Per-Person Versus Per-Room Rate Error on a College Quote
A new agent at a Jalandhar travel agency prepares a quote for a 24-person college group for a 2-night/3-day Shimla package. The hotel contract states ₹1,800 per person per night on twin sharing, including breakfast, plus 12% GST on room charges. The intern instead enters ₹1,800 per room per night and calculates 12 twin rooms × 2 nights = ₹43,200. He adds bus hire ₹28,000, meals ₹400 per person per day for 3 days = ₹28,800, guide ₹4,000 and a 15% agency markup on total cost. The quote sent to the college is ₹119,600, about ₹4,983 per person. The college has paid a ₹25,000 advance. The hotel contract copy in the file clearly says per person. The group travels in 12 days. The agency’s bank balance is ₹40,000, and the bus operator demands 50% advance.
1. Quantify the error and the agency's financial exposure if it honours the quoted price of ₹119,600. Show the corrected cost.
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Correct hotel cost = ₹1,800 × 24 persons × 2 nights = ₹86,400. GST at 12% = ₹10,368, so the hotel total is ₹96,768. Other costs = bus ₹28,000 + meals ₹28,800 + guide ₹4,000 = ₹60,800. Correct total cost = ₹1,57,568. At the intended 15% markup, the selling price should be ₹1,81,203, or about ₹7,550 per person. The quoted price is ₹1,19,600, so if the agency honours it, it receives ₹37,968 less than its actual cost - before any markup. The ₹25,000 advance does not cover the bus advance of ₹14,000 plus a hotel advance; the ₹40,000 bank balance is also too thin. The error is not a small rounding issue: it is a per-person versus per-room contract misunderstanding plus omitted GST. The intern's room count of 12 is correct for twin sharing, but the rate unit was wrong. I would preserve the cost sheet, the sent quote and the contract page as evidence before speaking to the client.
2. Recommend how to handle the client conversation and present two options with numbers. What would you not do?
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Call the college coordinator the same day, before further commitments. Own the error without blaming the intern: 'Our internal costing used the wrong rate unit; the hotel contract is per person, not per room.' Show the contract line and the corrected cost sheet. Option A: revise to ₹1,81,203, about ₹7,550 per person, with the ₹25,000 advance adjusted; this protects the agency and delivers the promised package. Option B: keep a lower price by changing scope - move to a hotel at ₹1,200 per person per night (hotel cost ₹64,512 with GST), cut one meal to ₹250 per day (meals ₹18,000), and keep the bus and guide; total cost ₹1,14,512, at 15% markup ₹1,31,689, about ₹5,487 per person. A middle path is to absorb part of the loss, but only if the owner approves a written cap. I would not silently downgrade the hotel, hide the GST, cancel the bus after taking the advance, or let the group travel without written acceptance of the revised price.
3. What process controls would prevent a repeat?
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Use a standard cost sheet with separate columns for rate basis (per person or per room), nights, rooms, pax, taxes and markup. Require a second person to check the hotel contract against the cost sheet before any quote leaves the office. Add a validity period and a line saying the quote is subject to written confirmation. Train staff on net versus gross and on GST treatment. Keep supplier contracts in one shared folder and attach the relevant page to the quote file. For new agents, require owner approval above a stated value or below a stated margin. Reconcile advance receipts against supplier advances weekly, and never accept a booking if the deposit cannot cover the non-refundable supplier advances. Finally, log the error, review one quote per week for a month, and check that the same mistake has not appeared in other files.