Should tour operators be banned from using your money as working capital?

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• Nathan says:

  30 Apr30 April 08:26

  Yet more anti-competitive nonsense. The likely result being fewer, larger, snouts in the trough for longer and the end-consumer effect being zero value-add (at best, most likely prices to rise), less choice, less innovation …
  A thoroughly good idea then. Hurrah CAA! Just what we needed from you.

  • J says:

    30 Apr30 April 09:09

    If someone can only compete by playing with fire then it’s hard to justify how the market is improved by their presence. Innovation requires more than just being more careless than the other guy.

• Chris Heyes says:

  30 Apr30 April 08:35

  I Must admit I’m very much in favour of the client (Holiday person) paying into a fund to guarantee their Holiday/flight ect
  I Would think around £5 per person would be a reasonable amount (I’m aware it would rise with time though)
  I Myself don’t use travel agents, with the exception of Hotels.Com
  But my family do very often, I think £5 to be able to get their money back immediately from a cancelled Holiday or flight is a very attractive proposition

  • Chris Heyes says:

    30 Apr30 April 08:45

    I Should add I’m talking immediately not 14 days and beyond, it would also stop firms crying we could go bust if we pay them what we owe them, or maybe not lol

• Sam says:

  30 Apr30 April 08:35

  I’m a bit taken aback by the amount of inaccuracies in this article. Appreciate the comments section is a right to reply, but don’t want to appear snarky/unappreciative as slightly hungover after sadly spending a big chunk of last night talking about said reforms in the pub due to nature of our work. But it’s very important to differentiate between Tour Operators & Travel Agents as different models/protection (most TA’s not ATOL, funding models different), the reduction in the number of TO’s would not be a good thing as would primarily be small, ethical, (and normally profitable) specialised operators that vanilla companies like BA Holidays certainly wouldn’t replace, and one of the biggest understated threats to Tour Ops (ignoring the no business for 18 months thing) is the hundreds of millions of pounds refunded to clients by Tour Ops they havnt received back from hotels & mainly airlines yet (who certainly don’t have the same pressure on them from regulators for 14 day refunds etc) – I mean, we’ve refunded money to clients for flights cancelled 13 months ago & we havnt seen a penny from the airlines yet, and don’t get me started on merchant accounts, or the bonds the CAA insist on you don’t mention and etc.

  Maybe I’ll have a couple of strong coffees and organise a Sponsored Post on behalf of responsible Tour Operators everywhere.

  • @mkcol says:

    30 Apr30 April 08:37

    Please do, it should be interesting.

  • Rob says:

    30 Apr30 April 09:23

    Swapped references to travel agents to tour operators, although 99% of people couldn’t tell you the difference.

    • RussellH says:

      30 Apr30 April 10:49

      I would expect a large number of those here to know the diference between a TA and a TO. It is not unlike the difference between an insurance company (TO) and an insurance broker (TA), so there is a world of difference.

      But when I registered my TO business in 1987 for VAT, Customs + Excise did not have TOs as a category and I had to register as a TA – with an apology from the customs person I dealt with, who clearly did understand the difference.
      Following the introduction of the Tour Operators Margin Scheme for VAT I suspect that VAT people do now have TOs as a business category.

    • Sam says:

      30 Apr30 April 11:45

      “99% of people couldn’t tell you the difference” actually makes things worse – as you’re deemed an industry expert with a huge following writing an article about proposed changes to Tour Operators – NOT Travel Agents – who are largely bonded & protected & capitalise with very different models. If 99% of people can’t tell the difference (and I take it that included you?) – and i’m sure that’s a far lower % for your informed readership – then it’s a good opportunity to address this if you’re going to try and speak with authority on the issue. “I’m sorry I kept calling British Airways a car hire company, but it’s ok as fundamentally they do the same thing, getting people from A to B”. The obfuscation is not helpful, so thank you for correcting.

      The levy imposed by the CAA is not the biggest source of funding for the ATOL scheme – that is bonding, subordinated loans etc – protected capital that will be used to refund clients in the event a company goes pop. APC is largely used to rebuild the shortfall created when Monarch & Thomas Cook closed down – companies with airlines AND Tour Operational businesses – and for the latter the TO side was largely profitable – it was the ‘running an airline’ bit they were struggling with (and critically Thomas Cook & Monarch customers without ATOL protection were repatriated by a scheme not intended to protect them – at huge cost to the industry & CAA funds).

