Risk Solutions Manual for

Travel Industry in Hong Kong

1 February 2008

Aon Hong Kong Limited
21/F, Aon China Building

29 Queen’s Road Central

Hong Kong

Page 1


Important Notes
Aon Hong Kong Limited has compiled this report for the benefit of the Travel Industry Council of Hong Kong [TIC] and its members. The applicability of this report is strictly limited to the matters stated herein and is not to be read as an extension by implication to any other matter in connection with any of the documents reviewed for the purposes of this report. Further, this report is not to be relied upon by, nor to be quoted or referred to any other person in any public document or submitted to any governmental body or agency without our prior written consent.
The preparation of this report has been undertaken on the basis of information provided by TIC and its members and other Aon’s clients outside of Hong Kong and documents available from public sources and we have not verified the accuracy or completeness thereof.
This report is only for the purpose of risk consultancy to TIC and its members (including Outbound and Inbound Travel Agents) and for no other purpose. It is not a legal opinion and does not contain or purport to contain any specific legal advice on the matters covered therein. All templates, specimens, sample clauses, agreements, documents and the like are provided strictly for reference and information only, and do not constitute legal advice on the matters covered therein, and further on the express understanding that the recipient shall obtain its own legal and other relevant advice, in accordance with its specific interests, needs and circumstances.
Notes: In case of any inconsistencies between the English and Chinese versions, the English version shall prevail.
Acknowledgement of support and disclaimer
The Research Project on Risk Management for the Travel Industry is organised by Travel Industry Council of Hong Kong and funded by the SME Development Fund of the Trade and Industry Department, HKSAR Government.
Any opinions, findings, conclusions or recommendations expressed in this material/event (or by members of the Project team) do not reflect the views of the Government of the Hong Kong Special Administrative Region, Trade and Industry Department or the Vetting Committee for the SME Development Fund.

CONTENTS

A. / Supplier Management / 5
1. / Risk Mitigation / Loss Control / 5
1.1 / Land Operator / Supplier Selection / 5
1.1.1Supplier selection criteria checklist
1.1.2 Preferred Supplier List / 5
6
1.2 / Service Agreements with Suppliers / 6
1.3 / File Documentation
1.3.1Communication with suppliers is documented
1.3.2Central record of customer complaints against suppliers / 7
7
7
B. / Marketing & Sales / 9
1. / Risk Mitigation / Loss Control / 9
1.1 / Proper management of customers’ expectations / 9
1.2 / File Documentation / 9
1.3 / Tour Booking / 10
1.4 / Employee Checklist / 10
2. / Risk Transfer / 12
2.1 / Assumption of Risk and Liability Waiver
2.1.1 Assumption of Risk Statement and Liability Release Form
2.1.2 Sample wording / 12
12
12
C. / Tour Trip / 14
1. / Risk Mitigation / Loss Control / 14
1.1 / Transport Arrangements
1.1.1Tour coach
1.1.2Tour coach driver
1.1.3Charter vessel / sightseeing boat / 14
14
15
15
1.2 / Tourist guides / 16
1.3 / Restaurants / 17
1.4 / Hotel / Accommodation / 17
1.5 / Optional activities / 18
1.6 / Theme parks and attractions / 18
2. / Safety Checklists / 18
2.1 / Transport Arrangements
2.1.1 Tour coach
2.1.2 Tour coach driver
2.1.3 Charter vessel, sightseeing boat or other means of transport / 19
19
20
20
2.2 / Meals / 21
2.3 / Hotel / Accommodation / 22
2.4 / Activities
2.4.1Activities within the itinerary
2.4.2Optional activities / 22
22
23
D. / Post-Tour Follow-Up / 24
1. / Compliant Resolution and Refund Handling / 24
Appendix 1 / Sample Supplier Selection Questionnaire / 26
Appendix 2 / Sample Service Agreement with Land Operators / Suppliers / 32
Appendix 3 / Sample Contract Terms & Conditions for Managing Customers’ Expectations / 41
Appendix 4 / Employee Checklist / 43
Appendix 5 / Crisis Management / 44
Appendix 6 / Crisis Response Plan – Sample Contact List / 59
Appendix 7 / Crisis Response Plan – Sample Action Consideration List / 61
Appendix 8 / In-Crisis Event Status Report / 62
Appendix 9 / In-Crisis Event Tracking Log / 63

