As the ongoing coronavirus pandemic unfolds, Nick Parkinson, Associate at Travlaw, explains travel companies’ obligations to customers. In particular, in relation to when refunds are due – and the many questions which that raises!
Flights are being cancelled, borders are closing, entire towns or regions are in lockdown. To compound matters, the list of events that are being cancelled or postponed all around the world continues to grow. Whether you are a tour operator, hotel, airline or otherwise involved in the travel industry – it is important to know your rights and obligations.
UPDATE 16/03/2020 – ABTA have recently announced that they are calling on the government to implement temporary emergency legislation to:
- Introduce an emergency government fund to assist with refunds where tour operators are unable to obtain refunds from their suppliers
- Remove the obligation to make refunds within 14 days
- To allow credits as an alternative to cash refund
In light of this new development tour operators may well be justified, in certain situations, to hold back on making any refunds pending further developments on this approach to the government. More to follow!
PACKAGE HOLIDAYS – Questions!
When Are We Obliged To Offer Customers Refunds?
There are four main situations when tour operators may be obliged to offer their customers a full refund:
- Unable to Supply. This is where you are unable to provide all of the travel services that form part of the package without making any significant changes to the itinerary.
- “Unwilling” to Supply. This is where you are unwilling to supply the travel services that form part of the package (without making any significant changes). Typically this is where supplying the holiday would be against the advice of the Foreign Commonwealth Office (FCO).
- Extraordinary Circumstances. This is where there are extraordinary circumstances at the place of destination (or the immediate vicinity) that significantly affect either the carriage of passengers to the place of destination, or the performance of the travel services.
- Your T&C’s allow it. Your T&C’s ought to have been drafted to match the minimum protection offered by the Package Travel Regulations. However, if you have offered more favourable terms to customers, you are bound by those terms. This is rare, but not unheard of.
That said, you do not necessarily need to rush into volunteering refunds to your customers for various reasons as set out below:
You Can Offer Alternatives
Before you are obliged to offer any refunds, you are entirely free to offer alternatives to customers such as replacement holidays, adjusted itineraries or deferred holidays (credit). It is possible offer incentives to get customers to agree to your proposals.
So Many Questions!
Even if you are unable to agree an alternative with the customer: Applying any given situation to the above is likely to prompt a number of questions which are covered in a separated article below:
SUPPLIERS & AGENTS – Questions! – udated 20/03/20
If you are simply an agent, or a supplier of a single service such as accommodation, flights or ground handling services your obligations to customers are likely to be less onerous than the obligations above. You may also ask: Where do we stand with refunds to our customers?
The answer is quite simply that it all depends on what T&C’s you have in place with the consumer, and whether they are fair. Alternatively, if you are a supplier on behalf of a tour operator, it all depends on what T&C’s you have in place with them.
Key Terms to Look For
Ideally the T&C’s will make it clear what cancellation charges apply where:
- the customer cancels the contract
- you cancel the contract, or
- you cancel the contract but due to ‘force majeure’ (circumstances outside of your control)
Any clause you have could be challenged by a consumer if it is considered ‘unfair’. For example, a 100% cancellation charge for cancelling an accommodation only booking within 24 hours of booking, and with 6 months before the start, is a prime example of what may be an ‘unfair term’.
If it is not clear whether your T&C’s mean A or B in any given situation, the interpretation that the customer (reasonably) believes to be true is likely to prevail.
It may be that the contract has been frustrated, i.e. that you are unable to fulfill your obligations under the contract because it is now impossible or illegal (e.g. recent measures in Spain and France may have made it impossible to supply certain services). In that situation, unless the T&C’s say otherwise, you are obliged to offer a full refund less any reasonable and necessarily incurred costs with your suppliers. This can be particularly helpful if you have laid out substantial costs to your suppliers with negligible profit margins!
WHAT NEXT FROM TRAVLAW?
These are of course unprecedented times for the travel industry and we fully recognise the need to do whatever we can to assist all those struggling during these very difficult times. With that in mind, to try and get as much information in answers to these Questions, we intend to publish further articles over the coming days and weeks covering topics such as: