RATE-MINUS AND

COST-PLUS CONCEPTS
SALES AND REVENUES OF TRAVEL MANAGEMENT
COMPANIES
TMC primarily help travelers from the
beginning of their trip, during and even
after they are back.

They make sure that travelers will have a

hassle-free and a very enjoyable trip.

TMC’s sources of Income are the

following:
a. Cost-plus
b. Rate-minus
c. Service fees
d. Rebates and Production Incentives
A. COST PLUS
 When bookings and reservations are done
through TMCs, travelers need to pay an EXTRA
AMOUNT for booking.

 When the exact cost of travel arrangement is

determined, TMCs ADD a certain percentage
or fixed amount to the actual cost.

 It is a professional fee or handling fee known as

COST-PLUS.

 It depends on travel agencies, sometimes they

add 20 to 35%
 Example:
Friends Gemma and Rina approached Mario of Explorers Travel and Tours.
They told him that they want to visit another friend in Auckland, New
Zealand. They asked about visa requirements and the cost of airfare and
tours. Mario gave them an estimate of airfares, hotel rates, and tour
packages. Furthermore, they were advised to visit Sydney, Australia since
it is just 3 ½ hours away from Auckland. They were glad about the
suggestion, advise, and recommendations of Mario so they requested him
to immediately lodge their visa application and book their flights. Here
are the details of the airfares:

PAL OCT 2 Manila to Sydney Dep: 10:15 PM Arr:

OCT 3 8:45 AM

Virgin Australia OCT 3 Sydney to Auckland Dep: 3:00 PM Arr: OCT 3

4:30 PM

Airfare: PHP34,592 + PHP1620 PH Travel Tax

The airfare quotation is PHP34,592. Mario adds 25% for professional
fees for all the expert advise and bookings that he did for them. The
computation will be:

PHP34,592 x 25% = PHP8,648

PHP34,592 + PHP8,648 = PHP43,240

Therefore, Mario will be charging Gemma and Rina PHP43,240 each.

Explorers’ Travel and Tours earns from cost-plus of 25% for each
transaction.
B. RATE MINUS
 Suppliers in the travel industry consist of the transportation industry,
the accommodation industry, entertainment and activities industry, and
food service among others.

 When the TMCs are able to sell seats for an airline, for instance, they
are given FIXED COMMISSIONS on regular priced fares.

Example:

Mario of Explorers’ Travel and Tours is able to get a rate-minus of 10%

from the North Sydney Harborview Hotel where he booked Gemma and
Rina. The total bill is AU$330 for three nights. 10% of that amount is
$33 – the amount that Mario EARNS from the SUPPLIER.
C. SERVICE FEES
 TMCs also help facilitate acquisition of travel documents
such as facilitation of passport or passport renewal, visa
application, and other tour-related documents.

 When TMCs are able to help tourists in any of these, they

CHARGE additional fees to the tourists.

 This is called, assistance fees, handling fee, or processing

fee.
Example:

Gemma and Rina asked Mario to assist them for Australia and New
Zealand visa application. Mario charges PHP2,000 for each passenger
and visa assistance. Therefore, the two ladies will have to pay
Explorers’ Travel and Tours PHP2,000 each for Australian visa and
another PHP2,000 for New Zealand visa. In summary, TMC earns a total
of PHP8,000 for visa facilitation for two clients.
D. REBATES AND PRODUCTION
INCENTIVES
 Apart from the rate-minus that some suppliers give the
TMC personnel, there are also times that they are given
rebates and production incentives especially if they are
able to book big groups.

 These may come in forms like additional airline seats,

additional heads for tours, and rooms in a hotel.