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There's been a lot of debate and discussion recently about travel credits over refunds and, where refunds are being issued, why they're taking so long to be processed.
In this video, CATO's Chair, Dennis Bunnik tackles those questions to provide some insight and answers around:
In Australia, some 1-in-13 jobs is impacted directly or indirectly by travel and tourism. So, we all know somebody whose livelihood is dependent in some part on the travel and tourism industry.
CATO members create, supply and deliver the travel experiences that Australians buy through travel agencies, and we're all devastated by the events of Covid-19, and by the fact that none of us can travel.
"None of us like having our wings clipped. And we understand that travel is such an important part of Australian culture. It's who we are, it's what we do, it's as much a part of our culture as going down to Bunnings for a sausage sizzle," says Bunnik.
But for that to continue once this is all over and the borders are open again, we're going to need a strong and vibrant Australian travel industry.
Because without it, our wings are all clipped permanently.
And none of us want that.
Amid the mounting confusion and concern around the rights of travellers seeking refunds from bookings cancelled due to the impacts of the COVID-19 pandemic, Australia’s peak body representing tour operators and travel wholesalers explains to consumers why travel ‘credits’, and not refunds, are the optimal resolution.
CLICK HERE for a downloadable PDF version.
The COVID-19 pandemic has obviously had a profound impact on travel with widespread and ongoing ramifications.
One of the most contentious points being debated in mainstream media right now is consumer rights around refunds for bookings made where travel was not possible due to government restrictions imposed in the efforts to contain the spread of the virus.
The Council of Australian Tour Operators (CATO), the representative body for tour operators and wholesalers that supply travel experiences to Australian consumers, would like to provide deeper context for consumers to better understand the complex issue.
On face value, across-the-board refunds might seem to be a fair and reasonable outcome but CATO Managing Director, Brett Jardine, says it is not a straightforward proposition given the way the travel industry works from the inside.
"Behind every tour or holiday is a complex network of operators that work in unison to deliver the safe, seamless experiences we all expect when we travel," he said.
"Australian based tour operators and wholesalers develop international travel packages that are distributed through retail travel agencies and sold directly to consumers."
"During the development phase, these organisations commit time, money and resources working with independent suppliers based in the destinations where the travel takes place and who will ultimately deliver specific components of each holiday. So, once a booking is made, and even before, contractual commitments to the various parties involved have already been made."
A typical multi-day package may include many individual elements such as:
"CATO members completely understand the frustration and anger some travellers have right now which is why we felt it was critical to get the facts behind the headlines out there," said Mr Jardine.
"Once consumers are fully informed, they are in a much better position to understand why travel credits are the optimal outcome from this difficult and unprecedented situation."
Mr Jardine said in the majority of cases, travel credits for paid services have been negotiated between suppliers and the tour operators. "This is because the payment for international travel services are arranged months (sometimes years) in advance with contracts between tour operators and their suppliers that are binding," he said.
"Returning deposits, is not often an option. In normal times, our members would be hit with a cancellation penalty if they do not proceed with bookings. Hence, when an initial deposit for a holiday is paid, it is generally non-refundable as this is a commitment from the traveller seeking the services of the agent and tour operator to start preparing their future trip."
Travel plans might only involve a small number of components (ie: air and hotel) but a typical two-week tour can involve dozens of individual elements and this is where the complex nature of the international travel ecosystem can become challenging to follow.
"Whilst plans for one future trip may appear simple, virtually every itinerary is slightly different," added Mr Jardine. "Multiply that by the 6.5 million leisure trips taken by Australians in 2019, and a huge amount of time and energy is expended by professionals in every layer of the travel ecosystem or supply chain to be able to deliver the final travel product."
Most participants in the global travel ecosystem are supportive of travellers postponing their trips as opposed to cancelling and seeking a full refund.
There may be circumstances where a refund is a more appropriate course of action and in some instances, operators do offer refunds as part of their booking conditions. However, consumers do need to be aware that if a refund is offered by an operator due to force majeure, each contributor to the travel package (such as those elements listed above) may have the right to deduct any unrecoverable costs.
Examples of unrecoverable costs include:
This amount may vary subject to what has been involved in the development of an itinerary.
CATO believes a better outcome is therefore delivered by a future travel credit because it will generally be provided at up to 100% of the value of the travel originally booked.
"By helping travellers understand this deeply connected supply chain that has delivered outstanding, high-quality and secure travel experiences for decades we hope to see all concerned accepting a future travel credit as the best outcome," said Mr Jardine. "The alternative and potential rush for full refunds could send many parts of this network to the wall and result in further consumer disappointment."
On 05 May 2020, CATO Managing Director, Brett Jardine, discussed credits, refunds and the travel & tourism ecosystem on air with ABC Radio Sydney's Cassie McCullagh.