      But after a couple of strong coffees i’ve realised what irked me most – “This would force many tour operators to close down or sell out, unable to raise the working capital required, but this is not necessarily a bad thing. The market would consolidate around a group of stronger, more reputable players.”

      Well quite. I think we should do that with airlines as well. I mean, reducing the number of airlines and routes available to us will only be a good thing right? Just allow BA to monopolise all ex-UK routes, as that will definitely be a good thing for consumer choice, regional customers, and i’m sure service levels will only increase whilst prices keep falling right? All we need is BA, BA Holidays, and maybe a couple of Property Development companies with a sideline in Tour Operating and the UK travel world will be rosy.

      • Lady London says:

        30 Apr30 April 12:50

        No Rob is not deemed to be an industry expert so far as tour operators are concerned.

        For pure flights as a frequent flier, the vast majority of readers being or having been business flyers, yes.

        For the occasional BA Holidays booking for leisure, or because adding a hotel or a car to make the booking technically into a package because of certain contractual improvements (such as being able to pay most of it later) or pricing improvements (due to adding a hotel or a car technically allowing a type of air fare typically only available to TO’s to be used) can bebadvantageous, there is a level of interest here. Package tourists (ie the vast majority of TO customers) have no interest in this contractual nitty gritty. They are not the audience here.

        I accept you are a TO or something similar concerned with the package market @Sam but fundamentally 99.999999% of HfP readers are not fundamentally TO customers they are airline customers.

      • RussellH says:

        30 Apr30 April 12:52

        Sam, I think I agree with at least 99% of what you have written here (hope the hangover is gone now too).

        Your comment about reducing the number of airlines is interesting. As I am sure you are well aware, the CAA has in the past called for airlines to be covered by ATOL as well as air packages.
        This has always been violently opposed by BA and other large airlines on the grounds that they would be effectively subsidising weaker airlines and startups.
        And this is where I have always strongly disagreed with the CAA – because they charge, in part, a flat rate per pax contribution, it is very easy for the big airlines to take the line that they do.
        If instead the whole business was put out to the insurance market, meaning that there would be both competition and variation in the cost of the per-pax proterction, the rug would be pulled from under the big and powerful airlines feet.

        When I was operating tours, I used financial protection insurance, which worked well for me, as a very small, niche operator. The upfront cost was reasonable, and as the number of pax increased, so I just paid another chunk of insurance premium.
        The CAA, though, was always totally opposed to this model, and as a result I was never able to offer air inclusive tours (not that I ever actually wanted to).

      • Rob says:

        30 Apr30 April 13:00

        As per my comment above, why should reputable companies – large and small – be at a competitive disadvantage due to other companies who fund their businesses on the back of customer pre-payments instead of raising loans or equity? Any good company will have no trouble getting a working capital facility from its bank or attracting additional equity to cover this, given that it is nominally secured against the trust fund.

        I went through all this with pre-paid funerals in my previous life as a co-owner of the UK’s biggest undertaker. If you pre-pay a funeral, the money now has to go into a trust until you peg it. This was not the case previously, and your £2000 could be used by whoever sold it you for whatever they wanted. You were relying on them being around in 20-30 years to pay for your funeral. There was a huge market shake-out when the money had to go into a trust but no-one would say that things did not improve.

        (Ironically, pre-paid funeral plans have been a long-term disaster for the industry. People who pre-pay their funeral choose the cheapest, least profitable, option because they want to preserve money for their family. When a family arranges a funeral which is not pre-paid, they are pressured to pay for hundreds – often thousands – of pounds of hugely profitable extras or upgrades, on the grounds that they would be shaming the memory of their beloved otherwise.)

      • Chris Heyes says:

        30 Apr30 April 15:07

        Sam I couldn’t tell you the difference, (same all my family)
        But I’M not in the slightest interested what the difference is either.
        Also if BA monopolise routes that wouldn’t bother me either as i only fly BA anyhow Plus price is irrelevant to us.
        Don’t look to see if we have got good value/bad value don’t even check cash prices.
        Have we got enough Avios, yes ok lets book it (have we got a 241 ok use it)
        Our soul decision is were do we want to go (when is irrelevant)
        OK use Avios book it, easy

• TimM says:

  30 Apr30 April 09:06

  The requirement for bonding is in itself anti-competitive. Being required to belong, directly or indirectly, to ABTA or ATOL is essentially grabbing the wrong end of the stick. There is huge expense for startups but minimal protection for consumers.

