You wait ages for a government consultation, and then they all come along at once. Not only is the consultation on fixed recoverable costs ongoing (particularly excitingly, given that the regime is only a week from implementation), the (mixed) results are in from the consultation on the proposal to move to a dual discount rate, and it's anyone's guess where (if anywhere) we're going with that. And finally, we're being consulted on some significant proposed alterations to the Package Travel and Linked Travel Arrangements Regulations 2018. Given the consensus that the existing Regulations are not working very well in some areas, notably linked travel arrangements and provision of information, it seems inevitable that change is on the way – we would encourage our readers to consider responding to the consultation within the twelve week window.
The Package Travel Regulations may be changing....
The Package Travel and Linked Travel Arrangements Regulations 2018 ("the Regulations") are the critical legislation for the protection of consumers who book package holidays. The Regulations are retained EU law and were last modernised in 2018. Since 2018, the travel industry has undergone significant challenges, namely the advent of COVID-19, which tested the resilience of the package travel operators (to put it lightly). Further, withdrawal from the European Union has resulted in continued ambivalence as to the status of Court of Justice of the European Union judgments.
It is with this background that the Government announced a consultation on 20th September 2023 on "Updating the Framework" for Package Travel Legislation. This consultation will last for twelve weeks, and is intended to "cut red tape" for businesses while also ensuring the continued protection of consumer rights. As Business Minister Kevin Hollinrake suggested, "many holiday companies are faced with often over-burdensome regulations that make it difficult for them to grow and thrive". This article will examine the issues raised in the consultation, and identify key future challenges for the travel industry as a whole.
First Proposal: Application to UK-only package holidays
Currently, the Regulations apply regardless of whether the new package takes place in the UK or abroad. The Government is considering whether to (a) remove all domestic packages from the scope of the Regulations or (b) remove all domestic packages from the scope of the Regulations "unless they include transport of passengers".
The existing Regulations provide extra protections for travellers in acknowledgement of the difficulty they may otherwise have in resolving issues while on holiday. This includes, for example, arranging repatriation if stranded overseas. This is of more relevance to trips with an international element, than purely domestic packages. Accordingly, views are sought as to whether the existing rules place a higher burden on domestic-package users and place a disproportionate burden on businesses. The Government also invites views on whether removing some of the restrictions from domestic packages would give businesses more choice to consumers.
Second Proposal: Minimum Cost Threshold
The Government seeks views on the benefits of exempting non-flight packages priced below a minimum price. This is said to be justified on the basis that the additional protections of the Regulations are intended to reflect the fact that packages can be a high value purchase for travellers. The need for additional refund and insolvency protections may be of less relevance when the consumer has relatively less to lose through a lower value booking. A further question is raised as to the level that such a threshold should be implemented and how and when that threshold should be reassessed.
Third Proposal: Linked Travel Arrangements
Few businesses use Linked Travel Arrangements. This is largely because they are confusing both for travellers and organisers, rarely used, and are challenging to enforce. Linked Travel Arrangements have fewer regulatory requirements, including (1) the organiser is not liable for the performance of all services in the booking, (2) there is limited insolvency cover, (3) there is significantly limited information that the organiser has to provide in relation to the booking.
The Government seeks views as to whether (a) Linked Travel Arrangements should be discontinued, (b) the definition of a package ought to be amended so that it includes some of the arrangements that are currently defined as Linked Travel Arrangements, or (c) retain the Linked Travel Arrangement Category but limit the ways in which it can be created.
Fourth Proposal: Information Requirements for Linked Travel Arrangements
Subject to whether Linked Travel Arrangements are to abolished, the Government seeks views on simplifying the information requirements that must be communicated to travellers. A linked travel arrangement facilitator must currently provide information in accordance with Regulation 26(7 – 9) and one of Schedules 6 – 10 depending on the circumstances. Stakeholder feedback indicates that the information requirements are too complicated and hard to understand for organisers and consumers.
