Carnival warns of direct sell move

Carnival warns of direct sell move
By admin


Carnival Australia has warned it may be forced to start selling direct to the public if the Travel Compensation Fund is scrapped.

In an alarming response to the potential shake-up of consumer financial protection in the travel industry, the cruise line said it may have no option but to bypass retailers and begin a direct sell strategy.

Should the TCF be axed, as seems likely, and without a process to ensure the financial stability of agents “we may find it more attractive to drive direct sales”, Carnival said.

The pro-TCF response from such a major and travel agent-reliant company will set alarm bells ringing in the trade and adds a new twist to the reform issue.

Until now the debate has been largely one-sided and in favour of reform. To add further intrigue, the Travel Compensation Fund response to the draft Travel Industry Transition Plan has also been made public.

Carnival said the absence of the TCF will put pressure on the operator to honour the booking when a travel agency collapses.

“It seems to us the practial effect of removing the Fund and the licensing requirements will be to pass the risk of travel agent insolvency on to operators,” Carnival said in its submission. “This will inevitably mean operators such as us will need to reassess the ways in which we use agents as a distribution channel.

"Without a collective approach to ensuring the financial stability of agents, we may find it more attractive to drive direct sales.”

To protect against the risk of agent insolvency the cruise line said it “may insist that customers pay us directly for their booking where they use an agent”.

“This might in turn have an effect of the usage of travel agents,” it said.

Carnival added that operators may need to draw up their own criteria and deal with agents they know are solvent. “This may mean smaller agents are not given the opportunity to sell an operator’s products if they cannot meet whatever criteria the operator puts in place,” the submission said.

The risk for cruise lines is even more acute because of the long lead time between the time a booking is made and the departure date.

The result is that agents could hold a client’s money for a long time before it needs to be remitted to the operator, Carnival said.

Should reform progress and the TCF vanish, the company insisted the government must draw up regulations requiring travel agents to pass clients’ money to an operator within two business days of receiving the money.

Alternatively, money should be held in a trust account, with “trust account inspectors” recruited to police the schemes.

The inspectors could be funded from TCF reserves, Carnival said.

“It seems to us as though some form of regulation dealing with the handling of consumer’s money is necessary,” Carnival argued.

In another suggestion in a move to protect operators, Carnival said agents should be required to hold insurance that meets certain minimum requirements, including fidelity coverage.

“The Fund reserves could be used to finance inspectors, as well as an advertising and communications campaign advising consumers that they should only pay money to agents with the necessary coverage,” Carnival said.

Proponents of reform have argued there is sufficient safeguards under existing consumer and corporations law to protect consumers.

But Carnival claimed that such laws “will be of little assistance if the agent has no resources to pay a compensation order”.

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

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