Refund Calculation on a Cancelled Corporate Group
A Bhubaneswar travel agency sold a 4-night Goa package to 40 employees of a fertilizer company for 18–22 December at ₹21,000 per person, total ₹8,40,000. The per-person cost build-up is: airline ticket ₹6,600 (non-refundable and non-changeable); hotel ₹9,000 (contract: cancellation 30 days or less retains 50% of room charge); transfers and meals ₹4,000 (vendor refunds 50% if cancelled 10 days ahead); agency service fee ₹1,400 (non-refundable). The agency has already paid the hotel a 30% deposit of ₹1,08,000. On 8 December the client cancels 12 participants because a plant shutdown is postponed; the other 28 will travel. The client demands a full refund of ₹2,52,000 for the 12 and hints that future annual bookings depend on it. The agency owner asks you to calculate the maximum refund and recommend a response.
1. Calculate the maximum refund payable to the client for the 12 cancelled participants. Show each retained and refundable component.
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For each cancelled participant, the amount paid is ₹21,000. Split it into recoverable and retained components:
- Airline ₹6,600: non-refundable and non-changeable, so the agency retains the full ₹6,600.
- Hotel ₹9,000: cancellation is within 30 days, so 50% is retained = ₹4,500; ₹4,500 is recoverable.
- Transfers and meals ₹4,000: vendor refunds 50% = ₹2,000 recoverable; ₹2,000 retained.
- Agency service fee ₹1,400: non-refundable, so retained in full.
Retained per person = 6,600 + 4,500 + 2,000 + 1,400 = ₹14,500. Refundable per person = 4,500 + 2,000 = ₹6,500.
For 12 participants: 12 × ₹6,500 = ₹78,000. Check: 12 × ₹14,500 = ₹1,74,000 retained; ₹2,52,000 − ₹1,74,000 = ₹78,000.
The maximum cash refund is therefore ₹78,000, not ₹2,52,000. The hotel deposit already paid does not change this calculation; the agency must still settle the balance for the 28 travellers.
2. Draft the key points of the agency’s written response to the client, balancing the contract with relationship management.
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The response should be in writing, factual and sympathetic, not defensive. Key points:
- Acknowledge the cancellation and confirm that 28 participants remain confirmed.
- Attach the per-person calculation showing ₹78,000 as the recoverable amount within seven working days.
- Explain clearly that airline tickets are non-refundable, the hotel retains 50% within 30 days, and the transfers vendor refunds only half; attach or cite the relevant clauses.
- State that the agency service fee of ₹16,800 for the 12 is also non-refundable, but offer a goodwill credit of, say, ₹10,000 against the next group booking, rather than inventing a cash refund.
- Offer to help the client claim on any travel insurance or to transfer names on tickets if the airline permits (only if it does).
- Propose a short call with the client’s HR team to protect the annual relationship.
Do not promise a full refund and then fail to pay it. A clear, calculated offer plus a small goodwill gesture is more credible than an emotional concession. Keep the tone: ‘We regret the disruption; here is what is recoverable under the contract and what we can do commercially.’
3. Recommend two changes to the agency’s booking terms or process to reduce this type of dispute in future.
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1. Sell a cancellation waiver or insurance at the time of booking. For group bookings, offer an optional waiver costing, for example, 3–5% of the package price, which covers non-refundable airline and hotel retention within specified periods. This converts an unpredictable dispute into a priced risk. The client can decline in writing.
2. Improve the payment and disclosure process. Issue a one-page ‘cancellation ladder’ with the invoice: what is refundable at 45, 30, 15 and 7 days; which suppliers are non-refundable; and the last date for name changes. Collect a signed acknowledgement from the client. Also stagger supplier payments so the agency does not pay the full hotel deposit before the client’s own cancellation deadline.
A supporting change is to build a small contingency in the group quote and to use changeable tickets where the cost difference is modest. The aim is not to profit from cancellation but to make the financial consequence clear before the client books.