TOURISM AND HOSPITALITY

Contracts between Tour Operators and Hotels: Allotments, Cancellation and Force Majeure

A significant number of hotels in Türkiye generate most of their revenue from contracts with European tour operators. These contracts are usually signed before the season and provide for a certain share of the hotel's rooms to be made available to the tour operator at agreed prices. Fluctuations in demand, cancellations and extraordinary events during the season, however, frequently put the terms of these contracts to the test for both sides.

Disputes between tour operators and hotels often arise because the type of contract and the cancellation terms have not been clearly defined. The following sections address the main points that tour operators working with Turkish hotels and hotel operators should consider.

Allotment and guarantee contracts

Contracts between tour operators and hotels can be broadly divided into two types. Under an allotment contract, the hotel makes a certain number of rooms available to the tour operator, and the tour operator may return unsold rooms to the hotel free of charge up to a release date set in the contract. Under a guarantee contract, by contrast, the tour operator undertakes to pay for the rooms irrespective of whether it sells them.

In practice, the two types are frequently mixed, and the contract does not clearly state which rooms are given on a guarantee basis and which on an allotment basis. Release periods, whether these periods may be changed during the season and the hotel's right to recall the allotment must be regulated in the contract in clear and measurable terms.

Payments and advances

Under many contracts, the tour operator pays an advance to the hotel before the season, which is offset against accommodation charges during the season. The repayment of advances not offset where the season is weaker than expected or the contract ends early is one of the most common subjects of dispute. The repayment terms and whether the hotel provides security should therefore be set out in the contract.

The payment currency and the treatment of exchange rate differences are also important. In contracts with tour operators resident abroad, prices may be agreed in foreign currency, but the conditions under which prices may be changed during the season must be clearly regulated.

Overbooking and service failures

If the hotel accepts bookings beyond its capacity and relocates guests to another hotel, this has serious consequences for the tour operator, since the tour operator that sold the package holiday is responsible to the consumer for providing the accommodation promised in the contract. The contract should therefore clearly regulate under which conditions and to a hotel of which standard the hotel may relocate guests, and who bears the additional costs and the compensation payable to consumers.

A similar recourse relationship arises with complaints about hygiene, food safety or service quality. Whether the tour operator can pass on to the hotel compensation it has paid to consumers depends on the applicable contractual provisions, the conditions of liability and proof of the damage; timely notification and documentation of complaints to the hotel are also important in this respect.

Force majeure and extraordinary circumstances

Natural disasters, epidemics, travel warnings or security incidents may, depending on the circumstances of the case, affect the performance of the contract and bring force majeure provisions into play. The contract should specify which events constitute force majeure, which obligations of the parties are suspended in that case and what consequences follow for guaranteed rooms and advances paid.

Where the contract contains no provision, Turkish law applies the general rules on impossibility of performance and excessive hardship. Since how these rules apply to a specific seasonal contract may be open to debate, however, an express contractual provision produces a more predictable result for both parties.

Governing law and jurisdiction

Standard contracts used by European tour operators often provide for the law and courts of the tour operator's country. This choice may be valid; where the hotel's assets are located in Türkiye, however, enforcing a foreign judgment in Türkiye requires separate recognition and enforcement proceedings. Where a decision would have to be enforced in the event of a dispute should therefore be considered from the outset when choosing the governing law and jurisdiction.

Conclusion

Contracts between tour operators and hotels largely determine the economic outcome of the season and are tested most in extraordinary situations. Clearly separating allotment and guaranteed rooms, setting the terms for advances and their repayment, establishing a recourse mechanism for overbooking and service failures and regulating the consequences of force majeure in the contract reduce the risk of disputes during the season. The importance of tour operator contracts in hotel acquisitions is discussed separately in the article on acquiring a hotel in this section.