The ongoing coronavirus outbreak is posing a number of legal challenges for tour operators and agents.
Travel specialist law firm Travlaw hosted a seminar to give advice and answer some of the key questions facing the trade. Amie Keeley reports.
When does a package organiser have to offer a refund or an alternative holiday?
Under the Package Travel Regulations (PTRs), package organisers have to offer a refund or alternative holiday if they are “constrained” to make a “significant” change to or cancel a holiday.
Senior counsel at Travlaw Stephen Mason pointed to a case involving Travelsphere during the SARS epidemic which concluded that if there is a “flicker of hope”, i.e. a genuine chance, the holiday can go ahead as planned, then the operator is not obligated to offer a refund.
Many package organisers allow cancellations up to 21 days before a holiday for situations such as terror attacks and epidemics where the Foreign Office advises against travel.
But Mason said the challenge for package organisers with the coronavirus epidemic was whether 21 days is still realistic.
“You have to assess on the basis of what trips and holidays you are offering and whether it’s realistic to say to consumers that ‘in a month from now, everything will be fine; we’ll be able to run the trip’,” he said.
“Is there a realistic flicker of hope the holiday can go ahead? If there is, you are not obliged to refund yet; if there isn’t, you should be in the business of making alternatives or offering refunds.”
What counts as a “significant” change?
Mason said that, in law, a “significant” change would mean what the average consumer considers significant and that “the only way to test it” is by putting yourself in your customers’ shoes.
“If a cruise went to nine ports of call instead of 10 but you’d advertised the tenth as though that was the main highlight, then that might count as a significant change,” Mason said.
If customers have to embark at a different port thousands of miles away, that could also count as a “significant” change. But, Mason stressed that each case “falls on its facts”.
What about if a “significant” change happens after the holiday has started?
The customer has the right to cancel a package pre-departure, with a full refund and without having to pay a cancellation fee, in the event of unavoidable and extraordinary circumstances (force majeure), “occurring at the place of destination or its immediate vicinity”.
If a change to the package needs to be made post departure, the operator has to make suitable alternative arrangements. If there if a price difference, then the operator has to give a price rebate.
The consumer can only reject the alternative if what is offered is “inferior or grossly inadequate”.
When does a package holiday officially start?
Queuing up to check in, unless the start of the package is a transfer to the airport.
“The package begins when the first service which is paid for as part of the package starts,” Mason said.
What if customers want to cancel their package because part of it travels through Hong Kong?
The Foreign Office does not advise against travel to Hong Kong and tour operators can enforce cancellation charges on customers wishing to cancel.
“Legally, people are not entitled to cancel free of cancellation charges in this scenario,” said Mason.
But he added: “The question is whether you want to and whether it’s good PR.”
Can I stop customers coming on holiday if they have travelled to China in the last two weeks?
Tour operators are not in a position to stop someone coming on a tour if they have a Chinese passport or if they have travelled to China in the last two weeks.
But they should run a risk assessment if there are concerns.
Travlaw recommends tour operators to ask guests if they have travelled to China in the last 14 days. The firm said many companies are sending out generic letters to customers asking them.
If a customer has travelled in the last 14 days, Travlaw recommends you run a risk assessment and work with the individual customer to come to an amicable conclusion.
Would they accept a full refund and not travel? Would they accept an alternative trip, or delay the same trip for 14 days so that they are out of the standard quarantine period?
If you have risk assessed the situation as a whole, and acted in the interests of your customers, it is unlikely any decision will result in legal action.
Should tour operators pay commission to agents where a holiday has been cancelled?
Mike Ellis, group general counsel at Abercrombie & Kent, said if the holiday is not going ahead then operators cannot pay full commission.
However, he said if there are cancellation charges imposed on the customer, then A&K’s policy was to give agents a percentage of the cancellation penalty monies which would depend on the relationship with the individual agent.
“The tour operator shouldn’t be keeping all the money and the agent not getting anything. “(For example) if it’s a 50% cancellation charge then the agent would get 50% commission.”
What can I do to limit my exposure in future when selling tour operator packages?
Mason says supplier agreements should have a provision in them which states in situations where agents have to refund customers money, they are not obliged to pay the supplier.
But he said many agents entered into informal agreements with suppliers or agreements that were on the supplier’s terms.
“It’s important to look at your agreements and try and get the wording right. I know it’s difficult with airlines and it’s time the industry got its act together to negotiate better terms, but away from airlines, you should be able to negotiate better terms for the future.”
Ellis said changing supplier contracts was “easier said than done” when it came to negotiating with big hotel chains.
However, he recommended agents add an addendum to contracts. For example, a line which states agents will receive their money back if there are unforeseeable circumstances that prevent someone from fulfilling a contract, i.e. a “force majeure”.
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