 participants and their respective names are changed.

Deposit PaymentsTour Operators Cycle• Learning Objectives• Definition of Tour






The contract agreement specifies the form of payment (e.g. cash, company check, bank draft) and currency. It also specifies when the 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. P100,000 or thirty days, whichever comes first.)

Form of Payment / Credit LineTour Operators Cycle• Learning Objectives• Definition of Tour






• Costing refers to the process of determining the actual cost of a tour package by detailing the various components of the package, and attaching a specific cost represented by the contracted rate to each, according to the costing methods detailed in this section.

• Costing can be done for a specific sightseeing tours, Ad Hoc or Regular tour packages and for Confidential Tariff.

CostingTour Operators Cycle• Learning Objectives• Definition of Tour

Operator• Tour Operators Cycle• Planning• Contracting• Costing

• Overview• Skeletal• Technical• Descriptive

• Quotations and Tariffs• Reservation

A tour package is best illustrated in an itinerary.

An itinerary is a schedule of activities and destinations arranged in a chronological order. There are three (3) types of itineraries, namely:

• Skeletal. Skeletal itinerary is a proposed and preliminary schedule of activities.

• Technical. A technical itinerary specifies the details, like the scheduled transportation, arrival and departure schedules, duration of sightseeing, land travel time, type of accommodation.

• Descriptive. The descriptive itinerary provides a narrative of the planned activities and destinations visited. It is produced primarily for marketing purposes.

Costing Ad Hoc or Regular Tour Package





Sample of Skeletal Itinerary

If quoted separately, this package would bea Land arrangements Tour Package only.





Sample of a Technical ItineraryTour Operators Cycle• Learning Objectives• Definition of Tour




• The sample technical itinerary in the previous slide is for an Ad Hoc Inbound group tour from Hong Kong. This 5-day/4-night Manila/Cebu Package is on full-board basis, inclusive of roundtrip transfers and sightseeing tours of Manila, Pagsanjan Falls with Lunch and boat ride, and a MactanIsland Tour with Lunch.

• The domestic airfare Manila/Cebu may be priced separately. As this component may also be made part of the international airfare, and include in the passengers’ air ticket, Hong Kong/Manila/Cebu/Hong Kong. If the domestic airfare is combined with the international airfare, then the package would be an Inclusive Tour Package, sold by the Hong Kong travel agency.





The costs of the components of a tour package can be either fixed or variable.

• Fixed costs do not change and remain constant regardless of the number of participants.

• Variable costs, on the other hand, depend on the number of projected or proposed participants.





The costs of all tour packages hare always on a per-person basis.

Transportation is the cost by air, sea, or land, to and from a point of origin to a destination, or destinations and back to the point of origin.

• Transportation costs by scheduled air, or land transportation companies are always based on a per-person fare and therefore remain constant regardless of the number. However, the suppliers of transportation services often extend “special” reduced fares for group tours. Concessions such as one Free-of-Charge (FOC) for a minimum number of full fares are also granted.

• If however, a group tour charters transportation equipment, be it an aircraft, seacraft, or land vehicle, the total cost of the craft/vehicle is divided by a predetermined number of passengers, not exceeding its allowed capacity and within its breakeven load factor – 50% to 60% - that will use such craft/vehicle. This formula is termed “prorated cost”.

TransportationTour Operators Cycle• Learning Objectives• Definition of Tour




Transfers refer to the cost of transportation to and from a destination’s getaway such airport, pier or bus station to the place of lodging, and vice versa. Transfers may also be provided from one location to another within the destination.

• Transfer costs are almost always prorated. However, if the transfer is by a regular airport shuttle services the cost is fixed per-person, just like the scheduled transportation service. The fixed baggage-handling fee paid to porters at the pier or airport may or may not be included in the cost of transfers. These are fixed per bag. In certain locations in the Philippines, motorized tricycles or bancasdeliver transfer services. In these instances, the costs of the tricycle or banca are prorated by a predetermined number of passengers not exceeding its allowed capacity.

