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29 September, 2021

AFTA chair says trust accounts won’t solve the industry’s image problem, but service fees might

A consumer advocate is calling for mandatory trust accounts and law reforms to protect consumers against travel agents doing the “wrong thing”.

Adam Glezer has been pushing for greater consumer protection in the travel space since the pandemic began in March 2020 after he and his wife struggled to get a refund when their travel plans were cancelled due to COVID-19.

During an exclusive interview, Glezer told Travel Weekly consumers have “very little trust and confidence” in the travel industry right now.

“If customers book travel at the moment, it’s uncertain as to whether they will get a refund if their trip is cancelled,” he said.

“These issues already existed. They’ve just been exposed due to the pandemic.”

Glezer is calling for more accountability and better safeguards to ensure consumers feel confident to book travel through an agent.

“We need legislative reform to give consumers protection in situations outside of human control,” he said.

“The need for mandatory trust accounts is urgent. Real estate agents need it, lawyers need it, why don’t travel agents have it?

“They are all dealing with large sums of money intended for a third party.”

However, Tom Manwaring, chair of the Australian Federation of Travel Agents (AFTA), said trust accounts, or client accounts as they are also known, don’t always ensure consumer protection.

“A trust account doesn’t do anything in terms of ensuring your purchase or anything else,” he said.

“The money transfers to the supplier quite quickly. Agents don’t hold onto the cash for long – within weeks, it’s gone out to the suppliers.”

Image source: iStock/South_agency

Manwaring said consumers already have access to more reliable ways to get their money back, such as a credit card chargeback, travel insurance or going directly to the supplier.

AFTA estimated in July the travel industry had already refunded $7 billion of the $10 billion worth of travel impacted by COVID-19, including travel credits. Manwaring said that number now sits closer to $8 billion.

The association has been campaigning for recognition of the work agents have put in to provide refunds despite experiencing more than a 90 per cent drop in revenue since March 2020.

“Everything’s been thrown in reverse in the last 20 months; 90 per cent of travel agent activity is now refunds and 10 per cent is domestic bookings or international repatriation,” he explained.

“They don’t make any money on refunds. All this work is going on and they’re not getting paid anything. But they’ve stood by the customer.

“Seventy to 75 per cent have remained open and are still actioning refunds. It’s a tremendous tick to the industry. It’s the minority of cases where consumers are missing out. It’s the one bad apple, basically.”

Are service fees the answer?

Glezer claims to have spoken to consumers who were shocked to only receive partial refunds, due to agents retaining their “mark-ups”.

He said he would like to see tougher regulations around service fee disclosure, including a “fee schedule where they itemise all the fees they are charging customers”.

“There are a lot of agents out there that are doing the right thing during the toughest of times. When others are doing the wrong thing by customers, it gives the industry a bad name,” he said.

“The inconsistent fees charged to different people has to be stamped out. It will go a long way to bringing credibility back to the industry.

“It is extremely risky for people to be booking non-refundable travel in advance now. There could be lockdowns put in place within a matter of hours.

“If there’s uncertainty around refunds, I know I won’t be booking in advance.”

AFTA, like many industry groups, believes the travel agent profession will move towards a service charge-based revenue system in time.

Manwaring said moving away from reliance on commissions would make cancellations from supplier insolvency or major events such as the global pandemic easier on agents.

AFTA believes the travel agent profession is already moving towards a service charge-based revenue system, and it will be commonplace in time.

“With commission-based revenue or remuneration, as you do refunds, you have to unbundle those earnings [from commissions or mark-ups] and pay them back. Many small commissions can add up to thousands of dollars,” Manwaring said.

“For luxury, long-haul, complicated itineraries, that’s a great opportunity to charge a service fee. And the customer will know it’s a 24/7 service; if they do get stuck, they can ring their agent for help. All that is being done now as a free of charge service.

“I think most customers are onside and would pay a service fee.

“After all; it’s not a charge for nothing.”

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

Latest comments

fordedilia says:
September 29, 2021 at 9:20 pm
If this theoretical resolution process was true travel companies would not have hit top of the charts on the consumer complaints register. Why are individual consumers forced into the CAT system in hand to hand combat? Unfortunately the charge back system failed, the insurance company failed and why should travel companies be allowed to keep thousands of dollars and offer consumers unusable credits. Just as Covid-19 was out of everyone’s control it seems that consumers are bearing the cost. If the credit is worthless and your personal circumstances prevent the consumer from travelling why should the companies be allowed to profiteer from misfortune?
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Adam Glezer afta australian federation of travel agents consumer advocate consumer sentiment travel agent trust accounts