The current legislative landscape that regulates both travel agents and tour operators in Ireland was introduced into law in 1982 following the spectacular collapse of Bray Travel the previous year. Bray Travel had been the largest tour operator in the state at that time and the financial fallout from that event which was estimated to be in the region of €1.5M was largely the reason why the subsequent legislation was introduced. Under the new scheme, all entities wishing to trade in the republic of Ireland had to be both licensed and bonded for a percentage of their turnover each year — currently 4% in the case of travel agents and 10% if you are a tour operator.
The world has changed a lot since 1982 — a time when the Internet didn’t exist as far as consumers were concerned and when the vast amount of travel arrangements made were conducted by either travel agents or tour operators. Fast forward to 2017 and it is estimated that just 15% of people who travel out of Ireland still use a travel agent or fly with a tour operator. Most travelers book their travel arrangements either directly with low cost carriers like Ryanair or Norwegian or through ‘legacy carriers like Aer Lingus, British Airways or other national carriers. Those that don’t, book and pay for their travel plans and pay for them by credit card through websites like Expedia, Booking.com and a myriad of other online players. That’s a lot of people and a lot of money. What’s shocking however is how few of those consumers nowadays are financially protected when things go wrong!
Contrary to popular assumption, your hard-earned money is not protected against loss if your airline or ferry company goes bust. Nor may you be covered if the company behind the website that you booked through goes belly-up — particularly if that website is located overseas in a jurisdiction where no similar legislation applies. Now, you may think that the chances of an airline going bust are minimal but you’d be wrong. Ever heard of Sabena? They were the national carrier of Belgium, now no longer with us. Or Malev, the national carrier of Hungary — now also a footnote in aviation history? Don’t forget Pan Am, Eastern Airlines, Braniff, TWA, Peoples’s Express and a whole host of other once-household names that have bitten the dust over the years because of the high attrition rate that exists in the aviation industry.
None of these companies were required to be bonded despite their huge resources and levels of capitalization. It is only the ‘mom and pop’ businesses that most travel agents are that are required to fork out thousands each year in hefty insurance premiums whilst the big guys continue to trade, unencumbered by the same regulatory requirements. In short, the current regulatory regime is not fit for purpose and instead of replacing it with something that acknowledges the complexity and diversity of means by which consumers can nowadays pay for their travel arrangements, the current government insists on tapping the ‘low hanging fruit’ that are travel agents and tour operators whenever the central funds managed by them reduce in liquidity because of company failures that occur on their watch.
As I write this week’s post, there are plans afoot to DOUBLE the current level of bonding required by both travel agents and tour operators whilst continuing to ignore all the other companies and booking scenarios where consumers will continue to be 100% exposed in the event of future collapses. The costs associated with such increased bonding could result in many of these companies having to cease trading — thus reducing the level of real competition taking place in the marketplace — not a healthy development in the long run for any consumer.
The travel trade in Ireland has been suggesting for years that the current system should be replaced with a more equitable one that would take cognizance of the anomalies that currently prevail so that EVERY SINGLE CONSUMER can be protected in the event of a failure of their service provider in the future. The only solution that can work is one whereby every single traveler leaving the country by sea or air pays a modest levy (which could be as low as €0.50) which goes into a central fund out of which consumers would be compensated in the event of losing their monies — a kind of universal travel insurance policy, if you will. The beauty of such a system is that it would capture all those instances where someone has booked their flight, car hire, accommodation, transfer, sightseeing excursion, ferry booking or inclusive package through an online entity — that may be located at the other side of the world.
Consumers accept that they must pay an insurance premium to cover their car, house, health, pet and tech gadgets etc., so why should their travel arrangements be any different? And here’s the biggest obscenity of the current status quo — the largest de facto travel agent in the country is none other than Ryanair yet they are excluded from having to comply with the same regulations as those imposed on those smaller companies who trade in the same space and who, let’s be honest, provide a far better level of customer care than their larger counterpart!