  When I let my house on AirBnB, the rent is paid in stages well in advance but I don’t receive a penny until after the guests have arrived AND have no complaints. Why can’t travel agents be made to made to work in the same way, thereby removing or reducing the need for industry-wide bonding and reducing the cost for new entrants to compete with the dinosaurs?

  We know in reality that the tour operators take the money early and don’t pay their suppliers until well after the event, sometimes 3 months after, unless they go bust in the meantime like the same folks who have operated SunWorld, JMC, Thomas Cook and now Sunny Heart keep on doing.

  It is a no-brainer. Customer’s money must be ring-fenced. Then crooks with big pockets to join a scheme that give them respectability would not repeatedly fail their customers while new innovative entrants could flourish, honestly.

  • JC says:

    30 Apr30 April 12:16

    As a supplier I can categorically assure you that “we know in reality that the tour operators take the money early and don’t pay their suppliers until well after the event, sometimes 3 months after” is not true.

    A small number of larger businesses have credit arrangements with *some* suppliers but the majority do not and pay in advance. And more to the point, no one is offering credit at the moment, they’re pulling it.

    • Sam says:

      30 Apr30 April 13:51

      Yes, what JC says is entirely my experience. We have no credit facilities as a) we don’t want them – no need for cashflow reasons and b) as our hotels / drivers / guides are independent there is a degree of immorality to force it upon them. However, larger Tour Ops have had credit pulled a long time ago in favour of pre-payment – I know one large Tour Op with millions of ££ due to Caribbean & Middle East hotels imminently for May 17 onwards travel anxiously awaiting for traffic light system announcements (also airline ticketing deadlines are due prior to to the announcement – do you ticket unsure if client can travel and refund if not allowed knowing many airlines will not refund them if they keep the flights running – or cancel clients holidays prior to announcement – which wouldn’t leave anyone happy). And then there is one huge predominantly charter company who owed/s millions to hotels across Europe for Jan-Mar 2021 travel that will never get credit again.

      We’ve got tens of thousands of ££ sitting across the world with airlines, hotels, guides and drivers as we prepay them. We’ve refunded clients who w/couldn’t travel, and won’t use our clout to demand refunds as many of those have had no work/bookings for 14 months – instead carry over as a credit. However, we would love to see the money back from airlines who carry on flying from the UK but insist they can’t refund. This situation on the whole is replicated on scale through Tour Ops – indeed it gets worse as companies get bigger as many have lodged bonds with airlines in exchange for the ability to ticket them, and have targets to hit with GDS’s – which they obviously havn’t – and having penalties (huge in some cases) forced upon them as a result. The ‘we know in reality’ is ‘we know from 2 decades ago and assume it’s still the case’ is wrong on the whole (and as i’ve explained above, there are exceptions, but I suspect not relevant to HFP readers).

      • TimM says:

        30 Apr30 April 14:28

        When Thomas Cook went bust, not decades ago but 22nd September 2019, it left around 150,000 people stranded overseas. the cost of the largest repatriation in peacetime history exceeded ATOL reserves. The taxpayer had to step in. They left months of unpaid bills with suppliers all around the World, some of whom went bust because of it.

        It is hardly surprising that credit for tour operators is harder to come by. Still, the same people can start up again with a new name and with a similar logo. How many more times?

        Ring-fenced, escrowed, clients money would prevent these practices. If an enterprise needs to borrow money let it be from the banks on commercial terms not from their customers on an industry-wide insurance basis. Current practice favours the large and risky over the dependable and nimble.

• Duck Ling says:

  30 Apr30 April 09:12

  I only recently received a refund from Dreamworld Travel for 2 x Business Class flights to Australia from London on Singapore Airlines. I booked these pre-pandemic with travel intended to be September, 2020. As expected, SQ cancelled the flights and notified me of this beginning of August and advised me to contact the TA for a refund, which I did.

  When I contacted DreamWorld Travel I was advised I was entitled to a refund but (understandably) they had a huge backlog to process and this could take up to six weeks so I was looking at mid-september.

  After six weeks still no refund, so I began chasing it up with the TA. In early NOV (12 weeks after canx) I received an email from the TA stating that the hold up was that they were still waiting for the funds to be refunded to them from the airline. And as soon as this was done, they would pass the funds on to me. I was a bit peeved by this and thought SQ would perform better, so contacted SQ directly to find out what was taking so long.

  I was really shocked and disappointed when I received a swift reply from the SQ LHR office advising they had refunded the TA – in September. I’d been given blatantly false information by the TA who seemed to want to sit on my cash for as long as possible.

