When will businesses be required to lodge guarantee?
Assisted travel arrangement
Faulty performance by the travel organiserThe Act on Travel Service Combination Providers, i.e. the guarantee Act, and Act on the Supervisory and Insolvency Protection Fee Provided by Providers of Travel Service CombinationsTravel packages and consumer protection
When will businesses be required to lodge guarantee?
The Act on Travel Service Combinations defines when a product is considered a travel package or assisted travel arrangement. These products are jointly referred to as travel service combinations. If a business offers travel service combinations, it will be governed by the Act on Travel Service Combination Providers and be obligated to lodge guarantee subject to certain conditions.
All travel service combination providers are not required to lodge guarantee or pay the supervisory and insolvency protection fee. Only traders who offer travel service combinations or promote assisted travel arrangements and charge advance fees from travellers will be required to lodge guarantee.
The guarantee is lodged to secure refunds for all travellers who have made advance payments to the travel organiser in the event of bankruptcy or other insolvency on the part of the organiser. The guarantee must also cover the costs of return transport for the travellers, even if no advance payments have been collected for the return trip.
Packages purchased on the basis of a general agreement for the arrangement of business travel also fall outside the scope of the Act. A general agreement, as referred to in this provision, is an agreement concluded between an organiser and a corporate customer acting for purposes related to their business, trade, craft or profession. Such an agreement is generally concluded with the organiser for an indefinite or certain period and concerns several journeys with regards to the company’s business or trade. The organiser must place a security that covers all travel service combinations not purchased on the basis of a general agreement, as referred to in this provision.
Travel service combination providers can avoid the obligation to lodge guarantee by not charging advance fees. The new opportunity to reduce the amount of guarantee if the business is on a sufficiently sound basis is also intended to help businesses.
The new legislation will replace the concept of package holidays with travel packages. At the same time, the definition of the concept will be expanded from packages created by the travel organiser in advance or at the request of the traveller to also cover, for example, travel service combinations compiled by travellers on the service provider’s website by signing separate agreements with different service providers.
A new combination covered by the legislation consists of click through packages, in which the travel services are purchased from different traders through connected online booking procedures, in which the traveller’s name, payment details and e-mail address are transferred from the business that sold the first travel service to a second trader and the agreement for the second travel service is signed within 24 hours of confirming the first booking.
In such packages, the business that sold the first travel service will constitute the travel organiser.
Assisted travel arrangement
The scope of the Act will also include assisted travel arrangements, in which the trader assists the passenger in making separate agreements with other service providers.
An assisted travel arrangement is created when a business contributes to the traveller’s choice of and payment for individual travel services during a single contact. The difference between a travel package and assisted travel arrangement is that, in an assisted arrangement, the traveller does not choose all travel services before undertaking to pay for them. Rather, the traveller will first choose and undertake to pay for one service before selecting the second.
An assisted travel arrangement is also created if the trader promotes the purchase of at least one complementary travel service from a different business in a targeted manner, such as through a link on its website, provided that the agreement with the second trader is concluded within 24 hours of confirming the booking for the first travel service.
From the provisions of the new Act, the trader assisting in the compilation of an assisted travel arrangement will principally only be bound by the notification duty and the obligation to obtain guarantee for the event of its insolvency. The other regulations concerning travel organisers would only apply to such traders if they neglect the notification duty or obligation to obtain guarantee for the event of their insolvency referred to in the Act.
The creation of a travel package or assisted travel arrangement will still require the traveller to purchase a minimum of two travel services of different types for the same trip or holiday. In addition to transport and accommodation, travel services include the hire of vehicles such as a car, motorbike or scooter, and other tourism services. Tourism services include, for example, entrance to concerts, sports events, tours or theme parks, guided visits, ski passes and sports equipment rental and spa treatments.
If a tourism service such as a ticket to an event is connected to another travel service, such as accommodation, the combination constitutes a travel package or assisted travel arrangement only if the travel services included in the combination represent a major part (at least 25%) of the combination’s value or are otherwise an essential part of the combination or have been marketed as such.
As in current practice, trips with a duration of less than 24 hours that do not include accommodation remain beyond the scope of the Act, as do travel service combinations marketed to specific groups occasionally and without seeking financial gain. Neither will the new Act cover travel services purchased under a general agreement concerning business travel.
The new Act contains more detailed provisions on matters that travellers have to be notified of before signing a travel package agreement or creating an assisted travel arrangement. In addition to this advance information, travellers would have to be informed of their statutory rights with a standardised notification form.
Travellers have the right to cancel a travel package agreement without special reasons and at any time before the start of the trip.
According to the new Act, when a traveller cancels a travel agreement, the organiser will be entitled to charge an appropriate and justified cancellation fee corresponding to the losses suffered by the organiser due to the cancellation. In other words, travellers may be required to pay larger cancellation fees to travel organisers under the new Act.
As before, travellers will be entitled to cancel their trip with no cancellation fee in certain situations, such as if unavoidable and exceptional circumstances prevailing at the destination or its immediate vicinity have a significant impact on the agreed implementation of the trip, or if the traveller has another justified reason to assume that the travel organiser’s performance will be significantly faulty.
A traveller will also have the right to cancel the trip with no cancellation fee if the organiser makes significant changes to the agreement or increases the price of the travel package by more than 8 percent.
Faulty performance by the travel organiser
If the travel organiser’s performance is faulty, the traveller will have approximately the same rights under the new Act as under current legislation, including the rights to have the fault rectified, obtain a discount, cancel the agreement and receive compensation.
However, the new Act will improve the rights of travellers in the event of faulty performance in certain respects. For example, the new rights include the traveller’s right to a separate compensation for the loss of travel or holiday enjoyment. The loss of enjoyment can entitle to compensation in situations such as a serious illness contracted from meals included in the travel package. However, being compensated for the loss of enjoyment requires a significant fault in the performance of travel services.
The Act on Travel Service Combination Providers, i.e. the guarantee Act, and Act on the Supervisory and Insolvency Protection Fee Provided by Providers of Travel Service Combinations
The new guarantee system will still be based on individual securities deposited by travel organisers as guarantee. The system will be complemented with a deferrable appropriation included in the state budget. The primary uses of the appropriation will be the arrangement of return transport for travellers when the rapid use of the guarantee would be problematic and the prompt payment of compensations to travellers. The appropriation will also ensure full compensation in the event that the guarantee turns out to be insufficient.
This deferred appropriation nevertheless requires the travel agency industry to cover its estimated costs (the expenses compensated from the appropriation) with an annual tax, i.e. the new insolvency protection fee. The amount of the insolvency protection fee is determined by travel service combination sales revenue of the registered companies.
The amounts of both components of the supervisory and insolvency protection fee will be reviewed in approximately two years from the entry into force of the Act.