Tui’s head of EU affairs has condemned European Commission plans to limit package holiday prepayments in proposals for reform of the Package Travel Directive, describing the payments as “essential”.
Ralf Pastleitner, Tui Group director of international public policy and EU affairs, told the European travel agents’ and tour operators’ association first Travel Payment Summit in Brussels in late February: “Everyone benefits from the flow of payments. There is no need to limit them.”
The EC has proposed limiting prepayments or deposits by package customers to 25% of the holiday price, with the balance only payable 28 days before departure – although it has suggested allowing more “when organisers face costs justifying a higher downpayment”.
Pastleitner described the existing payments system where a tour operator may typically reserve beds and flight capacity for summer holidays in November and customers book and pay deposits in January or February.
The operator passes the prepayments to airlines and hoteliers, before receiving the outstanding balance in June and paying suppliers after the holiday has been taken.
He said “prepayments are essential” and suggested limiting them would “add layer after layer of additional cost”, arguing: “It’s about the balance between consumer protection and the burden of protection. We need to be careful not to price packages out of the market.
“If it becomes more difficult to provide protection, if the price is too high, customers could buy separate services with no protection.”
Pastleitner accused the EC of proposing “changing a system that has not given rise to any problem” and said: “I’m struggling to see what protection should be on top that benefits the customer.”
He acknowledged that “during the pandemic, it took longer to pay refunds to customers”, but said: “We had to repay hundreds of thousands of refunds [and] everyone was paid back. So, there was not a problem with the system of pre-payments.”
Pastleitner also acknowledged that existing prepayments in a market like Germany are only 20%-25% of the price of a package.
But he said: “It affects the commercial freedom of a business, [and] with dynamic packaging, the prepayments could be higher because low-cost carriers demand immediate payment.
“You would also have to prove why a prepayment was needed, so it would add bureaucracy.
“Competition in the sector has limited prepayments to 20%-40% [of a package price]. Why do we need to add regulation?”