Section A Supplier Management

A1Risk Mitigation / Loss Control

A1.1Land Operator / Supplier Selection

A1.1.1 Supplier selection criteria checklist

It is important for Travel Agents to exercise reasonable care and diligence in the selection of suppliers so that services to be delivered by the suppliers will be provided to customers with reasonable skill and care.

The following are some key elements that should better be included in an Outbound Travel Agent’s standard procedures for the selection of foreign land operators and suppliers. They should also be included in an Inbound Travel Agent’s standard procedures for the selection of local suppliers or travel services, such as hotels, coaches, launch operators, restaurants, travel and entertainment facilities, freelance tourist guides, etc. Although not all of these elements would be applicable in all cases, the majority of them should enable the Travel Agent to select the best possible vendor available.

  • Good reputation and sound financial status

The supplier is recommended by other known and trustworthy suppliers, industry colleagues and/or is recognized by an established travel or tour industry association.

The supplier is chosen for its expertise with a reputation for being among the most experienced of local travel service providers.

The supplier has been operating for a minimum of 5 years.

The supplier can provide collateral Letter of Credit or detain deposit, if possible.

The supplier can produce favorable credit references and financial statements.

  • Quality service standards

The supplier is accessible 24/7 for handling contingencies and emergencies.

The supplier has standard procedures in place for addressing customer service complaints.

  • Following legality requirements

The supplier is compliant with local insurance, employment and licensing regulations to provide services relating to means of transport, hotels, dining places, tourism and entertainment facilities, etc.

If the supplier provides tourist guides to accompany the tour at the destination country, tourist guides employed by the supplier should meet local legal requirements.

Evidences of compliances or copies of relating legal documents should be obtained.

  • Sound risk management practices

The supplier has a proven track record for safety, either incident-free or with no serious or material claims.

The supplier has a well-written Crisis Management Plan.

  • Good partnership between Travel Agent and the supplier

Travel Agent and the supplier have signed a contract with a warranty of compliance with relevant laws and regulations especially in relation to insurance, employment, licensing and safety requirements.

Travel Agent and the supplier perform periodic quality review programs.

Travel Agent has written minimum service standards with the supplier.

A sample “Supplier Selection Questionnaire” is enclosed in Appendix 1 for reference.

A1.1.2Preferred Supplier List

An effective practice which is utilized by a number of overseas travel agents is that of the “Preferred Supplier List”. Management should furnish their employees with such a list consisting of recognized, quality suppliers from the standpoint of product/service quality, experience and financial stability.

Criteria for a supplier to be qualified as “Preferred Supplier” should include:

  • The supplier has completed, signed and returned the Supplier Selection Questionnaire (Refer to Appendix 1) to the Travel Agent.
  • The Travel Agent has carefully read the information provided by the supplier in the Supplier Selection Questionnaire.
  • A service agreement (as described in Section A1.2 and refer to Appendix 2) has been signed between the Travel Agent and the supplier.
  • Service and quality standards as laid down in the service agreement, and performance of the Preferred Suppliers will be regularly reviewed to ensure quality is up kept consistently.

In addition to minimizing risks of engaging poor quality suppliers, the Preferred Supplier List method can also improve the legal protection of the Travel Agent by having the contract between the Travel Agent and the supplier properly in place.

A1.2Service Agreement with Suppliers

The Supplier and Travel Agent agreement (Refer to Appendix 2) is a document signed by both parties laying down the details of the following:

  • Terms and conditions of the services provided by the supplier
  • Minimum quality and safety standards to be followed by the supplier
  • Obligations of each party
  • Legal compliance requirement

The Supplier Selection Questionnaire (See Section A1.1.1 for details) should also be completed and signed by the supplier and form part of the agreement between the Travel Agent and the supplier.

