CTP Business & Financial Management Flashcards

What is a 'familiarization (FAM) trip' and its main business purpose?

Answer: A complimentary trip given to travel agents to experience and sell a product

FAM trips allow travel agents and media to experience a destination or product firsthand so they can confidently promote and sell it.

Which document outlines the agreed terms between a tour operator and a hotel, including room blocks, rates, and release dates?

Answer: Allotment contract

An allotment contract specifies the number of rooms reserved, the contracted rate, and the deadline by which unsold rooms must be released.

What does ROI stand for, and why is it important for tour operators?

Answer: Return on Investment — measures profit relative to the cost of an investment

Return on Investment compares the net profit of a business decision to its cost, helping operators allocate resources to the most profitable activities.

A tour operator wants to reduce fixed costs. Which action would best achieve this?

Answer: Switching from owned vehicles to leased or contracted transportation

Leasing or contracting transportation converts a large fixed asset cost into a variable expense that scales with actual tour volume.

In tour costing, what is a 'per-person land cost'?

Answer: The total ground expenses for a tour divided by the number of participants

Per-person land cost is calculated by dividing all ground-based expenses (hotels, meals, transport, activities) by the total number of travelers.

What is the primary risk of operating tours with very low occupancy minimums?

Answer: Revenue may not cover fixed costs, resulting in financial loss

Running tours below the minimum viable group size means revenues fall short of covering fixed and semi-fixed costs, eroding profitability.