Financial protection


Vacations are a time to switch off, to relax, to forget about paperwork and small print. But there are a few steps you need to take before booking any vacation to ensure that it is as blissful as possible. These include taking out travel insurance, checking you are up to date with any vaccinations, and finding out what kind of financial protection your tour operator offers. While the first two steps are standard practice for most responsible travelers, the third step is less well understood, and many people may be unaware of its implications for their trip. It’s something few people will ever need – but if your vacation company runs into problems, you will be glad you took the time to check.

EU-based tour operators: what is the 1992 Package Travel Regulation?

In 1992, the EU passed a legislation which required any organiser selling more than one part of a vacation to have financial protection in place. This includes UK-based operators. This affects anyone selling two or more elements, lasting over 24 hours – such as accommodation plus activities, or accommodation plus transport. Therefore any vacation organiser based in the EU that offers this kind of trip should have guarantees in place to ensure the customer will be refunded should they cease to trade for any reason. If the customer is already on their vacation when the company encounters difficulties, and their flights have been booked through the company, then the company must guarantee their repatriation. This guarantee is arranged through a third party – much like a form of insurance. As a customer, it is up to you to understand what financial protection your vacation organiser has in place.

Tour operators based outside the EU

If the tour operator is located outside of the EU, this legislation does not apply – but that does not mean that they will not have financial protection in place. You will need to ask if the operator is covered by another form of financial protection, and if not – how they offer assurance that your money is protected. There are many local schemes which are used around the world, primarily organised by national tour operator registration schemes.

Remember – if a company does not have bonding, this does not necessarily imply negligence. In many parts of the world it is simply not possible to obtain this kind of insurance, even though many overseas companies would like to be able to offer reassurance to their travelers.

How to reduce risk

Until recently, local operators were unable to book flights at all – and many are still unable to do so. In the event that a local operator does offer to book your flight, we advise against this as it is one less thing to worry about should the operator get into financial difficulties; far better to book your own.
We always recommend paying for any services – including flights – with a credit card, although if you are not using a credit card issued by a UK bank, you will still need to check if your credit card company offers protection and refunds. Some smaller, local companies may not be able to process card payments, with PayPal or bank transfers being the preferred method of payment – but if you can pay by a credit card, then do. You are still saving money by booking with a local operator, so think of the small credit card fee as a form of basic insurance. Some tour operators may only require full payment on arrival – which, of course, reduces risk even further.
Always purchase travel insurance. If you are booking an accommodation-only vacation (i.e.. directly with a hotel or guesthouse) make sure your travel insurance covers “end of supplier failure”. We have not found travel insurance company that covers end of supplier failure for a tour operator. Finally, make sure you are comfortable with the payment terms. The further in advance you pay, the greater the risk. If you are not comfortable with that risk, and are planning on traveling outside the EU, then book the vacation with a UK-based, bonded operator.

Other things to take into consideration

One of the main incentives to tourists of booking with a local operator is that the price may well be lower. However, as with anything you purchase, the trade off is that paying less may come with a slightly higher element of risk, and you need to understand the financial protection they have in place.

But equally, it’s important to note that a locally run vacation company is no more likely to experience financial difficulties than a large multinational. It’s just that if they do, the bonding may not be in place to ensure you are refunded or repatriated.
“I have to say I was wary about sending money to Kathmandu and booking over the internet. Don't be, Achut from the operator is extremely professional and thorough… he could not do enough for me. I will certainly be using his company again.”

- Eleanor May Gilchrist on a Tibet cultural vacation with Manakamana, our Nepal-based tour operator
Photo credits: [Top image: joiseyshowaa ] [Credit cards: 401(K) 2012] [Help desk box: Ninara]
Written by Vicki Brown
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