Fifth Proposal: Flexibility over Insolvency Protection
Part 5 of the Regulations requires package organisers to obtain security that covers the reasonably foreseeable costs of refunding all payments made by the traveller for services not performed and for the traveller's effective and prompt repatriation. Views are sought as to whether increased flexibility in insolvency protection would help businesses meet their obligations under the Regulations, and also how the insolvency provisions interact with the card-related consumer protection under s.75 of the Consumer Credit Act 1974.
Sixth Proposal: Other Tourist Services
One of the four types of travel service that can be combined to form a package or linked travel arrangement are "other tourist services". These are services that are not intrinsically part of the transport of passengers, accommodation or motor vehicle hire. Examples include admission to concerts, sports events, excursions or event parks, guided tours, ski passes and rental of sports equipment.
These can form part of a package if they are combined with a service and make up a "significant proportion" or are an "essential feature" of that combination. The underlying directive considers a "significant proportion" to be equal or more than 25% of the value of the package. The risk of course is that a minor service being included could nevertheless lead to a package being formed if the relative prices change.
The Government seeks views on removing the "significant proportion" requirement and retaining the "essential feature" criterion. This would address the ambiguity caused by fluctuations in price. It also seeks views on what constitutes an "essential feature".
Seventh Proposal: the Travellers
At present, travellers include travellers booking for business purposes unless a general agreement is in place. The Government notes that the inclusion of business travellers in the Regulations may be unnecessary, and may result in increased burdens to travel organiser businesses being greater than necessary. Accordingly, views are sought as to whether the definition of a traveller should change, and in particular whether it should be amended in line with the definition of a consumer under the Consumer Rights Act 2015.
Eighth Proposal: Redress from Third Parties
Regulation 29 provides organisers with the express right to seek redress from third parties if the organiser is required to pay compensation, make a price reduction, or similar, and the actions and failings of the third party contributed to triggering the compensation payment. Organisers have indicated that this can be difficult. Further information is sought on organisers' experience of obtaining effective redress from third parties.
Ninth Proposal: Extenuating Circumstances
COVID-19 brought significant disruption to the travel sector. The Government is interested in reflections on the operation of the Regulations during this time, and whether changes ought to be made such that it better caters for any similarly extreme extenuating circumstances in the future. There may be a case for introducing a bespoke approach and offering flexibility in rules like this for extenuating circumstances.
Tenth Proposal: Territorial Cover
Currently, an organiser can take out one or more insurance policies which recognises travellers as the insured persons and therefore pays direct to travellers in the event of insolvency. The policy must be held by an insurer who is authorised in the UK, Channel Islands or the Isle of Man. It is noted that relaxing the territorial restriction on whether the insurer is authorised could widen the choice available to organisers which in turn could lower costs. Accordingly, views are sought in relation to this.
Eleventh Proposal: Updating Information Requirements
The Government is considering whether it would be beneficial to modify Schedules 1 to 5, which set out the information which must be provided both in the package travel contract and before the conclusion of the contract. It is suggested that changes could be made where the Secretary of State considers that a modification would be in the interests of travellers or their understanding of the protections they receive under the Regulations.
Of the eleven issues raised in the consultation, the two key issues for travel practitioners are introducing a minimum cost threshold and changing the definition of other tourist services.
It is notable that the summary section for the minimum cost threshold suggests that it would only be non-flight packages that would be subject to the threshold, and yet the questions raised by the consultation do not limit it to non-flight packages. Indeed, if such a threshold is introduced and not carefully formulated, there is a real risk that less well-off consumers will be denied the protections currently afforded to cost-effective package holidays.
Further, restricting the definition of a 'tourist service' to an "essential feature" generates more questions than answers. As Nick Parkinson of Travlaw has highlighted, if a big "song and dance" is made about visiting major attractions in marketing material, there is a real prospect that it could have been advertised as an essential feature and would be caught by the Regulations. Should the 'significant proportion' proviso be removed from the Regulations, further litigation is likely to arise over the precise meaning and ambit of an "essential feature".
Of course, this is purely a consultation and none of the changes outlined may come to fruition. Organisations who represent consumers or operators are encouraged to respond to the consultation so that the government has a firm evidential basis on their future decision-making.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.