The Gazette 1981

GAZETTE

MARCH 1981

Travelling

Hopefully?

It may, as Robert Louis Stevenson once suggested, be better

to travel hopefully than to arrive, but is it better to pay

hopefully than to travel?

The collapse of Bray Travel Ltd., a leading tour

operator, following rapid departures from the scene of

other lesser fry, must throw this question into stark relief

and has already led to increasing demands for better

protection for the public against the loss of deposits or

other sums paid for holidays, which vanish with the

demise of the tour operator.

The collapse of any major trading company highlights

certain general flaws in our control of trading companies.

Apart from the basic weakness that major trading

companies are permitted to operate with minimal nominal

capital, there is no requirement that any particular

amount of paid-up capital should be maintained while a

company is trading, nor is there any obligation on a

parent company to accept liability for a subsidiary s

debts. With this background, the likelihood increases that

members of the public will suffer as a result of a failure of

a trading company, when that trading company is found

to be operating in an area of activity where profit margins

are by any normal standards extraordinarily small. It has

been authoritatively reported that the profit margins

hoped for by tour operators frequently do not exceed

10% and it is clear that the tour operators' business, like

modern-day insurance, has become largely a "money

business. Profit comes not only from the activity being

carried on, but from the investment income earned from

the monies paid by customers, in advance of their

holidays.

The tour operator is obliged to make commitments tor

hotels and for seats on charter airlines anything from six

months to a year in advance of the holiday period, which

calls for considerable expertise in anticipating likely

demand. Any unexpected drop in demand may have a

serious affect on the viability of the tour operator.

In such circumstances, the need for protection of the

monies paid in advance to the tour operator by the

holiday maker is obvious and it is strange that neither the

Trade Association nor legislation has, long ago, brought

effective measures into operation for the protection of

deposits. It is clear that a substantial bonding scheme is

required and it is suggested that, in the nature of the parti-

cular business, the individual bonding of tour operators

for very substantial sums is to be preferred to collective

bonding schemes. In addition, there is a strong case for a

rapid development of a "compensation fund" which could

be operated on a "trade-wide" basis, to cover the

immediate effects of the collapse of any tour operator on

individual travellers, whose particular holidays are

immediately affected by the collapse.

The Travel Reserve Fund Bill recently introduced in

the Dáil by Deputy Patrick Hegarty is, apart from its

obvious drafting defects, quite unsatisfactory. To confine,

as it does, the protection of the fund to customers of the

Irish Travel Agents' Association members alone suggests

that the aim of the legislation is as much the advance-

ment of the Association as the protection of the public.

The Bill, as introduced, confers a status on this Associa-

tion which ought not to be conferred on any group which

is not the subject of statutory control or regulation.

It is suggested that such a "compensation fund" might

be also used to compensate travellers who suffer unhappy

experiences on their package tour holidays. This second

aspect of protection for the travelling public has not as

yet been tackled comprehensively in the Republic of

Ireland. We have no equivalent of the Codes of Conduct

for tour operators and retail agents operated by the

Association of British Travel Agents and the arbitration

arrangements imposed in the Republic of Ireland on

individual travellers by the standard booking form of the

I.T.A.A. is unsatisfactory in many respects. Apart from

the fact that the arbitration cannot be conducted within

the context of a code of conduct, no arrangements were

made by the I.T.A.A. for the funding of the arbitration

scheme. The A.B.T.A. scheme provides for "a simple and

inexpensive method of arbitration whereby the claim may

be considered on documents alone". If the customer loses

on arbitration, he can only be required to pay twice the

deposit which, in the normal case, would be unlikely to

exceed £40. The I.T.A.A. have unilaterally provided that

an arbitrator is to be appointed by the President of the

Incorporated Law Society (without having consulted the

Law Society as to whether the President wished to be

involved in such an arrangement!) and has made no provi-

sion for any contribution, either by the Association or by

the tour operator concerned, towards the costs of the

arbitration. The arbitration can, therefore, be quite expen-

sive for a customer who is at risk of having the costs of

the arbitration awarded against him. The only redeeming

factor is that because the arbitration is not limited to

documents, the tour operator may be in difficulty in

producing witnesses from the hotels or transport authori-

ties concerned to refute the claims of the customer.

It is understood that the Director of Consumer Affairs

hopes to persuade the Irish Travel Agents' Association to

establish a code of conduct along lines similar to the

A.B.T.A. scheme in the near future. It is to be hoped that

the establishment of such a code of conduct will include

an arrangement whereby the costs of arbitration are

substantially funded by the I.T.A.A., so that the customer

is only at risk of suffering a relatively modest loss, in the

event of the arbitration going against him.