TransfersTour Operators Cycle• Learning Objectives• Definition of Tour




Sightseeing tours combine the total costs of transportation within the destination to sight and sites of interests, tour guide’s services, entrance fees, cost of entertainment or activities and, sometimes, the cost of snacks and meals.

• Sightseeing tours are mini-packages that include transportation, tour guide services, entrance fees, cost of entertainment activities, and sometimes snacks and meals.

• Transportation costs within a destination to sites and sights of interest are normally prorated by a normally prorated by a predetermined number of participants not exceeding its allowed capacity and within its breakeven load factor of at least 50% to 60%.

• Sightseeing tours by a scheduled transportation service is not advisable. Scheduled sightseeing tours are referred to as “seat-in-coach” sightseeing. This type of sightseeing tours will be explained in the Confidential Tariff section of this Chapter.

• The tour guide cost is calculated by adding up the sum total of the tour guide’s fees plus the cost of transportation, board and lodging on a single-room basis. The sum total is prorated by a predetermined number of participants. The rule of thumb when calculating the cost of the tour guide is one guide per vehicle.

SightseeingTour Operators Cycle• Learning Objectives• Definition of Tour




Sample Tour Guide Fees ScheduleTour Operators Cycle• Learning Objectives• Definition of Tour




• Entrance fees are always fixed. As a rule of thumb, no free concessions are given for entrance fees.

• Cost for entertainment activities may be fixed or variable. For example, the rental fees for a picnic hut at a picnic camp will normally be prorated, while the entrance fee to the picnic camp is fixed. A boat rental may be fixed per person or prorated by the numbers of riders.

• When meals and snacks are included in the package, these are always fixed and always include the FOC and the tour guide.

ActivitiesTour Operators Cycle• Learning Objectives• Definition of Tour




Accommodations refer to the cost of the lodging, depending on the number of persons occupying a room, and the costs of meals served within the lodging establishments.

• When the hotel accommodations are included in the tour package, the rule is that two persons share a room. Hotel costs are always fixed. For room costs, the rule of thumb is to prorate the cost of the room by the number of persons occupying it.

• The room being shared may either be a twin room with two beds, or a double room with one matrimonial bed.

• If the Twin/Double room rate at La Corona Hotel is US$ 48.00, the per-person rate for a share-twin or half-twin is US$ 24.00

US$ 48.00 divided by two guests = US$ 24.00

AccommodationsTour Operators Cycle• Learning Objectives• Definition of Tour




• If three guests wish to share one room, there is a triple reduction representing the cost of a double or twin room plus an extra bed, divided by three (3) guests. If the extra bed cost at La Corona Hotel is US$ 42.00 the single room supplement is US$ 18.00

US$ 42.00 minus US$ 24.00 = US$ 18.00

• If three guests wish to share one room, there is a triple reduction representing the cost of a double or twin room plus an extra bed, divided by three (3) guests. If the extra bed cost at La Corona Hotel is US$ 12.00, the triple reduction rate is US$ 4.00.

Twin rate US$ 48.00 plus extra bed US$ 12.00 = US$ 60.00 divided by three guests = US$20.00 minus half-twin rate of US$ 24.00 =US$ 4.00.

AccommodationTour Operators Cycle• Learning Objectives• Definition of Tour




• Some tour operators quote a one-third rate instead of a triple reduction. In this case the one-third triple rate is US$ 20.00.

Twin rate US$ 48.00 plus extra bed US$ 12.00 = US$ 60.00 divided by three guests = US$20.00.

• If four guests wish to share one room, the one/fourth quad rate would be the cost of a double or twin room plus two extra beds, divided by four (4) guests. If the extra-bed cost at La Corona Hotel is US$ 12.00, the quad rate is US$ 18.00.

Twin rate US$ 48.-00 plus two extra bed US$ 24.00 = US$ 72.00 divided by four guests = US$18.00.





