Risky Business

Sydney Morning Herald

Saturday November 8, 2008

Clive Dorman

As some travel agencies collapse, Clive Dorman suggests choosing an agent with insurance cover.

The alarming increase in the number of Australian travel agents closing their doors in the past 18 months appears to be accelerating.

The combination of high interest rates, the growth of the internet in travel purchases and weakening consumer demand as a result of the world financial turmoil has hit the travel retail industry hard.

The Travel Compensation Fund, an insurance scheme set up by the travel industry to protect consumers, handled 18 agency failures last year and paid out more than $4 million to customers left in the lurch. Less than $1 million was paid out in 2006.

This year, the amount paid out has already leapt to $27 million. The fund's chief executive, Glen Wells, says nine closures have occurred since September.

However, Wells has warned consumer losses may be even higher than fund records show, as not all travel agents are members and some agencies that have collapsed in the past have not been licensed.

Wells and other industry leaders have warned that consumers need to understand that only agents who are members of the Travel Compensation Fund offer consumer protection. Australian online travel agents are eligible to be members but popular online travel retailers based overseas are not.

Wells points out no travel insurance policy protects a consumer in the event of a travel agency collapse.

The industry is bracing for more volatility ahead but is using the opportunity to regain ground in the battle with internet travel. The global chief of Insight Vacations, John Boulding, says the Australian travel industry should seize the moment created by financial and economic uncertainty to woo back customers.

"This is the biggest opportunity in the travel industry for years," Boulding told the industry paper Travel Weekly. "It is an opportunity for the industry to attract people they have not seen for years - to pull people back from independent touring and into the travel fold."

Boulding says customers who book their travel independently, sometimes through unrecognised brands, are now becoming wary of risk and are warming to booking with agents because of the increased security it provides.

Australian travel agents pay $9000 to join the Travel Compensation Fund, then an annual levy of $350. About 4700 agents participate in the scheme.

The fund is well-resourced with more than $20 million in reserves and finished in the black last year despite the jump in the payouts.

Wells says consumers should ensure their agent is licensed and that it is a member of the fund before committing their holiday cash.

He also warns that, because of the sudden dramatic fall of the Australian dollar, there have been reports of highly unethical behaviour by some travel wholesalers who have demanded further payments to cover additional costs after full payment has been made.

Even if consumers are compelled to make these extra payments to avoid having to abandon their trip, they should take up the matter with state consumer tribunals set up to handle travel industry disputes.

© 2008 Sydney Morning Herald

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