The CMA’s new pricing rules ‘likely to cause confusion and complaint’

Soon after I joined the travel industry in the late 1980s, I was made responsible for writing the booking conditions that appeared in the back of all brochures.

The space for these was grudgingly provided as they didn’t result in the sale of any holidays. My challenge was to produce booking conditions that fitted on a single page. For a few years, I was able to achieve this. Admittedly, it involved writing in, at best, an eight-point typeface and cramming the conditions so close together as to make them almost illegible. In reality, I suspect the type was no larger than six-point.

Occasionally, a tour operator would go further. Memorably, the Travel Club of Upminster, set up and run by Harry Chandler who had been largely responsible for the creation of Abta and establishment of a consumer protection regime for travel, did not include any booking conditions in its brochures – relying instead on general law principles and an expectation that customers would behave reasonably.

Times have changed 

Those days have long since gone. Looking at the terms and conditions from the most recent package holiday I booked, these are still in six-point typeface but now run to nine pages.

The changes have been brought about by the raft of legislation affecting the industry over the last 30 years, and the latest Competition and Markets Authority (CMA) requirements are only going to add to the wording in booking conditions as well as making pricing much harder for consumers to understand.

These changes require travel sellers to display up front the total price that consumers will have to pay, irrespective of whether parts of the price are paid to the business selling the arrangements or to a third party.

Another feature of the last 30 years has been the growth of taxes and charges payable to governments or local authorities at destination airports or hotels. It used to be possible to persuade governments to delay implementation of new charges or tax increases to coincide with brochure editions. With the move away from brochures and ever earlier on-sale dates, I suspect those arguments are more difficult.

So travel sellers are left with a complex explanation process where if the advertised price at the point of booking is £1,100 per person, the seller may only receive £1,000 and the rest is paid in the destination. It’s easy to imagine a consumer believing they had paid the full cost up front and the payments in destination giving rise to complaints.

Charges not necessarily fixed

And these additional charges are not necessarily fixed. Governments find new ways of raising revenues and levels of local tax can change, often with little notice.

In addition, the charges are generally set in local currency and there can be significant variations in exchange rates. In the year to this January, the £/$ exchange rate has varied from $1.22 to $1.37. An exchange rate quoted at the time of booking may have changed significantly by the time the consumer travels.

In the past, a brochure would have a ‘pricing date’ and exchange rates were linked to that. Clearly, this is no longer possible or appropriate. But where does it leave the seller? Does the seller have to notify consumers of every variation and the impact on prices in their destination, or do only larger increases need to be notified?

Does the seller have to track every variation in local charges and notify these to customers affected? It’s highly likely customers will have purchased with exchange rates or taxes at different levels.

Furthermore, the amount payable in destination may vary depending on whether a consumer elects to pay in local currency or convert the amount at the time of payment into the GBP amount.

Messy approach

Common sense should have been used in implementing these rules – to say £X will be paid at the time of booking and £Y will be payable in resort, and this amount may vary. Instead, the CMA has apparently been inflexible.

The only way that a travel seller will be able to address this is to spell out these points in their booking conditions. The seller will then be forced to decide what changes to tell customers about and when. 

The CMA approach here seems both unnecessarily messy and likely to cause confusion and complaint – even if it does keep the legal profession busy.

Andy Cooper is principal at Owens Cooper Consulting. He is former chief executive of the Federation of Tour Operators and former head of government and industry affairs at Thomas Cook. 

He can be contacted at: andy@owenscooper.co.uk