The agreement should be properly signed with all suppliers.

Agreement wording and details should be reviewed and updated regularly.

A comprehensive standard Land Operator Service Agreement wording is now being used by a number of travel agents in Hong Kong. Improvements to the wording are recommended and the modified sample Agreement is enclosed in Appendix 2 for reference.

A1.3File Documentation

A1.3.1 Communication with suppliers is documented

It is important that all communications in relation to tour / travel arrangements between the employees of Travel Agent and the suppliers are documented and filed properly. Should a claim be lodged against a Travel Agent, notes on communication with suppliers can assist in reconstructing a sequence of events. However, documenting communication with suppliers does not eliminate the necessity for actual signed confirmation of travel arrangements.

All of the following should be properly documented and filed in the operation file:

  • Contract(s) and waiver(s) signed with the suppliers
  • Advice of itinerary changes and confirmations by the suppliers
  • Telephone conversations
  • E-mails
  • Handling of customers’ special requests

Employees should document telephone and personal conversations with suppliers. These notes should include:

  • Name of the person contacted
  • Time and date of the conversation
  • Brief notes

Example of Telephone and Conversation Record:

Supplier Name / Person Contacted / Date and Time / Notes
ABC Tours – David Lee / 06 Aug 2006, 13:30 / Confirmed car pick-up for Mr. Chan Tai Man at Hong Kong airport on 10 Aug 2006

A1.3.2 Central record of customer complaints against suppliers

As discussed in Section A1.1, it is crucial for the Travel Agent to have regular review of the suppliers’ performance and reputation to ensure the Travel Agent has exercised the duty of care in choosing the suppliers to provide service to its customers.

Suppliers which consistently have complaints from customers are likely to cause problems in the future. Complaints can quickly turn into incidents which can then turn into claims. The defense of the Travel Agent against liabilities for poor supplier performance will be undermined substantially if it is found the Travel Agent has engaged supplier(s) with known poor history or has made no effort in reviewing the supplier’s reputation.

The Travel Agent should therefore set up a central record system to capture all customer complaints against suppliers. This information should be shared with all employees and referred to during regular review of service agreements with the suppliers. Performance pledges or service standards should be agreed and incorporated in the service agreements. If the performance of a supplier is unsatisfactory, the Travel Agent should follow up immediately.

Section B Marketing & Sales

B1Risk Mitigation / Loss Control

B1.1Proper management of customers’ expectations

Customer complaints may arise if the Travel Agent fails to meet expectations. An Outbound Travel Agent could avoid a number of complaints if it reminds customers of preventive actions against holiday disruptions before and during the tour trip. An Inbound Travel Agent that accepts tour booking directly should also implement the measure. Company policies of the Travel Agent in handling cancellation of the tour either at the request of the customers or because of “force majeure” events such as adverse weather conditions, natural disasters, strikes, fire, mechanical failure of aircraft or land conveyances, etc. should also be made clear to the customers to avoid arguments in future.

Sample terms and conditions of travel for the above-mentioned purposes are enclosed in Appendix 3 for reference. They should be made clear at the outset, and prior to the customer’s booking. Terms and conditions should be printed on brochures. Clear reference should appear on the tour application form and other documents, e.g.

“YOU HAVE BOOKED THIS TOUR SUBJECT TO THE COMPANY’S STANDARD TERMS AND CONDITIONS. PLEASE ENSURE YOU ARE FAMILIAR WITH THESE TERMS AND CONDITIONS BEFORE YOU COMMIT TO YOUR TOUR.”

The contract incorporating these terms and conditions should be properly signed with all customers.

B1.2File Documentation

Similar to the documentation requirement for suppliers, all communications in relation to tour / travel arrangements between the employees of Travel Agent and the customers should be documented and filed properly. Should a claim be lodged against a Travel Agent, notes on communication with customers can assist in reconstructing a sequence of events. However, documenting communication with customers does not eliminate the necessity for actual signed confirmation of travel arrangements.

