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Bed banks rethink principal status: what it means for travel agents

Med Hotels’ decision to drop principal status has left travel agents rethinking their relationship with the supplier. Meanwhile, other bed banks look like they might follow suit. Chloe Berman reports





Just as the issue of principal liability seemed to have quietened down, the decision by Med Hotels to drop its principal status has sent ripples through the travel industry.


Announcing the move earlier this month, the bed bank said agents had not supported it because they were more concerned with finding the lowest price than working with a principal.


As a result, an increasingly large number of agents who rely on dynamic packaging are having to rethink their relationship with the supplier, for fear of being left liable if their client’s holiday goes wrong.


Meanwhile, some other bed banks are re-evaluating their position, not wanting to be left behind in an increasingly competitive marketplace. Agents who want to book with principals only could soon find themselves with far fewer options.


The issue of principal liability first reared its head back in 2007 when two children died from carbon monoxide poisoning in Corfu. Thomas Cook faced a barrage of damaging publicity, which continues ­today as two of its representatives prepare to appear in court in Greece later this year.


The Corfu incident made agents realise how vulnerable they were when booking a ­holiday outside the traditional package market, and bed banks, including Med Hotels, responded by adopting principal status.


Chain reaction?


Some believe that Med Hotels’ decision will prompt a sea change in the industry, as other bed banks buckle under pressure to offer rock-bottom prices and drop their principal status.


“Acting as principal adds cost for bed banks and does not create any opportunities for them. Other bed banks will go the same way as Med Hotels.”

Youtravel.com has denied rumours it will be the next bed bank to return to acting as an agent. Sales and marketing director Paul Riches said: “We remain a principal and will review this at the end of the year.  With market changes in the last six months, it is inevitable most bed banks will become agents.”


But hotels4u.com sales and marketing director John Harding said: “Acting as principal adds cost for bed banks and does not create any opportunities for them. Other bed banks will go the same way as Med Hotels.”


Bedswithease.com sales and marketing director Theo Demetriou said his company was also reassessing its principal status. “It needs to be a level playing field,” he said. “Agents want to retain their clients but also offer the best price – it’s a fine balance. We’re acting as principal now, but will be reviewing that at the end of the summer.”
   
Bed banks that staunchly remain principals say agents who are disappointed with Med Hotels are turning to them.


Hotelconnect.co.uk commercial director Ian Ackland said: “We have been approached by some miniples that want to work with us and we’re in the process of signing deals.”


He said the move towards acting as an agent could be bad news for industry standards. “Acting as an agent is one of reducing costs, but what will the next step be? This could lead to a drop in health and safety standards in a bid to be the cheapest around.”


Independents and consortia respond


Consortia have been quick to react to Med Hotels’ decision. Elite Travel Group has suspended selling Med Hotels through its dynamic packaging system.


Global Travel Lounge proprietor and Elite director Peter Buckell said the consortium could only work with suppliers it could trust. “It’s frightening to think the agent could be left liable if things go wrong. It’s not about finding the best price, but the best holiday for the client and that means being protected,” he said.


Triton Travel Group is seeking legal advice to find out if the indemnity cover being ­offered by Med Hotels is ­adequate for its members.


Board member Helen Burgess said: “Med Hotels has supplied information on indemnity cover, but this is quite a legalised document and our members are travel agents, not lawyers.


“Our job is to make sure they are well informed and let them make their own decision. Med Hotels will see a drop in sales if our agents don’t feel protected.”


Independent agents have also expressed disappointment with Med Hotels’ decision and are concerned other bed banks will follow suit.


Manchester-based Explorer Travel business development manager Steve Healy booked high volumes through the supplier. “In the last 12 months I’ve been booking a lot of tailor-made golf holidays and Med Hotels had good availability and prices. Now I’m in a position where I just can’t use them.”


He also hit out at Med Hotels’ allegation that agents booked on price alone.


“It’s a ridiculous statement. We’re purely online and a lot of my clients are price motivated, but I pride myself on looking after them. It’s not worth risking your business just to save a customer a few pounds.”


Maggie Rogers, director of Shropshire-based The Travel Wallet, felt the same. “I won’t book anyone who’s not a principal, so I was disappointed to see what Med Hotels said. I’ll only be using other companies such as Apartments Abroad or Bluebookonline now.”


However, Med Hotels group commercial director Carl Burrows said “The response from agents has been positive. The announcement has had no obvious impact on sales.”


Indusry standard


As for the future, some agents and suppliers are calling for an industry standard on principal liability to allow bed banks to end the confusion.


Hotelconnect.co.uk’s Ackland has called for a code of practice and invited other willing suppliers to come forward. The Elite Travel Group has backed this move and urged ABTA to get involved. 


The next challenges will be persuading suppliers to get on board and finding a way to make it work.


If successful, this could be a good way of ensuring agents make informed choices and sell holidays without worrying about the worst-case scenario.


Principal status timeline



  • October 2006: Two children die in Corfu as a result of carbon monoxide poisoning.

  • November 2006: Youtravel.com adopts principal status.

  • April 2007: Triton demands all its accommodation-only suppliers adopt principal status.

  • June 2007: Med Hotels adopts principal status.

  • June 2008: Med Hotels drops principal status.

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