If you’re running overnight trips, you need to make sure your customers have financial protection. Luckily there’s an easy way to do that – by using the Confederation of Passenger Transport’s Bonded Coach Holidays scheme
A calamity befell the travel and tourism industry in September 2019.
As a venerated and ancient holiday brand hit the headlines with its abrupt closure, it marked the end of over 150 years of social history. More importantly, it left 150,000 holidaymakers stranded abroad – and many thousands more left scrambling to repair broken holiday plans.
You might consider that there is something of a gulf between the size of your organisation and Thomas Cook’s, but there may be valuable lessons in the latter’s demise that you can apply to your own business, especially if you’re currently running package tours.
Bonded Coach Holidays: The simplest and the cheapest
There is a complex list of regulations to comply with if you run holidays – but an easy way to meet them. A package holiday is usually legally defined as a trip of over 24 hours or an overnight stay, with travel and accommodation included.
If you’re running coach tours, you need to have consumer financial protection in place, and this comes in three forms: Insurance, a trust account, or a bond, issued by a bank or insurer.
The coach tourism industry’s government-approved bonding scheme is called Bonded Coach Holidays (BCH), run by the Confederation of Passenger Transport (CPT), and it’s by far the simplest and cheapest way to ensure you have protection.
There are other bonding schemes – ATOL specialises in flights, and ABTA covers travel agents; but BCH is the bespoke scheme for the coach industry. To join it, you must hold an O-Licence and be a member of CPT.
How to join Bonded Coach Holidays
Joining BCH is relatively easy. Every year you submit an application to an independent panel made up of professionals who understand the industry, but are not directly involved in coach tourism.
They consider all applications. They also set the bond levels, which are typically 10% of the business’s package tour turnover.
The bonds are provided by the operator’s bank or through the operator’s broker with a specialist insurance company, plus joining fees.
BCH also has an insurance policy, to cover refunds if the bond cannot. It’s more cost-effective and easier to administer than a trust account, says BCH’s John Miller; a trust account can tie up an operator’s income and lead to cashflow problems.
Each member of BCH is audited at least every two years. “It’s an opportunity to help the operator to keep up to date with changes to legislation,” says John, adding that BCH sees very few business failures – the last major coach firm insolvency was seven years ago. “It’s a scheme that works well.”
BCH offers a legal advice scheme for its members in relation to coach package holidays, and it works closely with the Trading Standards Institute, which is invaluable, says John. As an example, if a customer has complained, the operator can get advice directly from the Institute – and in most cases its response will settle the matter.
New regulations for operators to be aware of
The legislation operators need to stay abreast of includes the new Package Travel and Linked Travel Arrangements Regulations, which came into force in July 2018.
The main changes in these regulations, relevant to coach tour operators, are two-fold: They tighten up the rules on trust accounts and insurance for repatriation, and they have stipulated that descriptions in brochures must be much more precise on how suitable each holiday is for people with reduced mobility.
BCH works with its members to make sure brochures are compliant, and offers practical advice. As an example, John recalls when a holiday was booked with one of BCH’s members, and the person dealing with the booking was concerned about the mobility of the potential client.
The client insisted on booking the holiday – but then had to curtail the holiday due to her medical condition, and sued the operator on the basis that the holiday had been mis-sold.
Fortunately the BCH member had written to the client advising that in their view the trip was unsuitable, and the legal action subsequently taken by the client’s family failed.
“It’s essential that if an operator has any kind of doubt, they should put it in writing on the confirmation invoice,” says John.
The new regulations also cover linked travel, which isn’t wholly relevant for coach holidays; it refers to non-package products booked together, usually online.
The Package Travel Regulations won’t be going anywhere after Brexit.
“The UK has always been the leader for consumer protection in the EU,” says John, adding that they will be re-enacted into UK legislation.
When a business goes into administration…
If your business goes into administration while you have coach tours in progress, BCH steps in to bring your passengers home – but not before they have enjoyed their full time away. “That’s the difference between BCH and ATOL,” says John. “We make sure people get to complete their holidays.”
BCH either agrees with the administrators to keep a coach with the holiday party, or if that’s not possible, it calls on another member of BCH to collect the passengers and bring them home.
It acts fast. John remembers when a large coach operator went bust 10 years ago, and its IT supplier was taking back equipment because it hadn’t been paid. BCH managed to obtain a copy of the operator’s bookings information before the data was lost – vital in ensuring would-be passengers got their refunds.
If a BCH member is seeing financial difficulties, John advises them to get in touch with BCH urgently, as it has links to business recovery firms, and there could be ways of saving the business.
If your business is not subject to financial protection
BCH does receive reports on operators that are running holidays without financial protection. These reports are passed on to Trading Standards to follow up – and, happily, in some cases they result in the operator joining CPT and BCH.
If an operator became insolvent without the necessary consumer financial protection in place, then it would be the responsibility of the administrator to make sure the passengers on holiday were repatriated.
In this situation the administrator would probably have to terminate the holiday, too. Subsequently legal action could follow. Trading standards is currently investigating a handful of operators with no protection in place. John says: “Consumers need to be protected, and BCH is the best way of doing it.”
Lessons from the Thomas Cook affair
There is another lesson for operators from Thomas Cook.
The business’s failure has caused other tour operators who sold their tours through high street travel agents to review their credit control facilities.
Thomas Cook was pushing operators to allow 90-day credit terms, instead of the more usual 30-day – and as operators had signed contracts allowing it, they are not able to regain their costs through the administrators or ABTA.
John says: “Operators are well advised to sharpen up their credit control practices where dealing with agents.” He adds that BCH has draft agreements for members who work with travel agents to use.
John says there seems to have been a slight resurgence in coach trips and holidays in recent years. “We’re certainly encouraged by the number of new applications.” As he reiterates the importance of ensuring customers’ money is protected, he says: “We know BCH is the best way of doing that.
“It’s government-approved, it’s working closely with Trading Standards, with a trading charter agreed with it, and it’s easy to deal with – and it complies with all the regulations.”