Managing change in an uncertain world
The following article appeared in ABTA's issue of Travel Law Today - Spring 2022.
No sooner were we looking forward to a relaxation of COVID-19 travel restrictions in the UK than we were faced with the prospect, and reality, of war in Ukraine. It is a reminder that we face continuing uncertainty when it comes to travel.
Customers are more savvy and better informed as a result of events of the last two years, and we must be ready to face further uncertainty. Our starting point when looking at managing change is Part 3 of the Package Travel Regulations 2018 (PTR) and the legislative framework:
Regulation 11(2) provides that changes should not be made before the start of a package (other than for price as per Regulation 10) unless the contract allows the organiser to make such changes and the change is insignificant.
Regulation 11(3) confirms that where significant changes to the package are proposed, or the organiser cannot meet any special requirements agreed with the traveller, or an increase in price of more than 8% is proposed, the organiser must adhere to the requirements in Regulation 11(4) to (11).
This includes setting out the proposed changes and any alternative arrangements offered of similar or higher quality (and price). The traveller has a reasonable period to either accept the changes or terminate the contract without incurring any cancellation fees. If the traveller opts to terminate the contract, a refund should be provided within 14 days of termination. The traveller may also terminate the contract and accept a substitute package and where this results in arrangements of a lower quality or cost, the traveller is entitled to an appropriate price reduction.
A disinclination to travel does not entitle a customer to obtain a full refund if they opt to terminate their arrangements because they have simply changed their mind or feel nervous about travel. Regulation 12 makes it clear that while a traveller may terminate the contract prior to the start of the package, they may be required to pay an appropriate and justifiable termination fee to the organiser.
Regulation 13 provides for termination by the organiser where minimum numbers required for travel are not reached or in the event of unavoidable and extraordinary circumstances. In these scenarios a full refund is due to the traveller but no compensation is payable.
The PTR is fairly clear on the issues regarding changes to packages and we are now well accustomed to dealing with them. But as well as the specific regulatory requirements governing how we treat customers, we need to consider how we work with suppliers to overcome or minimise the costs and disruption when changes are necessary.
Supplier agreements have been under scrutiny since the pandemic, primarily due to suppliers’ reluctance to provide refunds when organisers were compelled to refund by law. As a result, supplier terms and conditions are now being strengthened on both sides. Wherever possible, the organiser should outline the supplier’s specific obligations as regards refunds and cancellation terms under the PTR to mirror their own responsibilities to customers. There should also be specific indemnities in place to protect against claims by customers if the supplier does not fulfil its obligations. Supplier contracts should have enough flexibility for the organiser to provide efficient solutions for customers in the event of disruption.
In reality, no one wants to resort to expensive legal processes to resolve simple customer issues that could be avoided if the parties entered into a sensible discussion at an early stage. This should underpin all supplier negotiations to ensure that if changes are required either by the customer or the organiser, they should be accommodated with minimal fuss (and cost). Regulators have been calling on the industry to be as flexible as possible with customers; the only way to achieve this is to have suppliers on board where possible. Experience dictates that when customers are given the flexibility they desire, they are more likely to amend their booking or re-book in future – this is surely the best outcome for all.
Customer perception and understanding is another key factor when dealing with changes to package arrangements. Booking terms and conditions must provide clarity as to the customer’s options if changes are inevitable. The PTR obligations should be outlined in unambiguous terms and any details as to flexible options should be provided prior to booking. If you provide free changes or extended cancellation terms, make these clear to customers and outline specifically how this benefits them.
The first point of reference for customers when things go wrong are the booking terms and conditions: they should act as your roadmap when dealing with changes or disruption. Your sales and customer support teams should know these terms well so they can guide customers through their options and avoid a laborious change process, which could escalate.
Not every travel plan will go without a hitch and there will be instances where compensation should be offered. Many businesses opt to include a sliding scale of compensation within their booking terms and conditions as a further measure of clarity to customers for ease of reference and commensurate with PTR requirements.
Regulation 16 outlines the obligations where an appropriate price reduction should be offered to travellers for any period where there is a lack of conformity unless this can be attributed to the traveller (Regulation 16(2)). In addition, the organiser should offer appropriate compensation for any damage sustained by the traveller due to the lack of conformity (Regulation 16(3)).
Compensation is not payable if the organiser can prove that any lack of conformity is (a) attributable to the traveller; (b) attributable to a third party unconnected with the travel services and is unforeseeable or unavoidable; or (c) due to unavoidable and extraordinary circumstances (Regulation 16(4)).
Joanna Kolatsis, Themis Advisory – Director