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A new consumer-friendly law governing the sale of vacations, which came into force at the start of July across the European Union, is causing its fair share of confusion.
The so-called Package Travel Directive has been in the works for years, ever since EU legislators had decided that the previous rules—passed almost 30 years ago—were in big need of an update as technology has transformed booking travel.
On the surface, this looks like a win for consumers. The directive beefs up cancelation rights and, in theory, provides more clarity on who the consumer should contact if there is a problem with a trip.
The issue for businesses is that there’s a huge amount of uncertainty over the new rules.
What is an EU directive?
It’s a piece of legislation that “sets out a goal that all EU countries must achieve.” To some extent, each country has some leeway. Germany might do things differently than Greece, which could do things differently than the UK. But they all must get to the same point.
Directives differ from regulations, which member states need to apply to in full. The EU passed a law on packaged vacation at the end of 2015 but gave EU nations until July 1 of this year to put it in place under their interpretations.
Why the Need for Change?
Booking a vacation has moved on a lot since 1990. In those days you’d walk into your local travel agent and buy a readymade package vacation, including flights and hotel. The internet didn’t really exist, neither did low-cost airlines. But as the 1990s turned into the 2000s, things started to change. The growth in online travel agencies meant people bought holidays in different ways.
Consumers buying separate flights and accommodation in one transaction from these online retailers might have thought they were buying a package but this wasn’t always true.
In a lot of cases it didn’t really matter. Your flights and hotel were fine so you didn’t notice the difference. After all, problems only arise when things go wrong.
In the past if a customer was unhappy with their vacation or suffered an injury, they may have had to go to the individual suppliers. There’s now a wider definition of what a package vacation actually is, and the UK government estimates an extra 10 million vacations are protected.
“The biggest change is that an awful lot more is now considered to be a package,” said Alan Bowen, managing partner at travel consulting firm AGB Associates.
“That means whoever is selling it is liable for injury, illness or death if anybody has an accident in the hotel, whereas in the old rules if they sold the item separately they would just tell the customer they can only complain to the hotel or to the airline.”
They might also have to pay out if a labor strike ruins a vacation.
Still, with travel agents taking on additional responsibility as part of the changes, it’s not clear yet if the cost of insuring holidays could rise and consumers may end up paying more as a result.
What Does It Mean for Travel Companies?
Traditional package holidays specialists such as Thomas Cook and TUI, likely won’t notice much difference.
It is travel agents—both online and physical—that will experience the most change. By packaging up, say, an EasyJet flight and a hotel on the Costa del Sol, they will now, in theory, be liable if something goes wrong on the vacation.
“There will be greater potential liabilities for travel businesses and therefore greater costs to try and mitigate those risks. The need for public liability insurance has clearly grown and areas currently open to interpretation are likely to lead to legal disputes in an increasing litigious environment,” said Rajeev Shaunak, head of travel & tourism at finance firm MHA MacIntyre Hudson.
Travel companies have had two and a half years to get ready for the changes but the fact that each country has had a certain amount of freedom in interpreting it has made the whole thing a long, drawn out process. There are still some gray areas.
The UK government’s own guidance notes only came out last week after the law was put into place.
What are Travel Companies Saying?
On the surface most are happy to comply with the new rules. Although if something goes wrong, you can bet they’ll be the first to complain.
Edreams Odigeo, which claims to be the leading flights retailer in Europe, said the rule-change hadn’t had a big impact on the business.
“The new package travel rules have brought in many positive changes for consumers. To comply with these in Europe, we have undertaken a number of measures, ranging from updating our T&Cs to expanding our insurance coverage to cover all applicable ‘flight plus’ deals as many of these now fall within the scope of a package,” said Robert McNamara, the company’s head of UK & group external affairs.
“The new rules have had no major impact on the way we sell our products, though in light of the changes to flight plus, it’s very important that we make customers aware of the enhanced level of protection that their booking will entitle them to. In most cases, they’ll have good news; they’ll have even better protection.”
Expedia, another major pan-European player, said it was taking similar steps.
“Expedia Group takes compliance with EU regulation very seriously and we have been taking steps to implement changes resulting from the Directive (EU) 2015/2302 on package travel and linked travel arrangements,” the company said in a statement. “We are committed to ensuring that customers booking with us are well informed about the Directive and understand the protections they receive when booking a package or a linked travel arrangement with Expedia Group brands.”
What is a Linked Travel Arrangement?
This is a new definition brought in by the EU to cover a combination of vacation products that don’t meet the definition of a “package” but offer some form of protection for the consumer.
“They are classed as linked when one trader facilitates the booking of the subsequent service(s), and they are purchased for the purpose of the same trip or holiday.”
The main requirement for this type of vacation is financial protection for the consumer if an airline goes under.
Does it Differ Across Europe?
You bet it does. And this part of the problem. The European single market means a business selling vacations primarily to the UK consumer doesn’t have to be UK-based. Fine in theory but it can cause problems when a company enters bankruptcy proceedings.
The fact that member states are interpreting these new package travel laws differently is likely to cause problems in the future.
“Ireland hasn’t implemented it. Germany produced its law last year so it was ready but the law seemed to be completely back-to-front and they actually say if you split everything up into separate items you can avoid it being a package. That’s the exact opposite of what the directive says. Everybody, including German lawyers, is expecting the German system will be reported to the European Commission very shortly and they will take action against Germany for failing to implement the law properly,” Bowen said.
What happens next?
Because the directive differs slightly across Europe, it might take a legal challenge to bring about some clarity.
The European Technology and Travel Services Association (ETTSA), a lobbying group representing travel technology companies in Europe, said the original directive was “beset by contradictions”, highlighting the “vague” Linked Travel Arrangements, as well as confusion over whether it includes online advertising within the scope.
“As responsible operators we want to be able to comply with the law, unfortunately the Directive and the available official advice makes that extremely difficult. The lack of clarity means an unacceptable level of legal uncertainty which we have sought to address with the launch of our own guidance,” said Christoph Klenner, ETTSA secretary general.
Updating a 30-year-old framework is a noble idea, especially when the travel industry has changed so much. The problem is getting everyone to agree with what the new law should look like — and crucially, how it will be applied.