  At this point I realised what my biggest mistake was – I purchased the tickets with a Visa Debit card. Had it been a credit card I would have immediately initiated a charge back. Being a Debit card, this was not an option so I just had to pursue it (lesson learned).

  Every time I would contact the TA with the threat of submitting a Small Claims Court case I was assured the funds would be in my account ‘within three working days’. It just never happened. In the end I just had to see through my threat and lodged a small claim and when this was served on the TA they very quickly got in contact and the funds were finally refunded.

  • AJA says:

    30 Apr30 April 10:42

    You could still have done a charge back even on your debit card. You are confusing s75 on a credit card with charge back. Read more here:

    https://www.which.co.uk/consumer-rights/advice/how-do-i-use-chargeback-abZ2d4z3nT8q

  • Blindman says:

    30 Apr30 April 11:04

    “I realised what my biggest mistake was”

    Not booking direct surely?

  • r* says:

    30 Apr30 April 11:42

    Id literally never book anything with dreamworld travel again even if it were free.

    They advised us to lie to the airline about not being able to get in contact with dreamworld to get a change made, we got them on a conf call with the airline who told them directly what they needed to do to make the change (they didnt do it) and they gave a different story every call (yes we can make the change to we cant make the change to only the airline can make the change to we can make the change but its the cost of a new ticket)

    On the final call, they forgot to go on mute and we could hear them talking amongst themselves arguing about how its now a problem because everytime we talk to a different member of staff, they tell us a different story lol

    Calls after that were answered, put on hold then disconnected. Avoid in every way!

    • Blindman says:

      30 Apr30 April 13:12

      Why did you do so in the first place?

      • r* says:

        30 Apr30 April 14:45

        I generally avoid using ota but theres been occasions that it was required ie flight was 40% cheaper via the ota (that one had no problems and was likely a glitch as it went after about 30 mins) and another where I was unable to book via the airline as it was rejecting all amex payments, but in the instance above it was cos I was booking the flight for someone else and they had wanted the cheapest option – tho now if they want the ‘cheapest option’ booked and its not the airline itself, theyre on their own lol.

• Novice says:

  30 Apr30 April 10:27

  Trailfinders are awesome. I always use them for all my travels because usually I require a lot of logistical handling.

  Once I was in Argentina and had an issue so emailed my TA who immediately got on phone and sorted the thing out.

  I was booked for Maldives in March 2020 but obviously it got cancelled. I got a refund within the 6 weeks they said due to their office being closed but working from home sorting out stuff for thousands of travellers.

  If the Trailfinders model works for them, why can’t it work for others. I’m sure Trailfinders is profitable as they are always opening in more locations.

• Graham says:

  30 Apr30 April 10:37

  I booked a cruise with the travel agents Iglu Cruise and paid a deposit….they did not pay the whole amount over to the cruise line (the part that they did I got a credit for a future cruise) and the balance they keep saying they will return but do not.
  There are a lot of people owed money by Iglu Cruise. Many complaints on Facebook and a group formed of people unhappy with this company.
  Anything that can be done to prevent this companies activities would be welcome

• Blindman says:

  30 Apr30 April 10:59

  I still do not get why -in these days- people book through TA’s or TO’s?

  99% of the time it’s so easy to book direct with the airline\hotel\car-hire.

  I’ve been doing that for the last 30 years.

  Give me total control and is cheaper TBHO.

  Simple really.

  • Novice says:

    30 Apr30 April 14:08

    Usually it’s people who require a lot of logistical support. Well in my case it’s true. I tour pretty hard whichever country I want to go and just getting domestic flights/connections/private tour guides/ private transport/vip passes/hotels etc I’m too lazy I just can’t be bothered to do it myself.

    But yh I understand that if a person just requires hotel and flights then booking yourself is probably better but I guess I’m still lazy and I’m such a high spending regular with Trailfinders that they give me added stuff that I don’t even ask for.

  • ChrisC says:

    30 Apr30 April 16:15

    Many people want the comfort of the package coverage for their annual holiday because it’s been drummed into them from the likes of Cliff Mitchemore, Frank Bough and Judith Chalmers (showing my age now) and to be able to talk to ‘the girl in the office on the high street’ about their bookings and pop in once in a while to pay off some of the balance.

    Remember still not everyone has access to the internet so their only option is to use a real life high street agent

    Plus with the plethora of airlines and hotels there can be too much choice if you have no particular desires as to which airline you fly on or want of a particular hotel and all you are after is two weeks away in the sun with somewhere for the kids to play.

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