Tools and Resources
Best Practices to Keep Your Clients Safer:
- Make sure clients use a credit card when possible to keep a level of protection between their bank account and the supplier.
- Offer third party travel insurance to protect from supplier default. Iif the client declines, require them to sign a waiver stating their refusal.
Best Practices to Keep Yourself Safer:
- Triple check your coverage on E&O insurance (Does your host have a policy that covers you? What if you’re doing business under a different name?)
- Always have clients sign your terms & conditions before providing services
- When possible, avoid taking clients’ trip funds in house.
- Get all client correspondence in writing. If you talk on the phone, follow up with an email reviewing what was discussed.
Pro tip: even include what the client opted not to do (“We discussed cancelation but, per our conversation, you have decided to wait until June 1st to reassess the circumstances”)
- Provide all supplier terms & conditions for clients to review before client makes the payment.
Best Practices When Qualifying Suppliers
As we rebuild our businesses in the wake of COVID, gone are the days when we vetted suppliers based on who could offer the most unique experience. Now, we as advisors have a greater level of stewardship to our clients with the suppliers we choose to trust them with. One big disclaimer? Legally, we as agents and agencies have to be careful about even using the words “a vetted supplier” to your clients or it could appear that we are vouching for their solvency, thus making us liable should they go out of business. You’ll notice that any smart consortia or host agency right now is using the phrase: we cannot guarantee supplier solvency. I would recommend something along those lines go in your terms & conditions.
That being said, our role as advisors is reaching an even greater call of duty to at least ask the right questions and keep an eye on the warning signs of a supplier’s financial situation. Three best practices for you to keep in mind moving forward:
1) Understand What the Red Flags Mean
From a big picture perspective, when you’re vetting a tour operator or an on site in particular, you’re really trying to get to the bottom of: where are the client’s dollars going once we pay you? You want to make sure that they don’t have the business model of robbing Peter to pay Paul: essentially not putting those dollars straight toward reserving your clients vacations and instead, using your clients dollars to pay for another client trip that’s happening sooner. This is what having an escrow account means rather than just an operating bank account. Not only do we get into an ethical question of this business model, it’s why you see certain companies immediately impacted by a crisis like this because of the cash flow. In a crisis like this, most companies are in a cash bind, but a company that is not financially prepared will have to scramble to get from one day to another. That’s why you see behavior like missing refund deadlines: 60, 90, even 120 days is now normal – but if they’re missing the window they promised a refund? That’s a problem. It’s why you see commissions being withheld – and if you aren’t commission tracking right now more than ever, you need to stay on top of that – it’s your first warning sign, plus you want to get your money. It’s why you see a sudden and unfair changing terms and conditions from what the client initially agreed to so that they aren’t providing refunds even if a client’s original terms would have provided them cancelation with a refund (side note: this is a separate topic from the companies that have done this because of their government’s rules, that has less to do with their financial standing and more to do with the laws they have to adhere to) .
2) Work Smarter, not Harder by Using Your Community and References
It would be a ton of redundant work for each advisor to have this conversation with every supplier out there. Working smarter not harder here means relying on your network. Disclaimer here is that many travel companies are privately held – meaning, they don’t have to give anyone their financial information, agency or consortia. But, trust between an advisor and supplier is the single greatest commodity moving forward: a supplier who wants to earn the trust of an advisor will work with you to be transparent. If you are part of a consortium, rest assured that they are likely doing the highest level of vetting possible when it comes to the suppliers they allow in their collection. I recently sat in on an owner’s call from Virtuoso to better understand their level of qualification and it is as thorough as one can get, so we feel comfortable that their suppliers are well tested compared to a supplier just recommended on a Facebook group. Now is also a great time to lean into your representation company partners: a great rep company isn’t going to accept just anyone. Because their names are on the line, they typically require a level of qualifying for each supplier in their portfolio: they study reputation and agent process, as well as financial standing to ensure that they’re not taking on a bad client. We did an interview with Bennett Mercado to get a better understanding of this and will have that out to you guys shortly. That being said, don’t forget the rule from above: no one can guarantee the financial solvency of a company, not before COVID, not after it. But, using your network will get you an extra layer of security without you having to be the one doing all of the heavy lifting.
3) Equip Yourself With the Right Questions
If you’re working with suppliers that are not in the networks mentioned above, or even if you want more assurance from those who are in your network, it’s wise to educate yourself on best practices and the right questions to ask. This is not just for new suppliers: in this strange COVID recovery world, I would consider all suppliers new suppliers.
Great hosts and consortia are rolling out their strategies on this, but one of the best questions you as an advisor can ask is on behalf of your clients money.
- Tell me about where the dollars go as soon as my clients pay you?
- Is the money held in an Escrow account? At what point do you pay the hotels, safari lodge, or tour partners for the services rendered to clients?
Find this out before submitting client payment. As an extra step in your due diligence, once you book your clients, ask for a confirmation of the hotel reservation. When a tour operator or DMC goes out of business, this is the area that typically costs the client the most: we pay the vendor and assume a reservation was made when it never actually was.
Don’t Forget: No one can guarantee a supplier’s solvency, but our job as agents is to do as much as possible to ensure we are building great trust with our clients. Now, more than ever, this extends to choosing our supplier partners wisely and working to educate ourselves on how they do business.