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The EU Package Travel Directive: Unintended Consequences.

The EU Package Travel Directive: Unintended Consequences.

 

Unintended Consequences

1.       As the principal (the tour operator) can easily pass on the costs of compensation there is little incentive to robustly defend the supplier, and the supplier is not able to defend themselves.

2.       The Package Travel Directive has the unintended consequence of reducing market access for small scale producers and the informal sector.

 

The EU Package Travel Directive (PTD) has substantially extended the rights of consumers against the suppliers (agents and principals) of package travel arrangements and the PTD is being reviewed in order to revise the PTD in particular to cover dynamic packaging. The PTD has successfully extended the responsibilities of tour operators providing a remedy for European consumers when the contract is not delivered or when inadequate information is provided.

 

I wish that these provisions could be extended to my local railway company. It is ironic that I have significantly better consumer rights on a package holiday in Mongolia than I do when travelling on the railway from Faversham to London.

 

There are unintended consequences of the PTD which the Commission should be mindful of in any revision of the Directive.

 

  1. The process by which compensation is paid and funded is opaque. The main effect of the PTD is not seen in the cases which go to court but rather in the routine administrative processes which result from the Directive and which are legitimised by it.

 

UK tour operators determine whether or not a complaint or claim should be compensated financially and then, where they consider the fault to lie with their supplier, recharge the cost to the supplier through the recovery or reclaims department. Generally the supplier will have no say over whether or not the tour operator decides to pay compensation, nor over how much. But the supplier will pay the bill as the amounts will be deducted from the supplier’s invoices before they are paid. The supplier is generally too weak in the relationship with the operator to query or influence the decisions made unilaterally by the operator to the detriment of the supplier.

 

It is not obvious to me that a generally disgruntled consumer who feeling that the holiday did not meet their expectations casts around for specifics, and who subsequently makes a claim against the UK based operator, would pursue the claim if they realised that the compensation would be paid by the local hotel or guide, or if the UK operator more robustly defended the overseas supplier. As the operator can easily pass on the costs of compensation there is little incentive robustly to defend the supplier.

 

  1. The PTD is also used by some tour operators to discourage their holidaymakers from taking local excursions. Very rarely is a tour operator held liable for the omissions or commissions of a local supplier where it is clear that the operator has acted merely as an agent and that this was made clear to the consumer. In Moran v First Choice in 2005 the judge found that the claimant reasonably believed that the operator “was supplying the excursion and with the relevant safety checks and insurance” and found the operator liable. Tour operators generally make it clear in their terms and conditions that their contractual liability extends only to the negligence of suppliers where the services were purchased prior to departure. The organiser, the tour operator, is liable for the proper performance of the contract even where elements of the contract are being delivered by other suppliers.

 

Certification and regulations are often used to restrict access and to reduce competition. In destinations tour operators have contracts with ground handlers who provide and sell excursions. The extent to which end consumers are aware of the precise nature of the relationship between the tour operator and the ground handler varies. The tour operator may be acting as an agent, but if this is undisclosed the courts may find them liable as the appeared to the client to be principals; the tour operator may or may not have a shareholding, or own outright the ground handler.   The licensing regulations for ground handlers can be onerous; often the regulations appear to have been written to secure the continued commercial advantage of established companies.

 

Particularly in developing countries it is not unusual for resort managers, representatives and guides  to discourage clients from taking excursions other than with the appointed ground handler, as these competitor excursions do not pay commission to them. It is the interest of the tour operator to discourage clients form booking excursions other than with the contracted ground handler because of the loss of commission revenues to the company and to the supplementary income to staff, which ensures that they are willing to work for lower salaries than might otherwise be the case.

 

The Package Travel Directive is used as a barrier to access for competitor excursion providers particularly in the developing world; this was not the purpose of the regulations. However, the Package Travel Directive does have the unintended consequence of reducing market access for small scale producers and the informal sector.

 

 

There is a forum for the reporting of unintended consequences of the EU Package Travel Directive at  http://www.irresponsibletourism.info/forum/forum_topics.asp?FID=26

 

The DG Health and Consumer Affairs is considering revision of the provisions of the Package Travel Directive (PTD) adopted in 1990. The PTD covers pre-arranged holiday packages which combine at least two of a) transport, b) accommodation and c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package. Consumers are protected where: (a) at least two of the above elements are sold at an inclusive price and (b) the service covers a period more than 24 hours or includes overnight stay and c) where the package is sold in a member country.

