Guest Comment by Barry Mayo, director, House of Travel

Guest Comment by Barry Mayo, director, House of Travel
By admin


The national plan to deregulate Australia’s travel industry and remove consumer protection provided by the TCF appears to be a case of ‘throwing out the baby with the bathwater’.

There is little doubt that the current regulatory framework has its faults. However, to proceed down this path without understanding what the alternative is, is inappropriate and irresponsible, as would a decision to proceed with a transition plan that predisposes the closure of the TCF.

There must be a clear understanding within the industry and in the marketplace that there will continue to be effective consumer protection. Without an understanding of what will replace the TCF, it would be reckless for MCCA ministers to proceed.

Any TCF replacement should offer: a) prudential oversight of travel agents to ensure that we only license persons who have sufficient financial resources to trade and b) provision for compensation to consumers who suffer loss in the event of the financial collapse of a travel agency.

We forget that back in the early eighties there was a spate of travel agency collapses with huge consumer financial loss and disruption to travel plans. It was as a result of the adverse publicity that the federal and state governments legislated for travel agency licensing and the formation of the TCF.

You do not need large capital investment to set up as a travel agent and yet consumer-booking transactions can be very large in monetary terms, often requiring payment many months in advance before any contracted services are received. It’s not unusual for travel agents to hold hundreds of thousands of dollars on behalf of clients.

The Travel Industry Transition Plan contains key assumptions which are simply incorrect:

Firstly, it says prudential oversight is provided by other national laws and industry arrangements which cover a great proportion of the intermediary sector. This is substantiated by claiming that trends towards consolidation are resulting in fewer but larger agencies operating as publicly listed companies subject to regulatory duplication. This presumably refers to the Jetset Travelworld Group (JTG) which contains the Harvey World Travel, Jetset Travel, Travelscene and Travelworld brands whose members are primarily independently owned and operated either as a franchise or part of a buying group and who are not covered by ASX Listing Rules or ASX Corporate Governance Principles and Recommendations. Consequently there is no prudential oversight to ensure financial solvency, transparency or accountability of these and many other non-JTG travel agencies.

Travel agents need to ask themselves what they would do if a travel agent in the next suburb fails and consumers aren’t compensated. Bad news travels and such a situation could provide a challenge for legitimate travel agents.

Secondly, the winding up of the TCF without an effective and enforceable replacement will place consumer funds at risk and jeopardise consumer confidence in travel agents at large but in particular, the many small and medium sized independently owned travel agents who, together with Flight Centre, make up the bulk of outlets.

In its submission to COAG, in relation to the Travel Industry Transition Plan, AFTA responded that “Australia has a regularity and licensing scheme that is outdated and no longer fit for purpose” and that it’s now time “to future-proof the Australian travel industry to ensure it’s globally competitive and has a robust and appropriate regulatory structure”.

Yet nowhere does AFTA appear to demonstrate what a new structure will consist of or look like other than to state it will take the form of a “voluntary industry accreditation scheme incorporating a voluntary code of conduct”.

AFTA claims a voluntary industry code of conduct will provide greater consumer protection and refers to the Code of Banking Practice as an example from which to develop a voluntary code of conduct for travel intermediaries.

But to compare this with the travel agency industry which does not require significant capital investment and whose product is often only received long after payment, is disingenuous.

AFTA also contends that credit card charge-back provides protection for consumers in their dealings with travel agents. Yet it is often the travel agent who is left out of pocket when, through no fault of the travel agent a supplier fails and payment is reversed. If there is no TCF protection provided to consumers then undoubtedly the likes of Consumer Advocacy groups will encourage consumers to use credit cards increasing the exposure to agents even more if a supplier fails.

Without meaningful consumer protection then we can expect increasing media interest if distressed consumers are impacted by the collapse of a travel agent. The result will be a likely loss of public confidence in dealing with travel agents, particularly as existing safeguards under consumer protection laws cannot guarantee consumers a refund, which will mean consumers miss out on the value that an experienced consultant can add to their travel arrangements. In terms of dealing directly with suppliers overseas this could, in some cases, result in increased risk for Australian consumers that can currently be avoided by consumers dealing with a licensed Australian travel agent.

The Travel Industry Transition Plan states that the administration costs to Australian travel agents covered by the national scheme are estimated to be $19.57 million per year. A KPMG study commissioned by AFTA claims that this places a considerable administrative burden on the industry. The cost for House of Travel’s two travel agency businesses to comply with TCF requirements is less than $5,000 for both companies and the reason this is low is because we are a reasonably large corporate entity and we already have to do most of the work required by TCF.

With regard to a travel agent with turnover of less than $2.5m, we would estimate that it costs them between $3,000 and $4,000 per year as they would not usually require an audit.

Are these amounts too high a price for travel agents to pay for consumer confidence, travel agency quality and an appropriate level of consumer protection?

If you’re a travel agency owner, please take an interest in this and have your say because it could change your business forever.

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

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