17/3 2020, Gärdesta, Sörmland, Sweden
Margin of income in our sector is extremely low, never rising above 20%. On that we have to make some interesting consideration and reflection again. I use this blog to ask all our guests and travellers to be patient. A kind of different blog post with lots of strange types and styles. Hope you have the time to read.
Today. SAS closes 90% of flights, SJ (Swedish train) closes 25% of all trips, all travels in the EU are to be cancelled, etc. How long?
A reasonably very upset guest of Thealps, asks when he is going to get his money back for a cancelled trip to La Thuile, Aosta Valley. How long?
Every day we receive new rules and recommendations from government, institutions and our sector organisation. Every day Thealps gets new cancellations.
There are laws that regulate all travel package operators no matter the size, from Thealps to TUI (if you can see the difference between a dwarf and a giant).
I want to give you an idea of how the rules are and the impact they have on our business.
We follow EU - Travel Package Directive - a pretty complicated law that rules all travel packages in Europe. Shortly what we are expected to do is the following.
- Money-back and repatriation in case of bankruptcy: Organisers of packages must take out insolvency protection. This guarantee covers refunds and repatriation in case organisers go bankrupt. This guarantee applies also to linked travel arrangements.
- Clear rules on liability: The organiser of the package, is liable if something goes wrong, no matter who performs the travel services.
- Strong cancellation rights: With the new rules, travellers may cancel their package holiday for any reason by paying a reasonable fee. They may cancel their holiday, free of charge should their destination become dangerous for example because of war or natural disasters, or if the package price is raised over 8% of the original price.
It is not stated that we must pay back in case of pandemia - but who knows what the rules will be? Pandemia is a new issue for most of us, especially if the authorities react closing down all mobility of our societies, like in this Covid 19 times. If we have to pay back for cancelled trips and we cant sell any more travels, then what?
Because of the high risk of this sector, we also have very specific insurances, that really can help if there is some specific problem with a trip or if we make a mistake as travel agent. This can be the case when your flight or hotel must be changed and we have extra costs for this, and you don’t need to pay. They have never been tested in case of pandemia, like Covid 19.
These very expensive insurances are also individual and the price is depending on how many people we arrange travels for and how much money it implies. The risk for us is 10% of the total of the damage. AND IT MUST BE PAID IN ADVANCE.
So we need to pay guarantees to the Swedish institution that manages travel guarantees, Kammarkollegiet. In short you can read below what that means:
Travel guarantees insolvency protection.
- The travel guarantee should cover all advance payments made by travellers, such as registration fees and final payments. It should also cover other services included in the agreement with the traveller and, in some cases, expenses for home transportation. The purpose of the travel guarantee is that your travellers should not lose any money if their trip is cancelled or ends prematurely.
- The size of the travel guarantee is calculated on an individual basis. It should be sufficiently large that it can compensate your customers’ financial losses if the trip has to be cancelled or stopped.
- You must have a guarantee that is valid indefinitely. If it is not sufficient during your high season, it must be supplemented with one or more temporary guarantees.
Factors affecting the calculation
- Number of travellers per month.
- The cost of the arrangements.
- The amount that travellers have paid in advance in fees and cancellation insurance.
- When the advance payment is expected.
- The length of time before departure that final payment must be made.
- Standard cost for home transportation.
"We increase the sum of the items by ten percent in order to cover any potential increase in the number of travellers or the costs in relation to your budgeted amount.” says Kammarkollegiet.
Issuing travel guarantees
Travel guarantees can be arranged in various ways, such as:
- A payment commitment from a bank, an insurance company or a credit market company.
- A policy from an insurance company.
- Funds deposited with a bank or with us.
- Other similar commitments."
It means that we have to deposit a sum of cash of the total income on travel packages in advance, just in case we get insolvent, to cover for our clients.
Other things we have to pay in advance when we as a travel agency buy a travel package for you:
- hotel deposition
- food arrangements
- travel guides on place
So we have already paid for travel guarantees, travel insurances, and deposits. We have paid for direct costs to our suppliers. Now we are asked to pay back every single SEK or EUR to our European clients who have cancelled their trips as a result of Covid 19. AND WE ARE NOT ABLE TO SELL A SINGLE TRAVEL FOR A TIME WITHOUT FORECAST.
Virtual trips could probably be a solution for this battered sector of ours, where the dwarf is trying to survive. Do you have any better ideas?
We kindly ask for patience to our clients. Thealps, as all the other travel agents and operators, will do its foremost to be helpful and to ensure that you get back money for cancellations. We still don’t know how, and we are talking to governments and institutions, through our sector organisation SRF, Svenska Resebyråföreningen. As soon as we know how to do, you will be informed and helped. How long? We can't tell yet.