UK agency business models are increasingly changing with some travel agents experimenting at selling Linked Travel Arrangements (LTAs), a category of booking created last month by new Package Travel Regulations (PTRs).
John de Vial, director of financial protection and financial services at UK travel association Abta, confirmed: “Agents are choosing more complex business models.
“We’re seeing a steady migration to more mixed business models because the margins are greater.
“It’s a sensible way for agents to develop their business. Abta is seeing more dual members and dual members tend at heart to be retailers.”
Mark Tanzer, Abta chief executive confirmed “a big growth in duel membership” in June when he told Travel Weekly: “Our members are about one-third principal, one-third retail and one-third duel membership.”
The new PTRs and LTAs are driving some of the change.
De Vial said: “When a consumer books a flight, most agents try to sell additional stuff. The agent’s margin is going to come from the other stuff.
“Some of that activity will fall within the package regulations and some within LTAs. We are seeing changes.”
But the trend is not solely driven by the regulations.
De Vial pointed out: “Agents doing Flight-Plus was a longer-term trend [although] Flight Plus has been abolished [aside from] legacy bookings moving through the system.”
He said: “We’re seeing people take different commercial strategies. A lot are carrying on as before. Some will recognise they achieve lower margins from acting only as retailers but won’t want the risk involved.
“Some will say ‘I may as well take the role of organiser’. They’re embracing the changes, saying ‘If it’s an LTA anyway, we’ll make it a package’, [telling customers] ‘Book it all now and have these additional protections.’”
At the same time, De Vial said: “I’ve seen some [agents] do no follow-up call until 24 hours [after an initial booking] because they want to avoid selling a package or an LTA.
“We’re seeing all this go on. I’m sure we’ll see some people changing [their model]. I’m sure we’ll see changes in selling systems to support this. But it’s too early to know how it will settle out. My guess is we’ll have to go a year or 18 months before we see.”
LTAs at a glance
A Linked Travel Arrangement involves “at least two types of travel service for the same trip or holiday” concluded by “separate contracts with the individual service providers” where a trader:
a) “Facilitates the separate selection and separate payment of each travel service [in] a single visit or contact with a point of sale”; or
b) Facilitates “in a targeted manner, procurement of at least one additional travel service from another trader [within] 24 hours [of] confirmation of the first travel service”.
A ‘trader’ can be a retailer (agent or OTA) or a travel organiser.
‘Travel services’ comprise: transport, accommodation, car (or other vehicle) rental, and “any other tourist service” ‘material’ to the booking, for example event tickets.
LTAs require consumers’ money be protected by the trader only so long as the trader holds it before passing it on to the suppliers of the holiday components.
However, the trader must explicitly inform the consumer of the limited protection or the booking becomes a package holiday, with associated liabilities, by default.
Agents ‘can still be an agent’ but financial requirements may change
UK travel association Abta has amended its articles of membership to bring these into line with the new regulations, with the changes agreed at its annual general meeting in July.
The amendments involve no more than “a tidy up”, according to financial services director de Vial.
But any member who has been solely trading as an agent and now organises packages or sells Linked Travel Arrangements (LTAs) is likely to see a change to their bonding requirements.
De Vial said: “Abta has a system for all categories of turnover where we require a bond, and insurance provides cover if the bond is not sufficient. That is regardless of whether the member is a retailer or was a principal under the old Atol scheme.
“We have different levels of bond in relation to the type of turnover.
“We had agents selling Flight-Plus in ‘the old world’. We’ve had agents organising packages for some time and it’s growing. All we’ve done is bring [the wording] up to date with the new regulations.”
He insisted: “Agents can still be an agent. They can still sell a package as an agent or principal [‘organiser’]. But if they organise a package or an LTA, the level of bond and the insurance premium may change.
“This affects members only if they have been trading as an agent and they now engage in organising packages or selling LTAs. Then we’ll review the value of activity.”
De Vial added: “We assess the bond according to the value of the holiday, the risk value of the trader and the payment terms. Taking 100% upfront is a different risk profile to taking a deposit.”