A leading provider of trust arrangements to travel businesses has criticised the level of understanding of trusts in the industry, insisting their adoption could be “relatively simple”.
Sudheer Sharma, director of PT Trustees, said some in the industry “appear to oppose trusts regardless of evidence of their success”.
Writing in Travel Weekly, Sharma suggests much of the industry debate on Atol reform has been ill-informed and reveals “how little is understood about trusts and how trustees operate”.
However, he acknowledges there are “cashflow consequences” on businesses which switch to trust arrangements and these need to be addressed. Sharma argues a wholesale move to ‘hybrid’ trust arrangements would require “a sensible transition period of two to three years”.
Such a system would involve trusts holding a proportion of customers’ money – typically 70% – with the balance used to pay travel suppliers and protected by insurance.
Sharma insists bonding has proved inadequate and the segregation of customer money should be “relatively simple if properly managed”.
He points out companies are required to maintain adequate accounts of transactions and liabilities, and suggests “the issue is to make this data available to trustees”.
Sharma also claims trusts are “significantly less expensive [and] less onerous” to operate than frequently suggested. He argues: “Trustee fees are based on a combination of time, booking volumes and any special factors and are generally significantly below the costs of bonding. Also, trust fees are stable from year to year, while bonding requires annual applications subject to risk assessment by the CAA and insurers.
“Both bond levels and premiums are reset each year and open to vacillations in the bond market and, in addition, bond premiums are payable annually in advance whereas trust fees are paid monthly.”
Speaking at the Barclays Travel Forum in London on Tuesday, Sharma said: “All companies are required to hold data to record their liabilities. The question is, can we make it easy to supply that data to trustees? Automated data comes to us every day. If you have the right systems and well-trained people, it’s simple. The reporting is all automated. The only downside is ensuring the travel firm has the cashflow to make its way.”