Tour operators and agents can include the lost margin on a sale when setting cancellation charges, the Competition and Markets Authority (CMA) has confirmed.
The CMA has previously said a loss of margin would not count among the losses a company could add to a cancellation charge, insisting travel businesses should not profit on a cancelled booking.
But the authority confirmed its updated interpretation at a Travel Weekly Business Breakfast in London when CMA assistant director of policy Andrew Hadley said: “Loss [on a cancelled booking] can include a loss of margin.”
The CMA launched its ‘Small Print. Big Difference’ campaign in April to encourage travel firms to check their consumer terms and conditions, noting that an unfair contractual term is not legally binding.
Special report:Fair for firms to recoup loss on margins
Hadley told an Abta travel law seminar in May: “Deposits and cancellations are often a big issue. You should not be seeking to profit, to make money out of a cancellation.”
Abta director of legal affairs Simon Bunce challenged the CMA at the time, asking: “You can’t build in the loss of profit on a cancelled sale?” And Abta senior solicitor Paula Macfarlane asked: “Isn’t the margin built into the calculation?”
Macfarlane welcomed the CMA’s clarification, saying: “We’ve come to a good place on this.”
Luke Golding, partner at specialist law firm Travlaw, said: “It’s right the travel company should not be out of pocket. Yes, a consumer has the right to withdraw from a contract, but there is a commitment on the part of the consumer as well.”
The Advantage Travel Partnership chief executive Julia Lo Bue-Said pointed out agents can lose their commission when a customer cancels, even when a tour operator retains the deposit or resells a holiday.
She said: “The agent has done all the work. How do they recoup the commission?”