Where did it all go wrong? For years, the travel industry spearheaded financial protection for customers with a simple message: book with an ATOL-bonded tour operator, via an ABTA-bonded travel agent, and your money was 100 per cent safe. Not so now: caveat emptor is the industry’s new slogan.
Weak government lies at the heart of the problem. The powerful British Airways lobby means that if customers fly on scheduled or low-cost airlines they are not required to have financial protection. But when they step on to a holiday flight using exactly the same 757, flying from the same airport, mysteriously they require a government-backed scheme called ATOL to get them home and give them their money back in the event of an airline collapse.
The internet has muddied the waters further by creating a new type of holiday, in which customers or travel agents “dynamically package” components such as low-cost flights and hotel accommodation to create holidays. These holidays are identical in every way to the traditional tour operator’s package, flying from the same airports to the same destinations and hotels, but, owing to another legal twist, they are not required to be sold with financial protection. In a landmark legal case between ABTA and the CAA (the government body that operates ATOL), the judge ruled that buying a holiday was like going to the supermarket. If you can see the price of a flight, put it in your basket, and then go down the next aisle, see the price of a hotel and put it in your basket. Just because you pay for them in one go does not make them a package requiring ATOL protection.
The recent failure of Freedom Direct, a big travel agent, is set to rock consumers’ confidence, as many customers have been left unprotected even though Freedom was both ATOL and ABTA-bonded. Although the Freedom website proudly displayed the very ATOL logo that customers have been told to look for, ATOL has rejected 70 per cent of claims. Customers have been told that they do not have the right paper work, with Freedom having dynamically packaged their holiday, leaving them unprotected. To add insult to injury, ABTA rules have also been changed and no longer protect customers’ monies while held by travel agents. ABTA is telling customers that their overseas hoteliers have to honour the booking under agency law, even though they have not been paid. Try checking in with that one.
Thus, dear caveat emptor holidaymakers, you had better read the small print. A couple of insurance companies have spotted the opportunity and launched supplier failure cover that targets the gap of holidays put together through dynamic packaging. And at £4 per person it offers much better value than paying by credit card, which can double the booking fee and pays out only if the customer can prove that nobody else will - which, unfortunately, is quite often the case these days.
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Steve Endacott is chief executive of On Holiday Group