The nearly hour-long Focus segment explored the 'vexed world of travel refunds and credits', and included contributions from consumers with impacted travel bookings; travel lawyer, Anthony Cordato; and Andrew Paull from law firm Slater + Gordon.
CLICK HERE for the full Focus radio segment.
CLICK HERE for Jardine's seven-minute interview with Cassie McCullagh.
Last Friday 03 March, the NSW Government confirmed thousands of small businesses across the state struggling to cope with the COVID-19 shutdown may receive grants of up to $10,000 under a new assistance scheme.
This is in addition to other Federal Government stimulus measures and will likely only apply to CATO Members in our Tier 1 & 2 categories.
Whilst this is limited to business operating in New South Wales, we are researching if similar initiatives are being rolled out in other States and Territories.
To be eligible, NSW businesses will need to:
Applications for the small business grant of up to $10,000 will be available through Service NSW within a fortnight and remain open until 1 June 2020.
CLICK HERE to read the full NSW Government announcement.
CATO will keep a look out for further updates and advise as they become available.
For formal financial advice about how these announcements might affect your business, please refer directly to your own accountant.
By Aaron Zoanetti, Pointon Partners
LIMITING EXPOSURE TO WORLD EVENTS THROUGH EFFECTIVE LEGAL DOCUMENTATION
No industry is more directly and broadly exposed to world events such as Coronavirus than the travel industry. Many businesses will experience challenging times in the coming months as forward bookings cancel and new bookings come to a halt.
There is not much within the control of tour operators to generate new bookings in this environment. But where customers are cancelling or where the tour operator has taken forward risk on inventory, what can be done at a practical level to mitigate exposure?
Cancellations – do I need to refund my customers?
Turning firstly to cancellations, customers may have rights at law (or potentially under booking conditions) to cancel their booking due to Coronavirus being considered an event of force majeure.
An event of ‘force majeure’ is an unexpected and extraordinary circumstance outside of the control of the parties which prevents the fulfilment of a contract. Usually the parties will be excused from performing their obligations in these circumstances.
Where a customer has the right to cancel or where the operator cancels because of an event of force majeure, a crucial question is whether the operator needs to refund the customer, even if the operator has already paid its suppliers.
This type of fact scenario was considered in the 2015 case of Ferme v Kimberley Discovery Cruises. In this case a cruise operator cancelled a cruise just prior to sailing because of cyclonic weather conditions and sought to rely on a provision in its booking conditions which stated that no refunds would be made if the cruise was cancelled due to ‘unexpected events’.
The court found the 100% cancellation fee provision to be an ‘unfair contract term’ and therefore void because it went further than necessary to protect the legitimate interests of the cruise operator. Because of this, customers were entitled to a full refund, even though the cruise operator had incurred costs that were not recoverable.
The court offered some guidance on a type of condition that would be less likely to be considered ‘unfair’ and would therefore be enforceable: In effect, a condition which limits cancellation fees to amounts which have not been expended or legally committed to be spent would likely be enforceable in a situation where travel is cancelled due to ‘unexpected events’.
Do my suppliers need to refund me?
Whether or not an operator’s suppliers need to refund payments made for future services depends on the agreement between the operator and the supplier.
A supplier agreement should contain a force majeure provision which gives a right to cancellation and refund where services are cancelled due to unexpected and extraordinary events. A useful tip is to ensure that the definition of ‘force majeure’ encompasses a ‘do not travel’ or ‘reconsider your need to travel’ advice issued by DFAT.
Properly drafted cancellation/refund terms should mitigate exposure to refund customers for existing bookings where funds have already been paid to suppliers (although profit and potentially administration costs may not be recoverable).
Properly drafted force majeure provisions in a supplier agreement should mitigate the risk associated with forward risk on inventory that is no longer required due to ‘unexpected and extraordinary events’.
CATO Members seeking further advice, please contact us for a direct introduction to Aaron Zoanetti.
The summary below has been provided by CATO's external accountant who is available to members if further assistance is required.
UPDATE: The Federal Government has announced a $130 billion wage subsidy to support businesses to stay in business and keep Australians in work through the Corona Virus pandemic.
The JobKeeper Payment will support employers to maintain their connection to their employees. These connections will enable business to reactivate their operations quickly – without having to rehire staff – when the crisis is over.
Under this JobKeeper payment:
Businesses without employees, for instance sole traders, can also register for the JobKeeper Payment and will need to provide a monthly update to the ATO to declare their continued eligibility for the payments.
The Council of Australian Tour Operators (CATO) has announced the postponement of the 2020 CATO Awards due to ongoing uncertainty around the Covid-19 crisis.
“We are acutely aware of the challenges facing the entire industry right now, so we have made the appropriate decision to postpone our October event," said CATO Managing Director, Brett Jardine.
Image: CATO Managing Director, Brett Jardine.
