Deloitte Legal partner Farina Azam outlines considerations for businesses ahead of Abta’s Travel Regulations Conference on November 30
Businesses and consumers alike are currently feeling the impact of increased energy, food and other living costs. The findings from the latest Deloitte Consumer Tracker show that consumers have indicated that they will spend even less on leisure in Q4 2022, with intended net spend down across every leisure category.
Travel businesses are likely to be impacted by the rising cost of fuel as well as exchange rate fluctuations. As such, we may start to see travel businesses passing these rising costs on to consumers. This article considers the legal implications of increasing prices, both before and after booking.
Increasing advertised prices
When looking to alter advertised prices, travel businesses should be mindful of the Consumer Protection from Unfair Trading Regulations (CPUT) to ensure any price increase isn’t found to be a misleading action. This would only be the case where a travel business has deliberately advertised a lower price to entice customers in with the intention of increasing the price when the customer comes to book. In situations where a travel company has to increase the price of a holiday after it’s been advertised due to increased costs, this shouldn’t breach the CPUT as long as the price increase is made clear to the customer before any booking is made. Travel businesses should also include terms on their website and in their consumer terms and conditions that allow them to increase advertised prices.
Increasing confirmed prices
Once a customer has made a booking that has been confirmed by the travel business, there will be a binding contract between the parties, and the price will be fixed at the contract price unless a travel company’s terms and conditions explicitly allow it to increase the price. Should a business wish to include terms that allow it to increase its prices after confirmation, it must comply with the Consumer Rights Act 2015 (CRA).
Such terms must clearly set out the circumstances under which a price variation can happen, and the method of calculating the price variation, so that the customer can foresee, based on clear, intelligible criteria, the changes that may be made and evaluate the practical implications. Customers must also be given the right to cancel their booking and receive a full refund should they not wish to accept the price increase.
Surcharging under the PTR
Additional rules apply for package holidays. Where a package organiser wishes to increase the price of a package holiday after the booking has been confirmed but before the customer has travelled, the organiser must also comply with Regulation 10 (Alteration of the price) of the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR). This term, which is implied into every package travel contract, states that a package organiser cannot increase the price of a package after a booking has been confirmed unless the contract between the customer and organiser:
- expressly states that a price increase may be made;
- states that the price increases are to be made solely to allow for increases that are a direct consequence of changes in:
- the price of the carriage of passengers resulting from the cost of fuel or other power sources;
- the level of taxes or fees on the travel services included in the contract imposed by third parties not directly involved in the performance of the package, including tourist taxes, landing taxes or embarkation or disembarkation fees at ports and airports; and
- the exchange rates relevant to the package.
- provides that the customer has a right to a price reduction relating to any decrease in the costs referred to at i-iii above, which occur before the start of the holiday;
- provide how the revisions referred to in i-iii above are to be calculated.
Where a package organiser wishes to rely on Regulation 10 of the PTR to increase the price of a confirmed holiday, it must notify the customer in a clear and comprehensible way, with a clear justification for the increase and how it has been calculated, in writing, no later than 20 days before the start of the package.
Where any price increase exceeds 8% of the total price of the package, customers must also be given the right to cancel their package and receive a full refund, or the option to change to a substitute package (and where the substitute package is of lower quality or cost, the customer is entitled to an appropriate price reduction).
Please note that Abta members are required by the Abta Code of Conduct to absorb an amount equal to 2% of the holiday cost before passing on any surcharge. The Travel Trust Association has a similar requirement in its Code of Conduct.
Price increases, whether to advertised or confirmed prices, will always be a difficult message to communicate to consumers, especially in a period of high living costs. As such, travel businesses should think long and hard before passing costs on to consumers and ensure they don’t fall foul of consumer regulations in doing so.
This article was written by Farina Azam for Abta’s Travel Law Today (issue 14 x November 2022), which will be available to download after Abta’s Travel Regulations Conference on November 30 at abta.com/travellawtoday. There is still time to register for Abta’s Travel Regulations Conference at abta.com/abtaevents