• Therefore, the more persons occupying a room the less is paid per person.

• Meals in accommodation establishments are always based on fixed costs.

• As a rule of thumb, meals taken outside the place of lodging are normally less expensive. However the additional transportation cost to and from the restaurant may result in a higher cost than the same meal served at the place of lodging.





Tour Escort refers to the costs incurred in the accommodations, meals and some transportation components of the individual who travels with the clients from the point of origin and back.

• This cost does not normally include the per diem or salary paid by the employer. The Tour Escorts transportation, accommodations, meals, are always prorated by the pre-determined number of participants. However, suppliers’ concessions are always applied to the Tour Escort.

• Please note that while the tour guide costs are calculated by adding up the sum total of the tour guide’s fees plus the cost of transportation, board and lodging on a single-room basis, the tour escort’s costs are reduced by applying all possible concessions.

• Having gained an understanding on how to cost and Ad Hoc Tour Package, the application of these rules will now be shown in the next pages. Note, however, that the basic materials needed are the pre-contracted rates.

Tour EscortTour Operators Cycle• Learning Objectives• Definition of Tour




Sample Hotel and Resort Rate Sheet





A word of caution: foreign exchange rates fluctuate according to the economic conditions of origin and destination countries. It is always advisable to allow a small percentage for exchange rate fluctuations when converting foreign currency into Philippine Pesos.





Sample Land Transportation Rate Sheet in Philippine Pesos





Sample Meal Rate Sheet in US Dollar





Sample Costing for an Ad Hoc Group
























1. Service or Component. All the services and components are individually specified in chronological order, on a day-to-day basis.

2. Cost. This column indicates the net unit cost of each service or component.

3. Passengers’ Brackets. This section provides the number of persons per bracket to be used in prorating the costs. Bracket numbers normally follow the configuration of the equipment being used. Note, however, that the choice of equipment to be used is always subject to the passengers’ comfort. For example, a group of sixty-four (64) can easily be accommodated in a bus of forty-five (45) seats and a minibus of twenty-nine (29) seats. For a short trip, like an arrival transfer, this configuration should be acceptable. Note: For a longer trip, like a full-day city and countryside tour, two 40-seat buses, is a better choice. Consider also the feeling of passengers in a small bus. Some might complain about not having equal-sized vehicles as in the first example. The automatic concession of one (1) FOC as represented by the “+” sign in columns 4, 5 and 6.

4. In order not to re-cost in case of a shortfall, this bracket is based on the proposed number of participants, less twenty (20%) percent.





5. This bracket indicates the proposed number of participants and is always the basis for brackets 4 and 6.

6. In order not to re-cost in case of an increase in number of participants, this bracket is based on the proposed number of participants plus twenty (20%) percent.

7. FOC. The Free-of-Charge column details all cost not given complimentary by the suppliers.

8. Guide. The Tour Guide column details all cost involved for the tour guide.

9. S/S means Single Supplement. This column shows the total due for individuals opting for single-occupancy rooms.





10. T/R means Triple Reduction. This column shows the total reduction due to each individual opting to occupy a triple room with friends or relatives.

11. Sub-Total of Cost. This row adds up all the costs involved, per person, for each FOC and for each tour guide.

12. Prorate FOC. The total costs of the FOC/s is/are divided by the number in column 4, 5 and 6. Be sure to allocate one (1) FOC for every fifteen (15) participants.

13. Prorate Guide. The total costs of the tour guide/s is/are divided by the number in column 4, 5 and 6. Be sure to allocate one (1) tour guide for every vehicle.





14. Total Cost. This row shows the total per-person cost based on the numbers indicated in columns 4, 5 and 6.

15. Markup/Margin. In this row, add the desired percentage of markup/margin or profit.

16. Net due to Operator. This row represents the net amount due to the tour operator.

17. Agent’s Commission. Should a commission be included, this row shows the commission allocated retailers.

18. Gross Selling. This row shows the gross selling price of the package.





• A Tariff, Confidential Tariff or Rate Sheet is a list of services and products, with corresponding prices, of a tour operator. This is distributed to travel agents and foreign operators.