All of the following should be properly documented and filed in the operation file:

  • Contract(s) (tour booking documents) and waiver(s) signed with the customers
  • Advice of itinerary changes and confirmations by the customers.
  • Telephone conversations
  • E-mails
  • Special requests from the customers

B1.3Tour Booking

Another identified key risk is negligent booking by Travel Agent, which may be in the format of wrong dates, times or destinations.

The following conditions of tour booking and responsibilities should be clearly disseminated and explained to every customer on or before confirmation of the booking or produced to the customers upon request:

  • Extent of responsibilities and liabilities of the tour-booking agents towards customers, subject to disclaimer of liabilities clause as appropriate.
  • Circumstances in which and the conditions on which surcharges may be imposed on customers.
  • General policy of the tour booking agent both in the event of the agent’s canceling a package tour or in the event of his altering part of a package tour.
  • The amount of, or the basis for calculating the cancellation fees which customers will be liable to incur as well as the terms and conditions under which the customers will be liable to incur such fees.

B1.4Employee Checklist

Consideration should be given to adopting an Employee Checklist for each tour arrangement with a customer. A checklist ensures the employee will have addressed all the issues listed therein, which will reduce the risk exposure of the Travel Agent for liability arising out of the negligence of the employees in handling the booking of tour with customers.

A sample Employee Checklist to be used in operation is enclosed in Appendix 4. A practical checklist may include the following items.

# / Employee Checklist Item / Description
1 / Non-preferred suppliers / Travel agents should use suppliers on the Preferred Supplier List as far as possible. If a customer requests that a non-preferred supplier be used, then the fact that the supplier is on the Travel Agent's non-preferred suppliers' list should be advised to the customer.
The customer’s name, brief reason for using the non-preferred supplier, and the date of the discussion should be documented.
# / Employee Checklist Item / Description
2 / Travel insurance offered? / Customers who purchase travel insurance are less likely to initiate action against the Travel Agent for damages covered within the travel insurance policy.
3 / Hard copy confirmation? / Confirmation of travel arrangements by the customer can assist in protecting the Travel Agent from error and omission claims.
Signed confirmation should be obtained from the customer even when the customer books the travel arrangement through a sub-agent of the Travel Agent.
4 / Cancellation policies explained? / Penalties for cancellation of the travel arrangement should be explained in detail to the customer.
5 / Visa, passport and health check requirement explained? / Explanation of visa, passport and health check requirements to the customer will reduce customer complaints and assist in protecting the Travel Agent from error and omission claims.
6 / Assumption of Risk Statement / Liability Release Form / Many customers elect to travel to have new and exciting experiences and seek to participate in high-risk activities, such as action adventure tours, or travel to exotic locations.
As explained in Section B2.1 below, customers should be asked to sign an Assumption of Risk Statement and Liability Release Form for participation in these high-risk activities or travel arrangements.
7 / Travel Advisory Warnings provided? / Travel advisory warnings of known hazards and risks should be provided to customers.

B2Risk Transfer

In this section, we provide a discussion on the issue of the relationship between the Travel Agent and its supplier which we believe might have an impact on our overall risk assessment. The discussion and the examples provided are based on our understanding and experience as risk consultants, and only from a Hong Kong perspective and are for your information only and must not be relied upon as legal advice. As reiterated in page 2 containing the Important Notes, we are not providing you with legal advice, nor purporting to do so, in this section, nor in any other section of this report. You must obtain your own legal and other relevant advice to meet and address your specific interests, needs and circumstances.

B2.1Assumption of Risk and Liability Waiver

B2.1.1 Assumption of Risk Statement and Liability Release Form

Many customers elect to travel to have new and exciting experiences. These experiences generally coincide with increased risk.

For customers seeking to participate in high-risk activities such as action adventure tours, or for those customers seeking to travel to high-risk locations, it is recommended that they are asked to sign an Assumption of Risk Statement and a Liability Release Form. This is a common practice being adopted by a number of major Travel Agents both in Hong Kong and overseas.