New travel directive will cause business to leak outside EU, says OTA

The revised package travel directive, due to be implemented in the UK within the next three years, is likely to result in fewer holidaymakers travelling with financial protection, according to one prominent OTA.

Iglu.com founder and CEO Richard Downs warned that the European Union’s plan to include dynamic packages in the regulations could backfire by prompting more holidaymakers to book cheaper trips with businesses based outside the EU, such as Booking.com and Tripadvisor.

Speaking at the ABTA Travel Matters conference in London, Downs claimed that many passengers willingly forgo financial protection for cheaper holidays.

"Many people don’t want package holidays but what this legislation will do is force people to buy a package and pay for it," said Downs.

He said that by forcing travel agents who dynamically package trips to take on the financial burden of protecting every element of the holiday would increase their costs, making their services uncompetitive with companies based outside the EU.

"An agent in a sales and marketing and consulting role booking a trip to Disney will have to make sure that the Eurostar gets them there on time, if they sold that trip as a package. There will be a cost to that," Downs told the conference.

He said this would cause business to ‘leak away’ from the UK as many passengers would book cheaper trips with companies based outside the EU, such as US-based businesses like Booking.com.

Robert Mathiak of the European Commission’s consumer and marketing law unit said the changes to the Package Travel Directive would extend financial protection to some – but not all – of the 54% of trips that currently fall outside the PTD.

The changes are to be put to a vote of EU ministers this summer and should be adopted by the member states by early 2018 at the latest, after which companies will be given six months to comply.

Mathiak said that, if approved, the changes would provide financial protection for 120 million more trips across the EU.

However, Downs said it was possible the percentage of trips not covered by financial protection would grow following the introduction of the new legislation. "We have got to be wary of drawing a line of good intent around Europe and then seeing the business leak away to operators based outside," he said.

He said ‘the light’ in the Directive was the fact that Assisted Travel Arrangements (ATAs), where customers book several components as completely separate transactions, would not be classed as packages.

He suggested would lead customers towards booking ATAs, rather than fully packaged holidays, as these will be covered by ‘lighter touch regulation’.

"I hope that in three years, when there is a review, ATAs will be extended," he said.

Joining Downs in an onstage debate at the Travel Matters conference, Mike Bowers of TUI said this ‘flew in the face’ of what the EU legislators intended. "This gives agents a sense that they have a choice," he said.