• The Confidential Tariff or Rate Sheet must not be confused with the tour operator’s brochure. The brochure is the tour operator’s marketing tool that features the services and products in such manner that will entice the reader to purchase and avail of the services and products offered. The Rate Sheet is the sales tool.

Costing a Confidential TariffTour Operators Cycle• Learning Objectives• Definition of Tour


• Rarely is the brochure combined with the tariff. Although these two must be distributed together, the brochure would normally show no prices. The prices are shown in the Confidential Tariff or Rate Sheet. Having a brochure with the prices will shorten the life span of the brochure. Most of the operator’s contracted rates are valid for only a twelve-month period in most cases. A tour operator’s brochure, on the other hand, should be used for at least two years since these are more expensive to plan, produce and paint.

• When costing a tariff, the golden rule is to negotiate for the best available contracted rate from the suppliers. By the “best available” we mean the most competitive rate without sacrificing the quality of the supplier’s product. Some suppliers, like the accommodations establishments, may give a low, low rate for their room, but reduce the amenities of the rooms, such as providing only one towel, instead of two, and no shampoo. Transportation companies may commit low rental price for a 2000 model vehicle instead of a 2006 model.



• Other factors to consider when negotiating rates with accommodations establishments are the validity, the concessions and allocations. Validity of the contracted rate is important. It is more advantageous for the tour operator to have a longer validity, regardless of the season. In the Philippines the high or peak season is Christmas/New Year and Holy Week, and the low /lean season is during the rainy months.

• Consider and negotiate for concessions whenever possible. A most common concession of accommodations establishments is a drink. A breakfast included in the room rate is also a common concession. For group rates, the rule of thumb is one free bed for every fifteen (15) full-paying beds. Depending on the establishment’s policy, the maximum number of beds is normally four (4).



• Having allocations with the accommodations establishments is a big plus. Allocating ensure availability of rooms year-round and regardless of season. Hotels and resorts are not keen to grant allocations as there is no assurance that these will be sold. However, having a reasonable cutoff date, a specific date when the allocated room(s) must be used, to release the rooms might convince the supplier to grant a number of allocated rooms to a tour operator.

• For transportation companies and supplier other than accommodations establishments, the golden rule: “negotiate for the best available contracted rate” applies as well. The key word is “reduction”, that is, what discounts the tour operator can avail of. Discounts, in this case, apply to published rates, i.e. rates available to that general public.



A Confidential Tariff or Rate Sheet is normally divided into four (4) categories of services products, namely: Transfer Service, Sightseeing Tours, Hotel/Resort Accommodations and Meals, and Tour Packages.

• Transfer is a service that involves transporting the clients from point A to point B within the destination and with no sightseeing or entertainment en route. The general use of the term involves meeting and assisting clients at the gateway (airport/pier/bus station) and moving them to the lodging establishments, or vice versa. Aside from the transportation component, an arrival/departure transfer also involves the services of a Tour Coordinator/Airport Rep. A private transfer would also include the services of a tour guide. Transfers can also be used between the lodging establishment and a restaurant, and vice versa, but this may be part of a Dinner Package.

Confidential TariffTour Operators Cycle• Learning Objectives• Definition of Tour


• Sightseeing tours are min-packages that entail transportation to the sites and sight of interest in the locality, the services of a tour guide to provide pertinent commentaries, and walking visits or tours and/or entertainment. Sometimes sightseeing tours include participatory activities such as shooting the rapids in Pagsanjan.



• Accommodations and Meals are a listing of accommodations establishments with the applicable room rates, in Twin/Double, Single-occupancy room, Triple room, Extra Bed, plus the prices of meals, such as Breakfast (Continental, Filipino, American and the like) Lunch and Dinner. Meal prices are based on the table d’ hotel or regular set-plate or set menu, which normally consists of soup, salad, main dish and dessert.