 

More information about the PTD, its evolution, research and potential changes can be found at http://ec.europa.eu/consumers/rights/travel_en.htm

 

Extract from Goodwin H (2008)  Holding the travel industry to account – the role of the law. http://www.haroldgoodwin.info/uploads/hjgIBA.pdf Paper presented at the International Conference of the International Bar Association in Buenos Aires in session on The Greening of Tourism: An Oxymoron

 

“Tour operators and hoteliers are generally familiar with the trading standards legislation which pertains to the contracts which they enter into and this makes them cautious about what they print in brochures, on the web and in advertisements. Clearly where a traveller books a holiday or travel product in another jurisdiction they are unlikely to take a legal action there to seek redress over misleading claims. However, the Package Travel Regulations which followed a European Union Directive had the effect of extending to EU consumers the same rights they have in their home country to services supplied in to suppliers in developing countries.  

 

“The consequence of this is that EU based operators recover the costs of claims against them as the principal from their overseas suppliers. Tour operators tend to settle rather than go to court particularly where they can recover the costs from their suppliers. It is not unusual for suppliers to UK based tour operators to be required to achieve minimum customer satisfaction ratings, failure to achieve the minimum average level specified in the contract or if there are particular failures in service delivery, the originating market operator will exercise their right to claim from the supplier the discretionary compensation paid to customers; and the costs involved in arranging and providing alternative service.

 

“These monies are often deducted from monies owed to the supplier by the originating market operator and the contractual right to terminate the contract, often without notice, if the monies are not paid, or if the level of service remains below the standard defined in the contract. Often complaints originate only after the client returns home and this makes it more difficult for the local supplier to respond to the complaint. Recoveries are dealt with from the originating market offices and resort managers and representatives have to maintain good working relationships with local suppliers and live there; there is anecdotal evidence to suggest that representatives are therefore prone to encourage clients to “write when you get home”, making it more difficult for the overseas supplier to defend themselves. .

 

“The problem is that the overseas supplier is thus liable to pay for the compensation which the UK tour operator considers reasonable without being a party to the negotiations between complainant and the principal, and may not even be consulted. In some companies tour operating staff are expected to reach recovery targets of 60% in order to achieve bonuses, although the evidence is anecdotal – no one wants to go on the record about this aspect of tour operations. In most destinations the large overseas buyers are significantly more powerful than the suppliers, they have contractual arrangements which permit payment in arrears and non-negotiated claims compensation amounts are simply deducted from monies owed; and hoteliers and ground handlers are scared about loosing contracts when they are dependent on a few overseas operators. Several of the tour operator employees with whom these issues have been discussed have speculated about whether consumers would always pursue their claims if they realised that it was not the European tour operator but the developing country enterprise which was effectively paying the compensation.”

More honesty required in climate change science

 
by Harold Goodwin on Wed 27 Jan 2010 13:59 GMT  |  Permanent Link

In today's Times the UK government's chief scientific adviser has called for more honesty about the uncertainty which exists about the predictions about the rate of climate change. He called for more openness about uncertainties.

He is reported as having said  “I don’t think it’s healthy to dismiss proper scepticism. Science grows and improves in the light of criticism. There is a fundamental uncertainty about climate change prediction that can’t be changed.”

Quite.

The damage done by the inclusion in the 2007 IPCC report of the unsubstantiated claims about the melting glaciers is substantial - the credibility of the IPCC has been damaged

As Ben Webster explains in The Times today.  "The IPCC says its statement on melting glaciers was based on a report it misquoted by WWF, a lobby group, which took its information from a report in New Scientist based on an interview with a glaciologist who claims he was misquoted. Most glaciologists say that the Himalayan glaciers are so thick that they would take hundreds of years to melt."

Professor Beddington is reported as saying that “It’s unchallengeable that CO2 traps heat and warms the Earth and that burning fossil fuels shoves billions of tonnes of CO2 into the atmosphere. But where you can get challenges is on the speed of change.

“When you get into large-scale climate modelling there are quite substantial uncertainties. On the rate of change and the local effects, there are uncertainties both in terms of empirical evidence and the climate models themselves.”

Overstating the case does not advance the argument and enables the deniers to claim the moral high ground. It undermines trust in scientists

 

Read more about what Professor Beddington had to say at

 http://www.timesonline.co.uk/tol/news/environment/article7003622.ece

Still more concerns about the Global Sustainable Tourism Criteria

Still more concerns about the Global Sustainable Tourism Criteria
by Harold Goodwin on Thu 04 Feb 2010 11:26 GMT  |  Permanent Link

The case for spending public money on certification has not been made.

