Package travel regulations - financial protection
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When you go and buy a pair of shoes it’s really quite a simple process. You find the shoes you like the look of, try them for size and if everything is OK, you buy and off you go. Not much of a problem there then. If the soles fall off within weeks you then return to the shop and demand your money back, and if the product is not available in your size, you get your money back.
Buying a holiday is, of course, a completely different procedure. In many cases as an organiser you are selling a ‘dream’ or an image. Some members of your group may not have been to the destination before, and even if they have, they might not have been by coach, for example, or might not have stayed at the hotel. They will also be parting with, in many instances, large sums of money in advance of seeing the product.
Consequently, there is a fair degree of responsibility on tour organisers to ensure that the product they sell, whether professionally or not, matches the expectations of the customers and to ensure the funds paid to them is available to provide the holiday. To ensure that this happens, the Package Travel Regulations exist to safeguard customers rights in an area where much of the product is purchased ‘unseen’.
So how does this affect a group travel organiser? Well, it depends. The Regulations apply to anyone, not just a Company, who organises packages ‘occasionally’. Note that this does not mean the same thing as ‘infrequently’. If you organise on any kind of regular basis, you will almost certainly be bound by the law, and you will certainly be bound by it of you organise in any way in a professional capacity.
So assuming you feel you need to take these regulations into account, what constitutes a package?
It must:
Be sold or offered for sale
Be prearranged
Be over 24 hours or include an overnight stay
Include a minimum of two of the three elements of:
Transport Accommodation
Other tourist services accounting for a significant proportion of the package (e.g. a guided tour or admission to an attraction)
It will be noted that to constitute a package, it is necessary for all the criteria to be fulfilled. In other words, a day trip that included an entrance fee to an attraction is not a package for the purpose of the Regulations, but if it was a two day tour, it would be.
So assuming you are offering packages, the regulations require you to provide financial security against insolvency and to comply, you can provide it a number of different ways:
Bonding
Probably the best known method, with a high degree of customer recognition and credibility. The operator raises an irrevocable guarantee for a specific sum of money, enough to cover any potential claims and usually a percentage of the tour operating turnover, which is lodged with a bonding authority that administers any failure and distributes the funds fairly. The bond would typically be issued by a bank, but also might be provided by a specialist bond insurer. The drawback for GTO’s is that you would need to be a member of one of the Government approved bonding authorities, who include ABTA, AITO and CPT, so this method is more suited to professional operators than voluntary GTOs.
Trust Account
A much simpler way, particularly for smaller businesses and GTOs is to operate a trust account. This must hold any monies you receive for a package and can only be passed on to suppliers when the holiday is completed. Banks or solicitors can organise trust accounts. There is also the Travel Trust Association which acts as a trade body but also operates a trust account system that is auditable and transparent. Some law firms also operate schemes with minimal outlay and administration. The main drawback is that organisers would need to be able to fund any prepayments required as the client’s money cannot be released prior to the date of return. Some suppliers might be willing to provide limited credit terms if they see evidence of a trust account scheme in place. The Regulations also allow for some pre-payments from those deemed to be organising ‘not in the course of business’.
Individual Insurance
There is also a scheme which provides for an individual insurance policy, issued to each passenger who books with you, that covers financial failure. The scheme offers a simple solution with the minimum of administration, but is subject to insurer’s approval. You can also buy combined travel and operator failure insurance.
If you want to include air travel as part of a package you are putting together yourself, there are additional rules designed to protect your passengers in case of airline failure. We’ll be looking at the Air Tour Operators Licence (ATOL), and the new ‘mini-ATOL’ in more detail in the November/ December issue.
There is an alternative way of navigating yourself round this particular minefield. You can simply work with an existing operator who can ‘wholesale’ the product to you, which you sell on to your members on an agency basis. Although you may find an existing ‘off-the-shelf’ package that will suit your group, most operators allow you to specify the itinerary and include (or exclude) any element you like, and of course, negotiate a group price. However, to be legal, the transaction and contract must be directly between your group members and the tour operator. The Regulations make provision for a Principal Contractor – in effect a ‘lead name’ for the booking, whilst still passing on responsibility as the legal Organiser to the coach or tour operator. You also need to be assured that whoever you are using has the correct protection in place. Coach operators who are CoachMarque accredited, for example, have to provide audited proof that they have the appropriate cover in place.
There are many coach and tour operators who are more than willing to do this and at the same time work closely with you to ensure your customers receive the service they expect and require.
You can obtain more information about the Package Travel Regulations by contacting:
Trading Standards Officers – they enforce the Regulations.
The Department of Trade and Industry – can give general guidance on the Regulations and produce a set of guidance notes for organisers and retailers. The DTI’s address is:
Consumer & Competition Policy 6A Department of Trade and Industry, Room 570, 1 Victoria Street, London SW1H 0ET