• Tour packages would consist of transfers, sightseeing tour (if any), accommodations and meals, and transportation costs. The four (4) categories of tour packages, discussed in detail in Chapter VII, are summarized as follows:

• Ground Arrangements. Include transfers and sightseeing tours only.

• Land Arrangements. Include hotel accommodations (with or without hotels meals), transfers and sightseeing tours.

• Inclusive Tour Packages. Include transportation to and from the destination, hotel accommodations (with or without meals), transfers and sightseeing tours.

• Inclusive Escorted Tour Packages are inclusive packages plus the services of a Tour Escort. A Tour Escort manages the tour movements from the point of origin to the destination(s) and back.



• The tour operator on the basis of what the target market wants determines the above-mentioned products and services.

• The special Ad Hoc packages for specific markets were taken up in the previous section of this chapter.

• A basic rule to remember when costing a tariff is: “The lower the cost, the higher the margin.”



Sample Mark-up ScaleTour Operators Cycle• Learning Objectives• Definition of Tour


The sample costing for confidential tariffs in the following pages are in the Philippine Pesos, rounded off to the nearest zero, and based on the sample rate sheets in the previous figures.

Sample Costing for Confidential Tariffs



Try this! (Sample Costing for Transfer Service)



AnswerTour Operators Cycle• Learning Objectives• Definition of Tour


1. Number of passenger brackets varies from tour operator to tour operator. Normally, brackets follow the configuration of the equipment being used.

2. The “+” sign after each passenger figure represents the free-of-charge (FOC) concession granted to the client. In this sample, no FOC are included as the FOC cost is minimal.

3. Transportation costs are prorated, i.e. divided by the number in the passenger bracket.

4. Tour Guide costs are optional, depending on the tour operator’s policy. As a rule, tour guide services are required for private transfers.

5. Tour Coordinator’s costs are based on 1-2 hours as a minimum, depending on utilization. Some tour operators base this cost on the average daily wage.

6. Markup percentages vary from tour operator depending on the company’s overheads and desired profits. However the bottomline price must be competitive.

Explanatory notesTour Operators Cycle• Learning Objectives• Definition of Tour


Try this! (Sample Costing for the Hotel/Resort Room and Meal Rates)





Try this! (Sample Full Day Sightseeing Tour)






2. The “+” sign after each passenger figure represents the free-of-charge (FOC) concession granted to clients.

3. Transportation costs are prorated, i.e. divided by the number in the passenger bracket.

4. For bracket 24 + 1 a full-size bus is used for costing. A minibus could also be used instead.

5. The tour Guide Fee is US$ 40.00 at PhP50.00/US$. The Tour Guide costs include Lunch, although Lunch is normally a concession granted by the supplier.

6. FOC cost is multiplied by two in bracket 30 + 2 and by three in bracket 45 + 3. This cost includes the boat ride.

7. Markup percentages vary from tour operator to tour operator depending on the company’s overheads and desired profits. However the bottomline price must be competitive.



Try this! (2-days/1-night Tour Package)






2. The “+” sign each passenger figure represents the free-of-charge (FOC) concession granted to the client.

3. Transportation costs are “prorated” i.e. divided by the number in the passenger bracket.

4. For bracket 24 + 1 a full-size bus is used due for the sake of passengers’ comfort since it is assume the trip is quite long.

5. The Tour Guide Fee is US$ 160.00 at PhP50.00/US$. This is based on two (2) full days at US$ 40.00 each, plus evening services on Day 1, at US$ 30.00, and a rest-over-night (RON) fee of a US$ 50.00. Tour Guide costs also includes all meals while away.

