What are the implications of the new package travel regulations?

It’s been exactly two years since the lifting of international travel restrictions introduced during the pandemic.

Sarah Batterbury, a commercial lawyer at Arbor Law specialising in the travel tech industry, will be looking at how the legislature is approaching regulating the industry post COVID over a series of blogs.

This week: reforms to the package travel legislation.

At the end of last year, the European Commission adopted a proposal to amend the Package Travel Directive 2015 (“PTD”) with the aim of improving protection for travellers.

Why does the PTD need revising?

The PTD covers package holidays (a “package holiday” is the combination of two or more different types of travel services which are combined for the purpose of the same trip) and “linked travel arrangements” or “LTAs” (where the traveller purchases two or more travel services under separate contracts from different traders).

During the pandemic years, the new legislative protections were thoroughly road tested exposing several shortcomings.

What issues were brought to light during the pandemic?

• Refund headaches. The outbreak of COVID in 2020 led to mass travel cancellations with no new bookings coming in. Organisers were understandably slow to provide refunds (certainly far longer than the required 14 days under the PTD).
• Vouchers with no value. In May 2020, the commission recommended package organisers offer vouchers for cancelled packages, but at the time, these were not protected if the travel organiser became insolvent due to the challenging economic climate. Several travel firms in the UK and overseas went into administration due to the almost complete cessation of travel – rendering the vouchers worthless.
• Linked Travel Arrangements fail to protect. The pandemic fully exposed the ineffectiveness of Linked Travel Arrangements (LTAs) when those bookings should really have been afforded the same protection as packages.

What improvements are being suggested?

Benefits for consumers

• Clearer information for travellers on their consumer rights under the package (and importantly, clarification of whether they have the wider protection afforded by booking a package or only the limited protection of an LTA) together with details of the responsible trader.
• Wider definition of packages means that certain types of LTAs will instead be labelled as packages – resulting in wider protection for consumers.
• Unless the travel organiser needs to cover higher supplier costs at this stage, deposits on booking a package shall be no more than 25% of the total amount (which reduces the amount of risk in the event of a cancellation or insolvency). The remainder of the package amount is due 28 days before travel.
• Vouchers are now brought under the same umbrella of insolvency protection so the consumer is protected if the voucher provider is also insolvent.

Benefits for travel providers

• Increased use of vouchers will result in better liquidity for travel providers in the event of a future  pandemic/crisis.
• Package organisers will be entitled to a refund from travel service providers within 7 days of a cancellation (in order that they are able to refund the consumer within the required 14 days).

Whilst these changes have been applauded by consumer bodies, they have not been welcomed by the travel  industry. Rather than improving consumer protection, the industry has criticised that the proposals could instead result in higher costs for consumers which may encourage travellers to choose cheaper forms of travel that do not offer the same level of protection. The industry argues that the pandemic, as a highly exceptional situation, should not be used as a benchmark for regulation. Some argue that we should take time to let the dust settle and reassess the applicability of the PTD during normal travel times.

What is the UK approach?

Note that even though the PTD UK implementing regulations (Package Travel and Linked Travel Arrangements Regulations 2018) is retained EU law – and so any changes to the PTD should in theory flow through – post-Brexit, the UK Government now has the freedom to consider innovative ways to update the PTD Regulations. Late last year, the UK Dept for Business and Trade launched a call for evidence which included various proposals such as exempting all packages that involve domestic only travel and to simplify or even remove altogether LTAs.

As a whole, the changes are significant and will make a difference to travel companies and to the protection of travellers. Additional challenges will be faced by travel providers serving consumers in and outside the UK with the likely divergence of regulation in the UK versus the rest of Europe.

Further help

This article provides a snapshot of the issues to consider regarding incoming package travel regulation. For advice and support specific to your particular business needs, you can contact me to discuss how we can assist further.

About Sarah Batterbury

Sarah is a senior commercial lawyer working for a wide range of clients from small startups to Fortune Global 500 companies. She started her career at Berwin Leighton Paisner as an IP litigator and then went on to spend 10 years as a consultant at Halebury where she built up a legal practice in the travel tech sector alongside running a business. Sarah advises clients on a wide range of commercial matters from contracts drafting and negotiation to general advisory, regulatory and compliance work.