Tour operators

Comment: Has COVID-19 made dynamic packaging too risky

Posted on
Comment: Has COVID-19 made dynamic packaging too risky

Extra profit does not justify the risk, says Rebound Consulting’s Steve Endacott.

Although the large majority of Atol applications where renewed on September 30, it is noteworthy that 176 companies, or 20%, did not renew this time.

The expected sharp decline in use of retail consortia Atols will, however, be less visible.

Readers may remember that I fought hard against Abta’s acceptance that flight-plus Atols should be replaced with full Atols for agents as part of the implementation in the UK of the European Package Regulations. I argued that, unlike traditional tour operators, travel agents did not control the airline supply and should not be held liable for the airlines’ actions as the Atol ‘principal’, or organiser of the package.

My fear at the time was that the financial risk the agent was being forced to take on was unreasonable, as the new rules – in place since 2018 – make them responsible for the replacement of any flight element of a package if an airline failed.

I felt it was illogical for customers to be able to buy unbonded holidays on the same flights using Google and accommodation providers like Booking.com, but as soon as a travel agent or homeworker was involved the transaction needed to be bonded. The extra cost, and risk, of agents bonding would make agents less competitive on price compared to customers DIY booking themselves, creating an even bigger unprotected market.

This disadvantage, in recent years, has been exasperated by what is bordering on an abuse of power by low cost airlines in terms of the point of sale booking fees they impose on travel agents, but not direct customers.

For example, easyJet demand a whopping £12 per person per return flight to book over their API, which amounts to £48 for a family of four. There is no technical reason for this charge as the cost of the fare when booking over an XML API is exactly the same as customers booking on a website.

In reality, the charge is aimed at making sure the airlines get a large chunk of the agents’ DP profit and at the same time make their own in-house tour operations, who don’t pay this fee, look more competitive on price.

EasyJet are not alone in this behaviour, with Jet2.com constantly changing its point of sale fee, seemingly based on flight demand. Ironically, this pushed a lot of agents to book flights with Ryanair, which has not provided a chargeable access point because it doesn’t recognise agents’ right to book flights and knows agents can screen scrape or manually book on their site.

Heavy use of Ryanair has backfired on many agents during the massive disruption caused by Covid-19, with Ryanair making it as difficult as possible for agents to reclaim monies for cancelled flights.

Ryanair has clearly prioritised direct refunds over the claims of customers who have booked via agents because when the customer loses patience they will recharge the merchant who cleared their card, so the travel agent and not Ryanair.

Agents who operate trust funds are faced with another major issue as trust fund rules state that customer funds cannot be released until the customer returns from holiday.

Historically, agents have used a combination of low cost insurance policies and virtual cards, which provide reclaim protection, in order to pay low cost carriers on booking. However, the insurance markets are no longer willing to back the financial security of any of the major low cost carriers, because they believe the bigger you are the harder you’ve been hit by Covid-19. This leaves agents reliant on virtual cards and the recharge route which, although highly effective in the case of airline collapses such as Monarch and Thomas Cook, has been much slower in forcing refunds for cancelled flights.

Given the constant chopping and changing of FCDO advice and quarantine restrictions in summer 2020, the extra profit available from dynamically packaging probably does not justify the extra risk of agents using their own Atols in 2021. So expect a large surge in bookings for Jet2holidays, easyJet Holidays and companies like On the Beach, who provide a bonded dynamic packaging platform via trade brand Classic Package Holidays.

Ironically, this may come at the expense of Ryanair, which may yet regret trying to close down travel agent operations since its poor customer service record makes it unlikely that holidaymakers will trust the airline with their full holiday booking.

So having been at the forefront of the growth of dynamic packaging, I am now forced to advice that for anybody but a large online travel agency, the risk may now be too great to make it worthwhile.

Comments

This is a community-moderated forum.
All post are the individual views of the respective commenter and are not the expressed views of Travolution.
By posting your comments you agree to accept our Terms & Conditions.

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.