6. FOC is multiplied by two in bracket 30 + 2, and it is based on two (2) FOCs sharing one room.

7. Markup percentages is fixed at 20% regardless of cost, however the bottomline price must be competitive.



It may occasionally happen that an odd-numbered tour group leaves a person who has purchased a tour package on a share-twin basis, with nobody to share a room with or a pair sharing room of the opposite gender not married or related. These cases results in “Involuntary Single”. The tour operator will pay a single supplement due for the involuntary single-occupancy room/s.



When costing products and services inclusive of commission for retailers, the basic formula is to divide the net tariff rate by .9 if the desired commission is ten (10%) percent. If the desired commission is fifteen (15%) percent, divide the net tariff rate (not the total cost) by .85. If the desired commission is twenty (20%) percent, divide the net tariff rate, which includes the tour operator’s markup, by .8 in order to get the desired commission level.

Wholesale Prices and Commission Levels



• Transfer Service. The net to operator cost shown below for transfer services has a twenty-five (25%) percent markup, as shown in the next slide, which is derived by multiplying the total cost by 25%. To determine a ten-percent commission structure, divide the net to operator cost by .9, as shown in the next slide:

Transfer ServiceTour Operators Cycle• Learning Objectives• Definition of Tour


Sample Commission Calculation for Transfer Service



• Full Day Sightseeing Tour. The total cost shown in the next slide for a full day sightseeing tour has the cost of the FOC concession and Tour Guide prorated by the number of the participants in the bracket. The resulting total, which is the net to operator rate, is then divided by .9 to calculate a commission of ten (10%) percent for retailers, as shown below:

Full Day Sightseeing TourTour Operators Cycle• Learning Objectives• Definition of Tour


Sample Commission Calculation for Full Day Sightseeing Tour



• 2-day/1-night Tour Package. The total cost shown below for a 2-Day/1-Night Tour Package, has the cost of the FOC concession and Tour Guide prorated by the number of participants in the bracket. The markup is a straight twenty (20%) percent as shown in the next slide for all bracket of participants. The resulting total is then divided by .9 to calculate commission of ten (10%) percent for retailers, as shown below:

2-day/1-night Tour PackageTour Operators Cycle• Learning Objectives• Definition of Tour


Try this!Tour Operators Cycle• Learning Objectives• Definition of Tour




• Ad Hoc Costing Sheet. The total cost shown below for the Hong Kong Merchant’s bank Group in Fig. 8-7, an Ad Hoc request and costing, has the FOC concession and Guide costs prorated by the number of participants in the bracket. The markup is a straight ten (10%) percent for all bracket of participants with no commission due whatsoever.

• It is up to the Hong Kong retail travel agent to add a markup on the amount due. This is normally done after combining the land arrangements with an airfare to produce an inclusive escorted tour package.



Ad Hoc Costing SheetTour Operators Cycle• Learning Objectives• Definition of Tour


• A Quotation is the sum total price of services requested or proposed. A Firm Quotation is the sum total price of services requested, reserved and reconfirmed.

• The Proposal is a formal quotation indicating the category of accommodations, meal plan, included transfers and tours, number of complimentary concessions, booking terms and payment conditions. It is normally made up of a cover letter indicating the foregoing, with an attached technical and/or descriptive itinerary.

QUOTATIONS & PROPOSALSTour Operators Cycle• Learning Objectives• Definition of Tour


• Once the client has accepted the proposal in writing, the processing of required reservations may commence.

• As explained during midterms, The Travel Management Cycle, reservations are advanced requests for available space or services at sometime in the future. A confirmation is a written advice by a supplier that a reservation has been accepted and will be honored, thus the term “confirmed reservations”.

• When placing reservations with suppliers, the information relayed through the different methods is basically the same, however the most important aspect is to ensure that the reservations are received, accepted and confirmed.

ReservationsTour Operators Cycle• Learning Objectives• Definition of Tour


• To affect reservation for tours, follow the methodologies detailed as explained during the midterm period. Note that the Field Operations Supervisor always makes the reservations for the land transportation required for transfer services and the sightseeing tour within a destination and for the services of a tour guide.

