So, how are these penalties assessed? For a very general example:
--30 seats are blocked, requiring $100 deposit per seat ($3,000.00)
--Some airlines will also require an additional separate Group Deposit, perhaps $250.00 or more.
--The group is financially obligated to use a minimum of 80% of the seats blocked. If that 80% is maintained, there will be no penalties.
--If the group drops below that minimum, the per person seat deposit will be retained by the airline for each seat dropped below this required minimum.
--If the entire group cancels, the entire deposit will be forfeited.
Deciding how many seats to hold can be difficult at times, if registrations are slow coming in. So- called "Option Dates" are set by which time the group must decide whether to drop any seats before penalties apply. These dates are normally 120 and 90 days before departure, with the latter being the date penalties for unsold seats apply.
It is the group or group leader which pays these penalties, not the tour operator or agent making the arrangements. The tour operator may also levy cancellation fees in addition to those charged by the airlines.
Dollar amounts used in the above example are for illustrative purposes. Actual deposit amounts vary across the airlines.