Turmoil in Travel Industry

Friday October 4, 2019

There has probably never been a few weeks like this for travel agents. First, Thomas Cook, an icon of the industry with a 140-year history went into liquidation. This left around 600,000 travelers stranded somewhere and needing to get back home. Then, a short time later, Australian travel wholesalers, Tempo Holidays and Bentours both entered voluntary administration. Again, the owner, Cox & Kings is a longstanding industry stalwart, having been founded in 1758.

So, where does this leave Australian travel agents? In Australia The Australian Federation of Travel Agents (AFTA) run an AFTA Chargeback Scheme (ACS). While travelers may be hugely inconvenienced, and may have their dream holiday ruined, they will receive financial compensation if they have booked through an ATAS accredited supplier.

Unfortunately, Tempo Holidays and Bentours were excluded from the scheme. AFTA have confirmed that the ACS will only be valid for Tempo Holidays and Bentours bookings made via credit card and before 22 August 2019. This means the insurance scheme will not apply to these suppliers for holidays paid for after this day or by a means other than credit card.

This will leave the travel agent in a tough spot. For starters, if a client paid for a holiday with one of these suppliers after 22 August 2019, but used a credit card for payment, the client would be entitled to ask their credit card company for a chargeback. This would be on the basis that they did not get what they paid for. Good for the client – they get their money back. The credit card company though will debit the merchant’s bank account for the amount. So, the money will come out of the travel agent’s bank account when the client gets their chargeback credit.

The next issue is when payment was not made by credit card. Let’s say the client paid by electronic transfer. There is no chargeback, but they have still paid for something they have not received. This may give rise to a claim against the travel agent. On the assumption that the signed agreements have clauses to address this issue, it is likely that the client is not legally entitled to a refund from the agent and may end up as an unsecured creditor of a company under external administration.

As an aside – a key take home here – always pay for travel on a credit card. If all else fails you may be able to claim a chargeback from your credit card company and at least get your money back.

This leaves travel agents in an unenviable position. An angry client who has lost money and have had their holiday plan ruined. No insurance to claim on. The agent may have a choice between refunding the client themselves, or telling the client there is nothing they can do about it. There have already been reports of travel agents reimbursing clients from their own resources, sometimes by increasing their mortgages with the bank or dipping into retirement savings. While they may not be legally required to do so, some agents are making these refunds for goodwill or reputational reasons.

If you have a travel agent on your books, now might be the time to give them a ring and see how they are going. The potential fallout from these industry events is huge, and the effects may be felt for quite some time. It is easy to see how travel agents could face all kinds of financial pressures, not to mention the personal and emotional strain of dealing with affected customers.

The whole industry has had a massive shock. The impact on individual businesses could be quick and devastating. If you have any clients impacted by these events feel free to give us a ring to discuss the situation. Our firm has helped many travel agents in the past, and we have a good understanding of the industry and the issues that will need to be addressed.

Should you have clients or associates that you know are struggling with financial issues or need assistance in reviewing their business affairs in preparation for what’s around the corner, our team of Strategists would be pleased to discuss options that are available on how to best design and implement insolvency strategies. Contact us now on p. 1300 765 080 | ua.mo1721815840c.arj1721815840d@ofn1721815840i1721815840

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