Trust accounts are likely to emerge from the coronavirus pandemic as a preferred method for offering customers financial security, according to a leading regulatory expert.
Firms that operate trusts like Trailfinders, On The Beach and Travel Counsellors are “trumpeting” them, Chris Photi partner at White Hart Associates told a Travel Weekly COVID-19 webcast.
While they are reimbursing customers for cancelled bookings, many other travel are being advised to offer credit notes instead to stave off financial collapse.
Trade association Abta is pressing for a change in the EU Package Travel Regulations to buy firms more time to refund customers, with a final decision expected any day.
Photi said: “Trust accounts have been around a long time and it’s always amazed me the industry’s general view towards them, including regulators and trade associations.
“Even though there are CAA approved trust accounts they went through a period of time when they appeared to be reluctant to see those as protecting consumers. Their mood has changed dramatically in recent months and years.
“The astonishing thing about Abta is they have never accepted trusts as a means of protecting non-licensable business, which is probably more to do with competing associations who do operate trust accounts as opposed to their effectiveness.
“It is a cash flow drain on any business to operate a trust account but there are some very successful businesses out there that voluntarily use trust accounts and they have been trumpeting that loudly on their websites in recent days, particularly around the whole refund process.
“If money is held in your trust account and is outside the liquidity of your business then it’s not going to affect you too badly to make refunds.
“I can’t help feeling trust accounts are going to become more into focus. It doesn’t meet the needs of a lot of travel businesses, particularly where suppliers need to be paid in advance or where you own the assets that make up the holidays.
“But, I have to think they will become more important going forward, maybe not in the short term but certainly in the long term I think regulators are going to view those a desirable.”
Trust accounts not a short-term fix
Will Waggott, former Thomas Cook, Tui and Airtours boss, said trusts are not likely to be taken up in the short term as firms look to restart cashflow to get them back on their feet.
“The problem the industry will have when it is trying to rebound is that cash flow from deposits is what’s going to get them going again.
“If that’s got to go straight into a trust it’s going to make it even more difficult for these businesses to get back off the ground.”
Photi agreed any move to trusts will be more of a medium to long term trend once firms have recovered.
Waggott backed travel businesses that are maintaining an optimistic outlook about this year. “Jet2, Royal Caribbean and those other businesses are doing exactly the right thing,” he said.
“If I was sat in those businesses I’d want us to be being optimistic, telling customers we will be back and have a great season next season.
“I’d be wanting to make those noises and I’d want to be planning for every eventuality when it does go back on sale so I’m ready.
“I think any business leader has to be optimistic about the future while making the tough calls.”