In July I argued that the case for certification had not yet been made and said that I knew of no substantial evidence that certification delivers for the businesses which fund it or the public agencies which have subsidised and promoted it. I asked that if there was evidence that
a) sustainable tourism certification increases the market share of businesses that adopt it, or that
b) there is consumer demand for certification, or that
c) the environmental impacts of tourism have been reduced and that tourism has consequently become more sustainable. 

No evidence has been forthcoming.

Justin Francis and I launched the campaign at the end of July 2009 asking that the following issues be addressed by those promoting the idea of an international standard for accrediting sustainable tourism certificates.

In July we had 5 concerns. We now have 10.

1. Concern that many of the impacts of tourism result from the behaviour of tourists, sustainable tourism cannot be reduced to managing the impacts of tourism businesses.
2. There are no indicators or targets against which progress might be reported.  It is all about policies, strategies and plans rather than defining targets and measuring the  outcomes.
3. The certification process is opaque. The customer does not know what has been achieved and cannot take any action about failures even if they did.
4. The criteria are very many  and varied and not ranked. There is no indication of how they might be varied to meet local concerns and priorities.
5. There is no evidence that sustainable tourism certification is effective, or the best way, to increase the market share of businesses that adopt it. It does not make commercial sense.

Those who have signed the petition have raised a number of other issues with us and we are now including them in the campaign.

6. Taking such a broad approach reduces focus and ignores local priorities. It can only result in a superficial approach and limited impact at the destination level. The GST Criteria approach can usefully be contrasted with the highly focussed efforts being pursued in Cape Town.
7. There is a real danger that certification will be used to exclude or disadvantage those who cannot afford the certification process or to renew their membership.
8. There is little evidence of private sector engagement unless subsidised. Indeed there is considerable evidence that businesses do not renew their subscriptions when they have to pay them themselves.
9. The approach seeks to impose supranational priorities over national and local ones.
10. Once again tourism is developing a solution which appears to be unrelated to the established international processes.

At the end of July last year we called on the then GSTC to engage in a more open debate about the criteria which they are promoting and the process which they had used to determine those criteria. 80 people have now signed our online petition calling for an open debate. 

The GSTC initiative is one of the Partnerships for Sustainable Development which was agreed at WSSD in 2002. There is little evidence of industry support. The latest listing suggests that 200,000USD has been committed and that donors have been approached for a further 1,000,000USD suggesting that the initiative will cost at least 1,200,000USD. Many of the supporters are organisations which might reasonably expect to be engaged in doing the work, funded through the project. Amongst the supporters are a number of agencies which have been involved in certification. We do not query their experience, our concerns are more fundamental. The certification approach does not deliver.

There are four key reasons why the Global Sustainable Tourism Criteria will fail:
1. We know of no evidence of consumer demand. It is not sufficient to argue that it has created consumer demand in other sectors so it will work in tourism. There have been hundreds of certification schemes none of them have effectively created consumer demand; this is not surprising since the consumer benefit is unclear. What is the experiential gain?
2. All tourism has local impacts (except for green house gas emissions) the impacts need to be identified, prioritised and managed locally. There is no global certification scheme for hotel room quality which is an inherently simpler task.
3. There is good reason for this; the world’s diversity precludes it. There is no case for one global set of priorities; any international accreditation scheme requires this. Tourism is a much more complex product than timber and the take up rates are still low there.
4. Only by creating a long “wish list” of criteria is it possible to encompass the diversity of issues which are of local concern, there is a very real danger of failing to deliver anything other than a wish list and of failing to identify and prioritise those issues which matter in a particular place.

We have now had a reply to our open letter. We have also me with Erika Harms at World Travel Market. There has been no response to the substantive points we raised back in July. Read their reply for yourself.

Their letter informs us that the new Tourism Sustainability Council will be launched in 2010. The letter confirms that we were correct in voicing our concerns that that Global Sustainable Tourism Criteria focus on the enterprise level and the universality of the proposed criteria. The open letter asserts that the businesses receive a tangible rate of return on the investment in sustainable practices; we accept that there is a good business case for cost reduction through Environmental Management Systems and that an improved bottom line can result.

The letter again asserts that the international accreditation will result in increased market recognition and sales for businesses certified as sustainable. However, there is still no evidence for this.

Our experience suggests that to engage consumers the issues need to be salient in their minds, whether because they brought with them the concerns from home, or because they know that they matter in the destination.

There is still no evidence anywhere that certification brings market advantage – if there is please share it with us. Certification is not necessary to the introduction of EMS and if the returns are good it does not need to be subsidised. The case for spending public money on certification has not been made.