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Implementing the new Package Travel Directive won’t be easy. Deloitte lead partner on travel, hospitality and leisure Graham Pickett outlined his concerns to Ian Taylor

There is no doubt about the biggest regulatory challenge facing the industry. A revised Package Travel Directive (PTD) and the process of Atol reform that will accompany it pose significant challenges.

The new PTD will expand the definition of a ‘package’ to bookings currently deemed Flight-Plus in the UK, extending not just financial protection but legal liabilities so an online travel agent (OTA) could have the same responsibilities as a traditional tour operator if things go wrong.

This will be accompanied by a new type of regulated holiday, a Linked Travel Arrangement (LTA) bringing ‘click-through’ sales between linked websites – such as between airlines and hotel providers – into financial protection, though without additional liabilities.

The two-tier protection that results could be a recipe for confusion.

In addition, protection will be extended across the EU, introducing a whole new layer of risk and complexity for regulators.

This last provision is required by the EC’s commitment to a Digital Single Market and could prove the most difficult aspect of the PTD to implement.

It will mean the CAA protecting bookings with UK businesses made anywhere in the EU, while UK consumers booking with non-UK companies will be protected under different, possibly less robust regimes.

Member States have two years to implement the directive and traders a further six months to adapt, taking us into 2018.

The Department of Business (BIS) is due to consult on the changes in early 2016, with the Department for Transport also planning a consultation on Atol reform.

Graham Pickett, Deloitte lead partner on travel, hospitality and leisure, highlights the problem with the PTD, saying: “It could make the consumer more confused.

“There is an understanding in the UK that the consumer is protected. If you book a package and something goes wrong you get your money back, either from a credit card company or the Air Travel Trust.

“Elsewhere in Europe that is not the case. In Germany, there is a cap on refunds.”

He says: “The ability to operate under different regulatory regimes worries me. Businesses will go offshore and there will be people who manipulate [the rules] for commercial advantage.

“The poor UK consumer will assume everything is covered and it won’t be. It’s a major challenge.”

Pickett believes the directive could require further updating even before it comes into effect. He says: “Digital business is changing daily and the PTD process is so spread out.”

Aspects of the existing protection regime also bother him. He notes: “There is confusion around credit card payments.

“If I buy a holiday on a credit card, the card company will pay out [if something goes wrong]. But if I pay for my daughter and the holiday firm goes bust, I’m not covered on my card. There are anomalies.

“The size of credit card fees [on transactions] encourages use of debit cards, but these rarely pay out.

“The general view of the consumer is ‘We’re covered’ and they are not.”

He adds: “There is duplication of protection, with the Atol Protection Contribution (APC) of £2.50 on protected holidays plus credit card fees.”

Pickett believes there is a case for reducing the APC, but he says: “I don’t believe there is appetite in government to reduce it.”

He questions the CAA’s arrangements with Accredited Bodies, whose members enjoy a £1.25 refund on APC payments, arguing: “This is not particularly transparent and the system needs to be.”

He also questions the CAA’s requirement for these bodies to have trust arrangements, suggesting. “We don’t have enough reliable, independent trustees in the sector and it is opening the industry to potential fraud.”

This is an extract from the Travel Weekly Insight Annual Report 2015