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Bonding has ‘kept prices low while protecting holidays’

Tour operators should resist a wholesale rush to trust accounts and recognise bonding has “helped keep prices low” while financially protecting “millions of holidays” over the years.

That is the view of former Abta chairman Noel Josephides, chairman of Sunvil Holidays and director of industry affairs for Aito, the Specialist Travel Association.

Josephides suggested the volume of recent articles “extolling the virtue of trust accounts” could lead anyone to think “consumer financial protection to date has been inadequate and bonding is past its sell-by date”.


MoreComment: Is bonding past its sell-by date?


But in light of the booking conditions of “several prominent companies” using trust accounts, Josephides asks how can they be termed “proper” trust accounts?

In a comment piece for Travel Weekly, Josephides points out these companies “pay airlines out of the trust account as and when required to do so – certainly well before clients travel.

“So when it comes to refunding clients in an emergency, there may not be enough money to pay out in full and companies have to promise payment in stages.

“How can this be termed a proper trust account, when the operator is using the client’s money?”

Josephides insists: “If we’re to have trust accounts, they must be operated properly. But can anyone afford this?

“Many operators would have to substantially increase the amount of capital in their business. Prices would rise dramatically.”

He adds: “The problem of switching to trust accounts is greater for operators working with charter flight and accommodation commitments.

“If you need to carry volume or work with certain market segments, operators need commitments. Deposits have to be paid to airlines and accommodation providers.

“Even for a small operation, these could amount to several hundred-thousand pounds. Capital requirements would soar.”

Josephides suggests it’s “worrying that merchant acquirers are pushing tour operators towards trust accounts” and argues: “To restrict tour operators’ ability to manage their businesses is a recipe for disaster.”

He argues bonding has “helped keep prices low” and provided “millions of financially-protected holidays over many years” and warns against the sector being “shoehorned” into a financial protection system “which suits some but not all”.

MoreComment: Is bonding past its sell-by date?

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