Tourism: Hotel Owners vs. Travel Agents (: the regulation of their relationships)

Tourism: Hotel Owners vs. Travel Agents (: the regulation of their relationships)

After a catastrophic (for Greek tourism as well) 2020, we look forward with too much hope (and restrained expectations) to 2021. The goal? The partial restoration of the (dramatic) consequences of the pandemic. Due to the size of this sector in our country but also its consequent contribution to the Greek economy, we would expect adequate arrangements (also) regarding the critical relationship between hotel owners and travel agents.

But is that the case?


The contribution of tourism to the Greek Economy

If one was looking for data on the contribution of tourism to the Greek economy, one should probably look back to the last (normal) year: 2019.

Based on a relevant study by SETE, the direct contribution of tourism to the country’s economy is estimated for 2019 at € 23.4 billion – a sum that corresponds to 12.5% ​​of GDP. In fact, if we take into account the multiplying benefits, the total contribution of tourism to the economy of our country for 2019 is estimated between €51.6 and €62.1 billion (: 27.5% to 33.1% of GDP).

These sums are, indeed, shocking. And so is the importance of tourism in the Greek economy.


Our “passion” for overregulation

It is known that our country suffers from overregulation. We are facing an incredible number of legislations. With impressive, in fact, details. Just taking a look at the Common Ministerial Order issued on a weekly basis to regulate issues related to the ongoing pandemic (: “Extraordinary measures to protect public health from the risk of further spread of coronavirus COVID-19 throughout the country…”) is proof enough.

But what about the issues that arise in the specific “heavy industry” of our country? What about the issues that arise from the relationship between hotel owners and agents?


“Hotel contract” vs ” hospitality contract”

The hotel owner’s relationship with the hotel agent (or travel agency) is governed by a special contract: what we usually call a “hotel contract”.

The specific term (: “hotel contract” -transfer of the internationally used term “Hotel Contract”) refers to the (usually) written contract, by which the hotel owner undertakes the obligation to the hotel agent (or travel agency) to provide hotel services. These services may refer to one or more tourist seasons. They may also refer to either a specific or a specified (maximum and / or minimum) number / percentage of the agent’s alternating clients.

The hotel owner’s relationship with their client, on the other hand, is governed by a different kind of contract. When, in other words, we agree, as customers, to rent one or more rooms in a hotel, we are talking about a “hospitality” contract. We will limit ourselves, at this time, to the issues and treatment of the hotel contract.


Hotel contracts

There are basically two forms of this type of contract, depending on its subject: the guaranteed reservation contract and the “allotment” contract.


The guaranteed reservation contract

It is a final and “clear”, we would say, agreement between the agent and the hotel owner. The latter (: hotel owner) in this case, agrees to provide, instead of a specific price, a certain number of accommodation and hotel services to the agent’s clients. The period of the agreement between them is, as a rule, fixed.

The business risk in the guaranteed reservation contract is transferred from the hotel owner to the agent. The agent must pay the agreed price regardless of whether they will be able (or not) to utilize the agreed accommodation. Reasonably reduced is the consideration due on the part of the agent.


The “allotment” contract

With this particular form of contract things look less “certain”. The hotel owner and the agent do not make final commitments regarding the agreed number of accommodations. They agree, on the other hand, to set two extreme quantitative limits (one upper and one lower) within one or more reference periods.

The hotel owner, in this case, must keep the agreed maximum of beds for the agent. The agent, on the other hand, is obliged to cover the minimum of beds reserved and pay the corresponding fee. If the agent covers fewer beds, the amount due will be the one that corresponds to the lower limit of the agreed beds. If the agent covers more beds than the lower limit, they will be obliged to pay the corresponding excess.

It is easy to understand, therefore, that the business risk in the allotment contract is transferred to the hotel owner. The latter can be found confronted with the probability of not filling the beds of their hotel in case the agent cannot meet the (expected) ceiling.


Existing (missing or insufficient) regulations

The significance of the hotel contract for the tourism industry, for the people directly and indirectly involved but also, ultimately, for the national economy, can be derived from the above.

Despite this special importance, however, the hotel contract does not enjoy independent regulation in the Greek legal system. Fragmentary (and still imperfect and ineffective) are its provisions and related efforts. With the regulatory administrative act No. 503007/1976 of the General Secretary of EOT (hereinafter: Regulation) the management of the specific issue was attempted. It retrospectively became a law (: article 8 of law 1652/1986). This Regulation, however, shows neither legal perfection nor verbal accuracy. Additionally: it does not contain an explicit reference to the guaranteed reservation contract while it manages the allotment contract incompletely.


The current regulations

In the absence of the above-mentioned strong regulations for the hotel contract, we are forced to resort to the extremely limited and, unfortunately, imperfect provisions of the Regulation and, in addition, to the generally applicable regulations of the Civil Code and to one court decision (39/97 Plenary Session of the Supreme Court) Indicatively:

For the cases of the pre-contractual liability of the agent and the hotel owner but also of the breach of the agent’s obligation for the payment of the agreed’s fee, we will refer to the Civil Code (197, 198 CC).

In the case of non-payment of rent, according to what was agreed, we will refer to the Civil Code as well (340 and seq., 383, 387 §1 of the Civil Code).

In case of non-receipt or early return of the accommodation by the agent, for the exercise of the right of cancellation [and the related issue of the reduction (or not) of the the rent due (or the elimination of the obligation to pay it altogether)] we will refer, for example, to the Regulation (article 12 §3, 13 §1) and in the positions adopted by 38/1997 Plenary Session of the Supreme Court -possibly also in the provision of article 596 b’ CC).

For the case of the existence or not of force majeure and its consequences, we will refer to the Civil Code (art. 596 a΄ CC) but also to the Regulation (article 8 §3).

Corresponding, very strong efforts should be made to manage issues arising from ancillary obligations (good use of the accommodation, loyalty and non-competition, information, etc.). However, given the lack of clear regulations, we will always come to inadequately safe conclusions.


The legal regulations of the hotel-hotel agent relations are impressively incomplete and, to a significant extent, problematic – inversely proportional to the value of tourism for our country and its national economy. Inversely proportional to the size (and scope) of the problems that both hotel owners and hotel agents are called upon to manage.

It would be desirable not to have to resort to a problematic, vague, and incomplete piece of legislation, to the general regulations of the Civil Code, to the case law of the Supreme Court and / or to the views of the theory.

It would be desirable to be able to resort to clear legislation capable of dealing with the multitude of issues that arise in the most important (for better or worse) part of the Greek economy.

Let us treat the current problematic (for tourism as well) period as an opportunity to manage problems of this nature and importance. To introduce the necessary (and valuable) legislation.

Desirable, in the end, for our national economy as well.

Until then: It is necessary for the management of important (and, often, of a very significant economic value) issues to conclude contracts that are approached in a meticulous manner.

Stavros Koumentakis
Managing Partner


P.S. A brief version of this article has been published in MAKEDONIA Newspaper (May 1-2, 2021).


Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.


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