Abta 2012 Special Report: OTAs use Convention to voice discontent with Abta

Abta 2012 Special Report: OTAs use Convention to voice discontent with Abta

Read all our other Abta Travel Convention 2012 coverage here

Ian Taylor reports from Abta's Travel Convention in Turkey

Leading online travel agents (OTAs) are threatening to break from Abta over lobbying in Brussels and take their own message to the European Commission.

A group of at least five companies - Travel Republic, On Holiday Group, Low Cost Holidays, On the Beach and Alpha Rooms ­- are furious at what they perceive as a betrayal by Abta in its attitude to a forthcoming revision of the Package Travel Directive (PTD).

The association believes the OTAs are wrong, fail to appreciate Abta's need to represent all its members and fail to understand the lobbying process.

On Holiday Group chief executive Steve Endacott led the charge at Abta's Travel Convention, but with Travel Republic managing director Kane Pirie equally critical. Pirie sits on Abta's board.

They believe the European Commission plans to extend the Directive to OTAs, turning their businesses from agencies into travel organisers with all the liabilities that accompany being a tour operator. They may well be right.

At a Convention session on the Directive, Endacott didn't mince his words. "I have a fundamental disagreement with Abta," he said.

"I'm shocked that Abta has been lobbying for us all to be within the Directive. It does not have a mandate.

"There is a fundamental conflict between tour operators and ourselves. Abta is not representing the views of OTAs and travel agents . . .  I'm asking Abta to put this to its members."

Endacott was supported by leading industry accountant  Chris Photi, partner with White Hart Associates. Photi argued: "This is not about tour operators versus OTAs. It is about the fundamental right [to be] a travel agent."

He warned: "The EC will say 'Flight-Plus is a package'. Agents could lose one sixth of their margin and have to take full liabilities. They will take on more risk and have to pay for that. Ultimately it will harm the consumer."

Unsurprisingly, Thomas Cook head of government and industry affairs Andy Cooper did not have the same view, although he downplayed the level of disagreement.

Cooper said: "The EC is going to make a proposal. Our objective is to make sure what comes out is something we can work with. We are in 95% agreement. We are all intermediaries - OTAs, tour operators and agents."

He argued: "We have three principles. We all want transparency about what is protected and the nature of protection, we want any solution to be proportionate and we want consistency.

"The tour operator view is that there should be consistency of obligation and of rights - whether a consumer buys from an intermediary or direct from a supplier.

"The battleground is on a relatively small aspect of this. We should agree the principles rather than say our trade organisation is not representing us."

Abta chief executive Mark Tanzer told Endacott: "We consulted our members [on changes to the Directive] in 2009. We are constantly in touch with our members.

"Some are not doing dynamically packaging. Some don't want to be the only sector to have to say 'We are not protected'. You can't assume they have got this wrong.

"It is not true that Abta has a bias towards tour operators. We have four agents on the board, including the chair, two tour operators and two vertically integrated companies.

"The case we fought against the CAA [over what is a package, in 2006] was entirely in the interests of agents.

"It's not true to say the whole Abta machine is flawed because a sector do not agree with our position. But that does not mean individual members cannot go and represent their own interests separately.

"Abta would support you in doing that. But Abta has to represent the majority of members."

Tanzer added: "I don't think a public spat helps the case. It is a delicate issue we need to work through. All sorts of arguments could come back to haunt us."

Endacott insisted: "I'm not criticising agents' response to the Abta consultation [in 2009]. I think if you asked the question again the answer would be different.

"The way this is going is dangerous to agents and OTAs. The agenda of tour operators is different from that of travel agents.Tour operators want a level playing field."

This is the crux of the matter. Pirie made this clear at a separate Convention meeting when he said: "The level-playing field argument is not right. We have different business models and need to be regulated in a different way."

However, Tanzer told the OTAs: "You can bang your head or you can work to try to get the position changed. As soon as we see the directive we will consult our members and, in light of that, review our strategy. But you have to look at the reality in Brussels.

He added: "We'll fight for agency status. That is the biggest issue and that is where we can all work together."

Outside the debate, Tanzer told Travel Weekly: "I can understand why the sector is worried and trying to mobilise other agents. But at the moment these are the voices of a small number.

"No one knows what is in the PTD proposals yet. However, the review has been undertaken with a view to extending the scope of the Directive not reducing it.

"People do have a responsibility for what they sell and [in turn] can seek redress from suppliers. That is the reality.

"I'm not saying the cost of this would be negligible. The bigger issue is tax: it might make it more likely a company would be seen as a prinicipal. The advice we've had is that agents could still do this as an agent."

Referring to the process of introducing Flight-Plus, Tanzer said: "The government was determined to introduce protection for these sales. We were determined agents should be able to provide protection while remaining agents.

"The OTA position is that they want Flight-Plus in Europe. We've said it's critical the EC allows agents to carry on as agents and not be forced to become principals. That is our position and it has been consistent."

"We want to work with the OTAs. We don't want an internal dispute to affect our ability to lobby effectively."

There is an irony in that some of the main protagonists in the row were among the sharpest critics of Flight-Plus. In the course of yesterday we heard: "The fight is for Flight-Plus" (Endacott); "Atol reform has gone well, it seems fine" (Pirie); and "Flight-Plus is a really good system, we should be fighting for it" (Photi).

But the concern at the heart of their opposition to what is on the Brussels horizon is real.

The extension of the Package Travel Directive may well make it difficult to sell a flight and a room without being considered a travel organiser. That would add costs and, crucially, bring liability for VAT under the Tour Operator's Margin Scheme (Toms) - destroying the margin of businesses based on low-priced dynamic packaging.

The clue to the concern was identified by Peter Hemington, head of corporate finance at financial firm BDO, at a separate Convention session.

Referring to the takeover of Travel Republic by Dubai-based Dnata in January, Hemington pointed out: "Travel Republic grew from nothing into a business with a transaction value of £450 million, generating a £10-million annual profit. . .  It's a tough environment."

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