| Table of Contents |
|---|
Supposing a travel agency books a hotel room from your company for June 1-5, 2022.
The total room rate from the supplier is 200 EUR and the markup is 20%, thus the service is sold to the travel agency for 240 EUR (which makes EUR 60 per night).
The initial cancellation terms set by the supplier include penalty charges of 50 per cent of the total service rate if the booking is canceled seven or fewer days before the service start date.
Case 1.
Cancellation terms are not specified in the contract
If you specify no values either for independent cancellation terms or for supplier penalty charges, the initial cancellation terms set by the supplier are applied.
...
In our case this means that the penalty charges are applied on May 25, 2022. If the travel agency cancels the reservation within the period from May 25-31, it pays you 120 EUR of penalty charge (50% of the supplier rate including the markup 240 EUR). In your turn, you pay 100 EUR to your supplier (50% of the supplier rate). 20 EUR difference is your company profit.
Case 2.
Cancellation terms are specified for supplier penalty charges only
If you enter no values for independent cancellation terms, but set up the shift of deadlines and increase of the initial supplier penalty charge, then the supplier penalty charges are applied in accordance to your settings.
...
Thus, if you set the shift of the cancellation deadline for 3 days and set the increase of the penalty charge to 10 per cent, then the penalty period will be extended to 10 days:
Cancellation period = 7 days according to supplier’s terms + 3 days according to your terms.
The penalty period starts on May 22, that is 3 days before the supplier's cancellation terms start. At the same time the amount of penalty charge additionally increases by 10 per cent of the initial supplier penalty charge including the markup of the tour operator. In this case if a reservation is canceled within the period from May 22 to May 31, the travel agency pays the penalty charge of 132 EUR.
120 EUR (50% of the initial supplier's penalty charge including the tour operator's markup) + 10% (penalty increase) = 132 EUR Penalty charge
You pay 100 EUR to the supplier. The remaining amount of 32 EUR is your company profit. Similarly you can configure supplier's penalty terms by changing only the deadline shifts or the penalty charge increase.
Case 3.
Only independent (your own) cancellation terms are set up.
If you set up only your custom cancellation terms and they overlap with the initial penalty charge terms set by a supplier for some dates, stricter penalty rules are applied for these dates.
...
If the service is canceled during the period from May 22 to May 24, the travel agency pays you 60 EUR penalty fees (according to your own terms, since the terms of the supplier are not yet active).
If the service is canceled during the period from May 25 to May 31, the travel agency pays you 120 EUR penalty charge (the supplier cancellation are applied since they are stricter than yours).
Case 4.
All possible cancellation terms are set up
You can set up custom cancellation conditions and change the cancellation conditions of the supplier at the same time. In this case stricter penalty conditions are used to determine the amount of charge and the deadline.
...
In this case the shifted penalty deadline attaches from May 22 and if the service is canceled during the period from May 22 to May 26, the travel agency pays you 150 EUR of penalty charge (0,5*240+25%). Your custom penalty charges take effect starting from May 27 and since it is stricter than that of the supplier, if the service is canceled within the period from from May 27 to May 31, the travel agency pays you 240 EUR.
...
In this case the shifted supplier's penalty charges take effect from May 22 and if the service is canceled within the period from May 22 to May 26, the travel agency pays 150 EUR (0,5*240 +25%) to you.
You custom cancellation terms take effect starting from May 27 (that include the penalty charge of 60 EUR payable by the travel agency), but since your conditions are less strict than those of the supplier (150 EUR), if the service is canceled within the period from May 27 to May 31, the conditions of the supplier are still active and the travel agency pays 150 EUR to you.
...