In this, the second article in our deeper dive into various aspects of the proposed amendments to the UK’s package travel regime, Nick Goodchild examines how proposed changes to a key element of how we might define a “Package” could impact the travel industry…
‘Other Tourist Services’ – the current position
Readers familiar with the Package Travel and Linked Travel Arrangements Regulations 2018 (PTRs), will be aware that one of the four ‘travel services’ (any 2 of which when combined will form a Package) is the more general term ‘any other tourist service not intrinsically part of’ one of the other defined types of travel service.
The PTRs provide a 2-part test for whether this ‘other tourist service’, when combined with any one of the other ‘travel services’, will form a package:
- Where the ‘other tourist service’ accounts for a significant proportion of the value of the combination, or
- Where the ‘other tourist service’ represents an essential feature of the combination [emphasis added].
The EU Package Travel Directive (PTD) at Recital 18 gives some helpful guidance on what might be termed a significant proportion: ‘If other tourist services account for 25 % or more of the value of the combination, those services should be considered as representing a significant proportion of the value’.
A classic example of this (from the 2022 guidance from BEIS, as it then was) is where a traveller books a tasting menu with a 1-night stay at a Michelin starred hotel in London. The meal is not an intrinsic part of staying at the hotel, as it can be accessed and paid for separately, but it is very likely to be a significant proportion (25% or more) of the value of the combination. The tasting menu would likely be an essential feature as it has been advertised as being a joint experience with the stay at the hotel, and is likely to be a major reason for the traveller’s decision to book the combination.
It is worth noting that the EU Commission, in their parallel proposals for reform of the PTD, have decided to amend the regulations in a different way. They will modify the 2-part test, to say that instead of a ‘significant proportion of the value of the combination’, the tourist service must account for ‘at least 25% of the value’ of the combination. This will not affect the definition, as that 25% figure already appears in the recitals of the PTD, as noted above.
Proposal for Change
The Call for Evidence document for the Consultation suggests that the 2 part test above can cause ambiguity, and that since Brexit the UK is now free to depart from the original intentions of the PTD. It further states that, because of the 25% threshold of the ‘significant proportion’ test, price fluctuations could mean that a minor service that would not ordinarily be considered a significant part of the combination could nevertheless lead to a package. The implicit argument is that this is wrong, and that the travel industry would benefit from more certainty in this regard.
The Government is therefore considering the removal of the ‘signification proportion’ part of the test, and just relying on the ‘essential feature’ test. It is also considering whether the ‘essential feature’ test should be further clarified.
The Call for Evidence document also raises the questions:
- Is there sufficient clarity about when an ‘other tourist service’ will form part of a package?
- Should the ‘significant proportion’ criterion be removed?
- Is it clear what forms an ‘essential feature’?
The 2-part test referred to above only applies where the ‘other tourist service’ in question is being combined with one other travel service, and is therefore the threshold of whether a Package is formed or not. This distinction is obviously of great importance to the person combining the services, as the formation of a Package brings many obligations on the Organiser.
While the removal of the ‘significant proportion’ part of the test may be a welcome simplification of the rules, will it actually have any effect in practice? In some cases it may not make any difference: there are undoubtedly plenty of services which would form a ‘significant proportion’ of the value of the combination, which would also be an ‘essential feature’. For example, regardless of the value of that tasting menu, it would still likely be an essential feature of the combination if it is advertised as such. However, where the service is not an ‘essential feature’ this change would take all focus away from the value of service. Thus it may allow sellers of accommodation to advertise a list of activities available (such as snorkelling, or quad biking) which are just ‘things to do in the destination’ which may be booked at the same time, and have no concern of the value of the activities relative to the cost of the hotel.
In this way, removing the ‘significant proportion’ test makes the ‘essential feature’ test do more heavy lifting. The common sense view would suggest that an ‘essential feature’ is one without which the customer would not buy the other service. However the Government may be encouraged to add criteria to determine whether the feature is indeed ‘essential’. Such criteria might include: ‘was the element advertised prominently as part of the combination?’, or ‘did the trader intend the element to be a significant reason for travel for the consumer’, or even ‘was the element a significant reason for travel for the consumer’? The latter two of these 3 suggestions introduce such subjectivity into the equation that they are unlikely to be workable in practice. This does illustrate the difficulty that may be placed upon determining what an ‘essential feature’ really is. It would then be down to the courts to decide on the approach of how an ‘essential feature’ was determined, perhaps by thinking objectively about whether the kind of service could reasonably be considered an ‘essential feature’ to an ordinary person.
For many travel companies selling package holidays or tours, this point will be moot because their packages will comprise of flights (or other transport) and accommodation, as well as other tourist services, which are undoubtedly packages regardless of this test. Accommodation providers wishing to sell some sort of activity along with the accommodation may benefit being able to sell extra activities, as long as they are not an essential feature but regardless of their value, without forming a package.
However, this proposed change will be of most interest to sellers of individual services (most likely hoteliers) who wish to widen their offering by combining an extra service, such as a tasting menu or cultural activity, with their own.
Ultimately, the status of ‘other tourist services’ as a widely drafted term for the creation of packages means that there is always likely to be some uncertainty on the margins. Whether the change or removal of the ‘significant proportion’ test simplifies things, or just creates further complication elsewhere, remains to be seen.
This article was originally published on: 1 February 2024