In this article, Nick Parkinson, Associate at Travlaw, provides questions and answers to the top 5 questions that we are regularly being asked about the ongoing coronavirus (Covid-19) outbreak and the implications that has on the travel & leisure industry.
Do we have to give customers a full refund if we have to cancel a package holiday due to coronavirus?
If you are unable to provide the package due to the impact of the coronavirus, this will be deemed as ‘extraordinary circumstances’ under the Package Travel Regulations. You therefore have two options;
- You have the option to cancel the holiday, but if you do so, you have to offer a full refund
- You can offer customers an alternative package such as:
- A similar package with a different itinerary (e.g. to avoid affected areas)
- A completely different package
- A deferred package to a later date (credit voucher)
The same options apply when you are forced to make a ‘significant change’ to the holiday, rather than cancel it altogether.
It is wise to make this an attractive proposition to your customers. The reason for that is because, ultimately, it is up to the customer to decide whether or not to accept your proposals. If they do not accept, they are entitled to a full refund.
You are also obliged to offer a ‘price reduction’ if the alternative package offered is of a lower ‘quality’ than the original booking.
N.B. The above sets out the minimum protection that your customers must have under the Package Travel Regulations. If you have offered more favourable terms under your T&C’s, you are bound by them. You cannot, however, enforce terms that try to reduce your customer’s rights under the Regulations.
What if the customer wants to cancel a package holiday?
A lot of customers are understandably getting anxious and wanting to cancel holidays not due to start until May and beyond! If you take the view that it is premature for you to cancel the holiday, you may wish to explain to your customers that they are free to cancel and forfeit any deposit etc as per your T&C’s. However, customers will inevitably want a full refund, which leads us on to question 3 below.
At what point do I have to accept that the package cannot go ahead?
The position here is that you do not need to cancel holidays or offer a full refund so long as there is a ‘flicker of hope’ that the package may be able to continue. However, if and when it becomes ‘obvious’ that the holiday cannot go ahead then you need to revert to options A and B above.
Typically the industry operates on a 21 day cancellation period (unless your T&C’s say otherwise). That is a good starting point, but this all depends on the precise circumstances of the holiday you are offering and how it is or might be affected. Your assessment as to whether or not there is a ‘flicker of hope’ on carrying out a package may differ between a situation where:
- Recent reports being that coronavirus is on the decline and borders are being opened rather than closed
as opposed to
- Recent reports being that coronavirus is on the move, appearing in new places and restrictions are being tightened up rather than eased
This is a fast moving situation and one on an unprecedented scale where 21 days may not be practically applicable depending on where the holiday is going to/from and the current situation in all places concerned.
What if specific customers are unable to come on the package?
There is a risk of customers not being allowed to board planes, cross borders, enter hotels etc if, for example, they have been to China in the last 14 days. You are entitled to take the view that, if the holiday can still go ahead, and it is just the case that one or more individuals are unable to travel, then you do not have to offer a full refund. The point being that you are able to provide the holiday, rather it is the customer that is unable to attend. This is no different than a customer breaking a leg just before the holiday and being unable to travel.
Unfortunately, it is not as simple as that. There is an exception where customers could argue they are entitled to a refund where:
- Extraordinary circumstances exist at the holiday destination (or the immediate vicinity)
- They are unable to travel to the holiday destination due to those extraordinary circumstances
That argument could arise, for example, where customers are unable to cross the border in to Saudi Arabia due to recent border restrictions imposed by the authorities. Whether or not that argument would stand up in court, we are yet to find out.
Whatever the situation, customers should of course be referred to their travel insurance in the first instance to check if they have adequate cover there.
Where do we stand with our suppliers?
This is extremely important, and it all depends on the T&C’s between you and your supplier. Two key questions:
- Control. Does it allow you to make the decision as to when the contract can be cancelled due to a coronavirus type of situation? (force majeure)
- Refunds. Are you entitled to a refund of any deposits if you cancel due to force majeure? What if the supplier cancels due to force majeure?
You may well find that some supplier agreements are much more favourable than others!
Have a Query? Get In Touch
Do you have a question that is not covered above?
- Are you unsure where you stand with your suppliers?
- Are you unsure where you stand with your customers?
- Could your T&C’s or supplier agreements be tightened up to protect you in the future?
We have a fantastic team here at Travlaw who can cover the needs of your business whether that be in relation to force majeure situations like coronavirus, the Package Travel Regulations, disputes, employment issues, drafting T&C’s, compliance, or even Brexit! Indeed, we act for numerous tour operators, travel agents, hotels, and airlines all over the world and we would be delighted to discuss any travel law related issue that affects your business.
This article was originally published on: 27 February 2020