"After the success of the 2019 CATO stream within the National Travel Industry Awards, the 2020 CATO Awards was to be our first stand-alone awards event. We are immensely grateful for all the sponsorship support and commitments we had received, particularly from the event's Platinum sponsor, Globus family of brands," added Jardine.
Image: Brett Jardine with the Globus family of brands team.
The CATO Awards are an opportunity for the land-supply sector—tour operators, wholesalers and the like—to recognise the outstanding achievements of retail travel agents and media.
"Travel agents and CATO members do an amazing job, never more so than recently, as they worked to bring tens of thousands of Australians home safely. We look forward to celebrating with them at the rescheduled CATO Awards at a later date," said Jardine.
For additional information and inquiries, please contact:
Managing Director, Council of Australian Tour Operators (CATO)
The Council of Australian Tour Operators (CATO) has held crisis planning talks with its members to support their short and long term needs.
"Our sector will be the key to recovery," said CATO MD, Brett Jardine.
"We need to take a unified approach and work together to ensure the survival of our industry so we are ready to help travellers with their plans when the timing is right," Jardine added.
A three-point action plan resulted from the meeting:
Jardine closed the meeting by reiterating the vital importance of the travel industry to the Australian economy.
"We are at a critical juncture. Working together with our members and other like-minded organisations, we need to enact smart decision-making to ensure that the travel industry survives this immediate crisis.
"We also need to start planning for the rebound which will undoubtedly happen to make sure we are ready to help our clients reboot their holiday plans and reignite the outbound travel sector," he concluded.
- Ends -
(March 17, 2020) The Council of Australian Tour Operators (CATO) has today issued a rallying cry to the travel industry and holidaymakers to work together in these unprecedented times to ensure the best possible outcome for the future.
The Association commended the efforts of the entire industry for its proactive customer focused approach to dealing with this crisis.
“It is obvious that front-line staff, across all sectors of the industry are doing it very tough as they work around the clock to help clients navigate through this.”
Brett Jardine, CATO Managing Director.
“We’ve all faced various crises before but nothing of this scale and magnitude. With borders closing, foreign governments imposing restrictions on movement and the Australian Government now imposing self-isolation of travellers returning from an overseas trip, CATOs view is that an event of ’Force Majeure’ has occurred,” said Jardine.
’Force Majeure’ is an unexpected and extraordinary circumstance outside of the control of the parties which prevents the fulfillment of contract terms and conditions.
In typical force majeure circumstances, tour operators, wholesalers and their suppliers would usually be excused from performing their obligations. However, right now in CATO’s view, the best possible outcome for everyone concerned is for customers to be issued with credits for future travel.
By issuing travel credits, where possible, as opposed to refunds, not only does the traveller have a positive experience in this difficult time with an assurance that their holiday of a lifetime can still be enjoyed at a later date, but the agent with whom they booked also retains their commissions which ultimately guarantees an even stronger industry in the future.
As an industry we have quickly entered uncharted waters and now is the time for us all to work together for the long-term prosperity of our industry.
The travel industry is a vital part of the economy, providing much needed jobs in cities and country towns throughout Australia. Working together to find the best solutions for both travellers and travel planners, we will ensure that the travel industry survives this crisis and when the time is right will be there to help Australians re-book their well-deserved holidays.
The Council of Australian Tour Operators (CATO) has announced that the Platinum Sponsorship rights to the 2020 CATO Awards has been awarded to Globus family of brands.
Image: Brett Jardine, CATO Managing Director (3rd from left) with the Globus family of brands team. Left to right: Chris Fundell, Head of Marketing Australasia; Gai Tyrrell, Managing Director Australasia; and Peter Douglas, Head of Sales.
“We are absolutely thrilled to have secured the Globus family of brands’ Platinum Sponsorship commitment for the 2020 CATO Awards. Their contributions to CATO’s support of Australia’s land-supply sector over the years has been immense—we’re delighted to have them on board", said CATO Managing Director, Brett Jardine.
Image: CATO Managing Director, Brett Jardine.
Confirming the CATO Awards Platinum Sponsorship, Gai Tyrrell, Managing Director Australasia said, “The Globus family of brands is a longstanding supporter of the Australian travel industry, so we’re delighted to come on board as CATO’s first dedicated Platinum sponsor for its inaugural awards.”
“It’s essential the industry continues to celebrate excellence and encourage growth within the field, and I have no doubt CATO’s travel awards will be a coveted event in the travel industry calendar for decades to come”, Tyrrell added.
Image: Brett Jardine presenting the 2019 CATO Awards stream at AFTA's National Travel Industry Awards in Sydney.
The inaugural CATO Awards were held as a stream within the National Travel Industry Awards (NTIA) gala in 2019. But it’s a different story in 2020—the CATOs will, for the first time, be run as a stand-alone event, one that recognises the outstanding achievements of retail travel agents as well as trade and mainstream media.
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