Package Travel Directive changes revealed

Posted: 26/07/2013

Mark Lee, head of Penningtons’ travel law team, explains the recently proposed reforms to the Package Travel Directive and the potential implications for travel businesses in Travel Trade Gazette:

‘The European Commission’s proposed amendments to the Package Travel Directive follow extensive consultations and lobbying from both the UK travel industry and consumer groups. This process will continue as interested parties analyse the implications of the proposed reforms and communicate their views to the European Parliament and European Council before the formal review process commences in September.

The reforms are intended to create better protection for consumers and a higher degree of certainty for travel businesses regarding the extent of their potential liabilities. This was necessary because of a massive increase in the use of the internet to combine travel arrangements, rather than selecting ready-made packages out of a brochure.

The EC has indicated that the revised directive, if approved, should afford protection to those 120 million consumers who purchase so-called 'assisted travel arrangements' when booking their holiday. According to the EC press release, travel businesses should benefit from 'a reduction in red tape and compliance costs', on the basis that the reforms will:

• create a level playing field between different operators
• abolish outdated requirements to reprint brochures, thereby saving tour operator and travel agents an estimated €390 million per year
• exclude managed business travel from the directive, resulting in savings of up to €76 million per year
• provide EU-wide rules on information, liability and mutual recognition of national insolvency protection schemes to facilitate cross-border trade.

Although this appears to be good news for the industry, the revised directive would still have significant implications for the way travel businesses manage their operations and also on the wording of their terms and conditions. For example, there is likely to be a greater strain placed on travel agents’ ability to handle complaints. This is because the reforms would entitle customers to address complaints directly to the agent from whom they bought their holiday. This has been introduced to ensure the consumer has one point of contact to address their concerns.

Tour operators would face stricter controls on price surcharges (with a 10% cap on price increases) and would have to pass on price reductions to the customer. They would also be obliged to allow customers to terminate a contract before leaving home, provided the consumer pays a 'reasonable' level of compensation. In addition, they may be exposed to a wider range of low-value compensation claims for 'immaterial damage' for components of the package contract that are not performed properly. A typical example might be a compensation claim for a ruined holiday resulting from building works at a hotel.

The Association of Travel Agents has welcomed the proposed changes, primarily because they do not introduce any significant extension to their members’ potential liabilities. If approved, firms selling dynamic packages will simply have to offer more information to 'explain clearly… that only the individual service providers are liable for the performance of the travel services concerned'.

It is envisaged that consumer groups will be disappointed that the reforms do not go further in terms of consumer protection, and they will no doubt be making their views known to the legislators in Strasbourg.

It is important to bear in mind that these proposed reforms are exactly that - proposals. There is a significant amount of work to be done by the lobbying parties before they are implemented by law, which will probably not be until 2016 at the earliest. In particular, more clarity is needed regarding the exact definition of a package holiday and 'assisted travel arrangements'.’

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