Travel Industry News - Winter 2006

Welcome to the first, of what we hope, will be a regular series of newsletters relevant to our friends, clients and contacts in the travel industry.

We would very much like your feed back, so please let us know what you think.

Elman Wall are leading accountants to the travel industry and audit and submit more accounts of independent travel businesses to the CAA and ABTA than possibly any other firm in the country.

CAA v ABTA

By now, all readers should be aware that the Court of Appeal agreed with the High Court judgement which found that CAA’s guidance note 26: “Sale of air package arrangements: Advice on the need to provide consumer protection” is misleading, or potentially misleading, and should be withdrawn.

Unfortunately, that is all that has happened and so, bizarrely but predictably operators, agents and even regulators still have little clarity as to what types of holiday must be protected, and what types don’t. At the time of writing, the CAA have not issued a detailed statement and it is unclear what the next steps will be. We urge all readers to remember that they do live and operate in the real world, and our advice is that nobody should at the moment, unbundle currently packaged holidays, without taking detailed legal advice. There are all kinds of untested issues outside of financial protection at stake, and leading commentators are focusing on consumer liability and risk management situations.

It seems to us, that until the Government gives clear direction as to how any or all holidays are regulated, then confusion and chaos will continue to reign. As a secondary wish, we would hope that there is a level playing field across the entire industry but it appears that those currently in the ATOL system will continue to be regulated in one form or another, while those currently unregulated, will continue to ‘get away with it’. Where have we heard that before? – sounds like the tax system to us!

One only has to look at the tragic events in Corfu last week and the confirmation that the two young children were killed by carbon monoxide poisoning, emanating from a hotel boiler. Under the Package Holiday Regulations, the tour operator is liable, and as such has taken insurance policies, has carried out risk assessments of the hotel and has other processes in place to mitigate their legal responsibility.

House of Commons deputy leader Nigel Griffiths apparently gave the Mail on Sunday a quote (29 October 2006) which said “If it is demonstrated this apartment was a gas deathtrap, the UK operator which sent holidaymakers to their deaths should be jailed”.

If, following the Court of Appeal decision, this holiday had been sold as separately priced components of hotel, transport and ancillary services, and no bond was in place, who is to say that the travel organiser has no liability or duty of care to the bereaved family? Which travel organiser wants to volunteer to be the test case?

If you are considering changing the way you operate, please make sure you do this with your eyes wide open.

Cash, Cash, Cash

Do you remember the days when travel businesses made their entire profit from bank interest, foreign exchange gains and insurance commissions?

Many travel businesses have a sizeable amount of money sitting in the bank, some of which is consumers’ advance receipts and some of which is retained profit and investment in the business.

We have negotiated agreements with major private banks to once again give attractive interest rates to travel companies on favourable terms.

Companies earn interest on deposits at a gross rate of 4.95% on balances between £100,000 and £499,999 and 5.05% on balances over £500,000 (rates as at 24 October 2006 and are subject to terms and conditions). This is a 30 day notice reserve account, with one free withdrawal per annum which means that you could take all your money out of the account at once without loss of interest.

We think these are excellent rates and are happy to provide you with chapter and verse and an application form.

Take the Elman Wall challenge – what interest rate are you currently earning on your cash?

Selling your travel business?

We recently helped the directors and shareholders of a travel business to sell their company to an AIM listed tour operator. This is just the latest in a large number of corporate transactions we have been involved in. If you want to have a chat about the possibilities of selling your business, or even acquiring another business, then please do not hesitate to contact us.

Bonding and licensing

We are proud business partners to AiTO, as well as ABTOF, ABTA and the Institute of Travel and Tourism.

We recently presented to AiTO members at the House of Commons on how tour operators can minimise their cost and exposure to licensing and bonding. If you want a copy of our 6 tops tips, then please contact us, and we will email this to you.

VAT

If you provide accommodation only products, you should know all about the recent “French Life” case. If you don’t, please contact us immediately!

There are also VAT implications on de-packaging. If you want a general review of your VAT and TOMS situation, then please do not hesitate to contact us.

Seminar

For some time now we have been threatening to hold a travel industry seminar covering some of these and other topics. However, until there is clarity on regularity issues, we feel there is very little to say that is earth-shattering. Hopefully, the industry will get to a point where there are clear decisions that need to be made and at that time, we will host a high quality seminar to give you clear and unequivocal advice and options. Watch this space.

And finally …

If you want a general conversation, or to obtain further advice on any of the issues raised in this newsletter, please do not hesitate to contact either Jonathan Wall or Ian Palmer on 020 7493 9595 or email: jonw@elmanwall.co.uk. We are always happy to hear from you or to meet for a chat.

We hope this initial newsletter has been of benefit.