Allotments in the tourism industry are used to designate a certain block of pre-negotiated carrier seats or hotel rooms which have been bought out and held by a travel organizer with a huge buying power like a wholesaler, tour operator or hotel consolidator, and more rarely by a retail travel agent. [1]
Allotments can be purchased for a specific period of time such as a whole season, part of a season or for any single dates and then resold to travel partners and final customers around the globe. A couple of days prior to carrier departure/hotel check-in any unsold setas/rooms may be released back to the supplier if such an agreement exists between the two parties. An allotment release back period is also negotiated as part of the allotment contract (e.g. four days prior to check-in/departure).
Allotments can be negotiated between a tour operator and a travel service supplier such as airline company/hotel chain, or between two travel organizers such as a tour operator and a retail travel agent. Either ways the buyer needs to prove a consistent level of business, cause allotments are hardly granted without any previous sales history.
Rooms or seats that have not been contracted between the travel
company and the product supplier are referred to as free sales and
their purchase is handled ‘on-request’ where each booking of an
airline seat or hotel room needs to be confirmed with the supplier
before being confirmed with the client.
The amount of the contracted rooms/seats to be specified in the
allotment contract is a result of the estimated, during the
negotiation, volume of sales to be realized by the tour operator. Tour
operators book a certain number of rooms in hotels or seats on
carriers and have the right to use them by a given date, also known
as a release date, that usually is some days prior to tourist's
arrival (hotels)/departure(carriers). The allotment contract
reduces the risk of any unsold products by the supplier and grants
relative price advantage to the travel organizer helping him to
stay competitive on the market by offering extra discounts. [2]
Tour operators obtain discounts, through allotment or commitment
contracts, primarily depend on the firm size and the bargaining
power exercised; they can vary from 10% to 50% according to the
period of the year, the destination, the quantity and quality of
services contracted upon. Some big tour operators are able to
obtain up to 70% of discount. [3]
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