• Please also note that in the tourism industry, a person of 12 years old and above is considered a full-fare adult. A child fare of fifty (50%) percent is usually applied to an individual between ages 2 to 11 years of age, while infants up to 23 months old pay ten (10%) percent or no fare at all.

• Also, Philippine law requires transportation companies to grant a twenty (20%) percent discount to bona fide senior citizen aged 60 years and above.

ReservationsTour Operators Cycle• Learning Objectives• Definition of Tour


When making manual reservation with interisland shipping companies above the following information:

1. Passenger/s Name and Numbers. Provide the number of passengers (adults/children with corresponding ages) with complete name(s), family name first, followed by the title (Mr./Mrs./Ms./Mstr.) and first name initial. In cases of group reservations, the name of the group or code followed by the breakdown of accommodations is sufficient.

2. Date of Departure. Refers to the scheduled sailing date of the vessel.

3. Embarkation/Debarkation Points. These are the origin port and the destination port.

Manual Reservation: LodgingTour Operators Cycle• Learning Objectives• Definition of Tour


4. Breakdown of Accommodations. Specify the types and corresponding number of accommodations being reserved. For example: Business-class accommodations in two (2) cubicles for four passengers and three cubicles for six passengers, total twenty-six (26) berths. Another example: Economy berths for sixteen (16) passengers.

a) Note: A suite room is located in the upper decks of the vessel with a large porthole (window); it has a large bedroom, lounge, and private facilities with bath tub.

b) A stateroom is like a suite room, but with a smaller bedroom, and private facilities with showers only.

c) A cabin is a bedroom with private facilities and no lounge. It may have a porthole (outside cabin) or no porthole (inside cabin).

d) Business-class accommodations are in cubicles of four, six, or eight berths. Facilities are shared.

e) Tourist class accommodations are in upper/lower bunks, dorm-type, in airconditioned, indoor areas of the vessel. Facilities are shared.

f) Economy class accommodations are similar to tourist class but situated in the open-deck areas of the vessel.

g) These configurations vary from vessel to vessel, but as a general rule these may be described as such.



Once the reservation has been received, request for its status and ticketing option. Reconfirm the number of meals included in the fare. Regular fares normally do not include meals. Ask for the name of vessel, departure pier and time, and the arrival pier at the destination and the scheduled date and time of arrival.



When placing manual reservations with restaurants and other food and beverage establishments, provide the following information:

1. Passenger(s) Names and Number. Provide the number of guests and a “Lead” name or the name of the tour escort.

2. Date of Event/Function. Specify the date the reservation is requested and the estimated time of guests’ arrival.

3. Number of Tables. Specify the number of tables and their respective configurations that is how many seats per table, and preferred location in the hall. For example: two (2) tables of six (6) seats each, for twelve (12) near the stage.

Manual Reservation: RestaurantTour Operators Cycle• Learning Objectives• Definition of Tour


4. Type of Service Requested. Indicate the type of service requested, like set menu, a la carte, buffet service with or without drinks, approved brand of alcoholic drinks, and the like.

5. Form of Payment. Advise the restaurant on how payment will be made if there are no credit arrangements.

6. Tour Guide’s Name. Provide the full name of your contact person, either the tour guide or the tour leader or escort.

Once the reservation is accepted, double check the show time.



• While most of the time the foregoing information is initially provided by the telephone, it is prudent to follow up or make sure to send the above information in “black-and-white” by the letter to firm up the reservations.

• Nowadays email and faxed booking orders with an authorized signature are accepted at reservation documentation.

• However for the transactions that involve substantial amount of money, such as reservations for tour groups in accommodations establishments, Reservation Requests or Bookings Orders are sent to the supplier as discussed during the midterm period, followed by the rooming list when available.





The Booking card for Tours is the working form of the Tour Operations Department. It is a complete record of all requirements of the passenger and provides a history of actions taken, confirmation, option dates, and relevant information.

