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Comment: Delaying Atol reform is not the answer

The industry must work together to rebuild stronger, argues Protected Trust Services managing director Daniel Landen

The CAA’s Atol consultation, which closed this week with more than 300 responses, may be considered ill-timed by some. But if we as an industry do not make changes now, then when?

All travel businesses, of all sizes, need to rebuild and recover from the enormous financial strain and damage this current crisis has caused. While doing this we must not rebuild and repeat mistakes of the past. We have an opportunity to build up stronger and smarter as an industry.

The failure of just one key player, Thomas Cook, is not the sole reason the current Atol consultation is taking place. The true problem that has risen above all others throughout not only this crisis, but many crises before, is the use of consumers’ monies as working capital. This practice must end. The negative impact this has on the whole travel industry is colossal.

Consumers must trust travel companies and their chosen travel agents. Travel agents and tour operators must trust one another and know precisely where their pipeline monies are. It is undeniable that the current protection for most pipeline monies does not cover the liability and as such is flawed. Stakeholders such as merchant acquirers must feel secure in their position rather than exposed – as they do currently. The list goes on.

I am not implying that all travel companies do use monies as working capital, there are some outstanding travel companies that already practice segregating consumer monies. But using consumer monies is a prolific problem that we must unite and stop now.

Upsides to reform

Segregation of consumer monies should be general practice. The Atol reform has a number of upsides to the industry. A clear model that allows regulators to assess risk and put in place cost where the risk is greater would work to make companies not view using clients’ funds as working capital as a viable option going forward.

This in turn would provide:

  • Lower merchant costs within the sector as a whole
  • Lower accountancy costs (working out future profit on income received but not held is costly and difficult to maintain accurate accounting)
  • Greater number of insurance products available to the industry
  • A clearer understanding of risk within the industry for pipeline funds and cost of sales payments (better payment terms)
  • Increased consumer trust in travel companies.
  • Lower regulatory costs

Trust accounts are still wildly misunderstood by many in the industry. Firstly, there are many trust account solutions and each offer different solutions that may suit different travel businesses. A trust account is not one size fits all. I know of very few that cost tens of thousands of pounds to set up. Trust accounts tend to be far more affordable than many other protection models.

Many trading companies have joined PTS due to the massive savings they are experiencing. Garry Butcher from Merlin Travel, a valued PTS member whose company is thriving, said: “It has been our experience that working with the PTS trust account has been much more affordable and brought greater benefits to our business than with the previous non-trust model we worked under”.

Another PTS member, Arron Mitchell of Platinum Travel and Syte, said: ”As a result of knowing how PTS protects clients funds, we made the decision to also transfer the Agency Business over to PTS in April 2021 as well. We have decreased the overheads for the agency business and also ensured our suppliers are financially protected by retaining funds in a segregated trust account.”

I appreciate I am only offering PTS members’ statements and this may seem biased. But they are true case studies and reflective of many, many trading companies that are joining PTS. There are many trading travel businesses moving to segregating consumer monies as they understand the benefits to not only consumers but to their own business.

We also appreciate that for many companies moving to a trust solution is not possible due to their cashflow. In truth, how many people can’t embrace trust as the consumer monies have been spent already?

More regulation essential

The travel industry must be more regulated. Travel agents all over the UK have been hit incredibly hard through no fault of their own. We have never experienced anything like Covid and the support for travel has been limited. So, whilst moving forward, let’s make our future stronger – together. We must build back trust not just from consumers but with each other.

In our opinion, there is never a good time for a large change. However, an incredible seismic shift has been forced upon us by Covid and I feel we have an opportunity to learn from the mistakes of the past that have caused such financial vulnerability for many and embrace the Atol reform.

Of course, in the present environment we would all like to be focusing on future growth and not consultations. However, with the correct model behind the industry, supporting the entire industry, we can all grow together as travel becomes ever more available in the coming months. Now is the time to have a voice and speak about how we as an industry are going to move forward in the years to come post this pandemic.

There are many details and intricate formalities, like the sharing of liabilities and how to scale APC, how to allow deposit payments, how to measure and limit exposure for every party and many more aspects that need to be discussed and outlined in the later consultation.

For now, the first step must be taken and we have an opportunity to rebuild our wonderful travel industry stronger and brighter without using consumer monies to do so.

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