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Accommodation-only: Acting as a principal or agent?

Since somewhere2stay.com’s launch three years ago, it has acted as a principal to its customers. 

But I am extremely sceptical about recent statements from other accommodation-only suppliers they will review their policies and consider acting as the principal.

Notwithstanding the impact on their businesses, it is debatable they can achieve the levels required to become a principal.

The underlying points driving me to distraction are threefold.

Firstly, costs are now thrown into the mix, with warnings to retailers that acting as the principal will impact margins.

Secondly, retailers put their businesses at risk by supporting accommodation only suppliers acting as agents despite huge financial risks.

Thirdly, dynamic packaging with the “wrong” partner can undermine consumer protection, both through safety and also financially.

Why have we forgotten the basic principles of what our industry is about?

There are legal and financial ramifications to acting as a principal as opposed to selling as an agent. To sell accommodation only under the Package Travel Regulations requires a level of liability to ensure the accommodation is of a certain standard. An agent has no such liability. The full liability sits with the hotelier.

If something goes wrong, say with the standard of a room, the customer has to pursue claims in the country where the hotelier resides.

Third-party liability insurance is required if acting as the principal – but beware, for many smaller businesses the insurance premiums required may be prohibitively expensive.

In addition, the operator is liable to tax under the Tour Operator Margin Scheme (TOMS) – VAT on the assumed margin on the accommodation element of the “package” or on the whole accommodation arrangement in the sale of accommodation only. 

Recently, however, International Life Leisure found even if you purport to be an agent, you may be deemed a principal in the eyes of the law. This means current accommodation only suppliers – and travel agents – may hear a knock on the door from the VAT man.

Meanwhile, many accommodation-only providers have health and safety policies that amount simply to selling properties audited by a Federation of Tour Operators member. Others ask contractors for an informal review of properties, or ask the hotelier to sign a check list. Such audits are rarely comprehensive. 

In conclusion, agents should choose partners carefully, stop being cavalier with their customers and their businesses and ensure they understand the potential liability of selling accommodation only or dynamically packaging.

Stuart Jackson is managing director of Somewhere2stay.com

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