The Booking Card for ToursTour Operators Cycle• Learning Objectives• Definition of Tour


To properly fill out and accomplish this form, read the following guidelines:

1. DATE. Write the date the card is issued.

2. REFERENCE NUMBER. Write the assigned reference number/code for this transaction. Some organizations do not write anything in this box unless a deposit payment has been made.

3. NAME(s). Write passengers’ family name, followed by a slash, then first name and title. Write age of children, if any. Male children are addressed as “Master” or Mstr.



4. FORM OR PAYMENT. Write “cash or card” for walk-in clients or “invoice” for with credit facilities.

5. AGENT’S NAME, FAX No. & NAME OF CONTACT PERSON. Assume a name of a travel agent or outbound tour operator in the country of origin.

6. PHONE NUMBER, FAX No. & EMAIL ADDRESS. Write the agent’s phone number, fax number and email address.

7. INTERNATIONAL ARRIVAL/DEPARTURE INFORMATION. Write the arrival and departure information, such as date, flight number or name of vessel and ETA/ETD.



8. HOTEL/RESORT ACCOMMODATIONS. This is a list of accommodation requirements, including number of rooms and the dates of the meals to be provided.

a) City. Name the city or place where the hotel/resort is located.

b) Arr. Arrival date, check-in date.

c) Dep: Departure date, check-out date.

d) Name of the Hotel/Resort Name. Write the address, phone, fax and email address at the back.

e) Status/By. Write the Confirmed or waitlisted and the name of hotel/resort reservations staff who provided the status of the reservation.

f) Write the room type & the number of rooms required, for example, single, twin, or double.

g) Write the meals to be provided with the corresponding dates.



9. DOMESTIC FLIGHT/SHIP/BUS INFORMATION. Write the schedule of flights/vessel name or the bus number and company for travel within the Philippines.

a) DATE. Date of travel: normally alpha-numeric day and month in three letters. Example: 01 JUL

b) FROM. Write point of origin.

c) TO. Destination point (and so on and so forth). Last box is last destination point.

d) FLIGHT NUMBER/NAME OF VESSEL/BUS COMPANY & NUMBER. Write three-letter airline code and flight number and booking class; vessel name and accommodation type; bus body or plate number.

e) ETD. This is the estimated time of departure from the origin point.

f) ETA. This is the estimated time of arrival at destination point.

g) STATUS/By. Write status as per airline/ship or bus company reservations staff or CRS monitor.

h) PNR. Write Passenger’s Number Record as per airline reservations staff or CRS monitor if applicable.

i) OPTION. This is the date and time when the ticket/s must be issued to avoid cancellation.



10. TRANSFERS & SIGHTSEEING TOURS. A summary of transfers and sightseeing tours requested.

a) CITY. Write name of city where tour is requested.

b) DATE. Write the date the transfer or tour is to be provided.

c) TRFs. Specify if one-way transfer (ARR or DEP) or roundtrip (RT) transfers are to be provided.

d) SIGHTSEEING TOURS. Write name of tour or tour title.

e) HOURS. Write the number of tour hours.

f) AM-PM. Write if in the morning (AM) or in the afternoon (PM) or full day (FD).

g) STATUS/By. Write the status and the name of person who confirmed the tour.



11. BOOKING ORDERS or RESERVATIONS REQUESTS ISSUED BY: Write the name of the person who prepared the Booking Orders or Reservations Requests.

12. TOUR VOUCHERS ISSUED BY. Write the name of the person who issued the Tour Vouchers or Exchange Orders.

13. PREPARED BY. Write the name of the person who prepared the Booking Card for Tours.

The Quotations and Reservations staff of the Tour Operations Department of a TMC/Travel Agency always prepares the Booking Card for Tours. Some organizations designate these individuals as Staff Assistant-Reservations or Staff Assistant-Quotations. Others designate them simply as Staff Assistant-Tours.



11. Tour Operators Cycle

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