Commentary: Tourism Matters: Perhaps this represents an enormous opportunity

Commentary: Tourism Matters: Perhaps this represents an enormous opportunity

By Adrian Loveridge

Our British and many of our Continental European holidaymakers look like they are in for a little relief next year. The current annoying and described by HM Treasury as ‘rip-off ‘ surcharges that apply to a large percentage of flight and holiday bookings both in-store and online are scheduled to be banned from 13th January 2018 under the second EU (European Union) Payment Service Directive, known as PSD2.

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Adrian Loveridge has spent 46 years in the tourism industry across 67 countries, as a travel agent, tour director, tour operator and for the last 24 years as a small hotel owner on Barbados. He served as a director of the Barbados Hotel and Tourism Association, and as chairman of the Marketing Committee. He also served as a director of the Barbados Tourism Authority and is a frequent writer on tourism

Initially this will affect payments by Apple Pay, PayPal, credit and debit cards and American Express.

The description by a British government department as a ‘rip-off’ is more than a little hypocritical, as a number of state entities also levy these exploitative charges including HM Customs and Excise and the DVLA (Driver Vehicle and Licensing Agency) along with several local authorities.

According to consultancy firm, RSM (formerly Baker Tilley), it will cost the UK travel industry up to £150 million, presumably annually.

The current rules do not allow businesses to profit from surcharging, but the actual costs they incur can be passed on.

TravelMole recently reported that the UK Card Association’s latest card expenditure statistics for the year to April 2017, show that consumer credit card spend with British travel agencies was £7.5 billion.

Based on charges of between 0.5 per cent and 2 per cent of the transaction value, this indicates a cost implication in the range of between £35 million and £100 million across the sector.

RSM’s head of travel and tourism, Ian Bell, stated, “As a result, travel operators face some difficult choices as to whether they choose to absorb the additional costs or pass them on to consumers in the form of increased headline prices or new booking fees.”

Of course, travellers use credit cards to pay for travel arrangements for any number of reasons, including staggering installments over a period of months and for added consumer financial security if there is any doubt that the operator carries sufficient failure protection.

The new ban builds on an EU directive originally launched in 2015 that capped the ‘interchange fee’ paid by the merchant at no more than 0.3 per cent for credit cards and 0.2 per cent for debit cards. At the time, the EU noted that the surcharges, which are only supposed to reflect the cost of processing payments, generated as much as €13 billion a year across Europe.

While there appear to be no recent figures for the UK, the British Treasury says the surcharges generated a ‘best estimate of £473 million in 2010.

Some merchants have taken surcharges to a ludicrous degree by applying a ‘service fee’ on top of an ‘order processing fee’ and occasionally a ‘facility fee’.

The ban is almost certainly going to negatively impact on the smaller tour operators and independent travel agents disproportionately and this in itself may help stifle real competition and could lower service standards.

Perhaps this now represents an enormous opportunity for the entire travel industry with a united consensus to go back to the banks and financial institutions to re-negotiate downwards processing and merchandising fees together with other handling charges.

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