Protect yourself. That’s the advice Houston attorney Rose Hache offered travel agents in the wake of last month’s shutdown of Seattle-based Cruise West.
“Travel for either leisure or business is an investment,” said Hache, who specializes in travel agency law. “It’s essential to protect that investment. We live in a world which is politically volatile; there are weather hazards, volcanoes that erupt, the vagaries of life.”
Hache advocates selling travel insurance with every booking. “If a problem arises, like a default, the client will look to be reimbursed; you’re protecting yourself. You also want to do the best you can as a travel advisor to your client. It’s an extra layer of protection for all the parties in the transaction.”
Travel Market Report asked Hache how best to guard against supplier default (and other unpredictable hazards of travel) and minimize losses to both clients and the travel seller. The following tips are drawn from TMR’s conversation with Hache and from ASTA’s Guide to Supplier Bankruptcies, which Hache recommended as a complete resource.
1. Mandate the sale of third-party insurance with every sale. Sell only travel insurance that covers trip cancellations for any reason. Make sure employees comply with your directive.
2. Be sure the insurance covers supplier default as well as cancellations and interruptions. Verify that the policy covers the relevant suppliers. (Major third party travel insurance providers include: Access America, Travel Guard and Travelex.)
3. If clients decline insurance, insist they sign a waiver that delineates your role as an agent for the supplier and states that your agency is not liable for a supplier’s failure to provide services.
4. Understand the difference between supplier protection plans and third party insurance so you can inform clients. For instance, unlike insurance, protection plans are not regulated. Most exclude coverage in the case of supplier bankruptcy, and coverage is often limited to the cruise or tour portion of a trip.
5. Urge clients to pay with a major credit card, rather than cash or check. Under the Fair Credit Billing Act, credit card holders can dispute charges for goods or services that were not delivered as promised.
6. If clients insist on paying by cash or check, have them sign a waiver indicating that they were advised to use a credit card.
7. Be selective about your choice of suppliers. Whenever possible use the suppliers on your consortium’s preferred vendor list.
8. Sell tour companies that participate in USTOA’s consumer protection plan, which will reimburse travelers’ deposits and payments (but not agency commissions).
9. Make sure your staff subscribes to and checks daily alerts, such as those issued by your marketing consortium, ASTA and ARC. Scan the news for information regarding suppliers.
When a Supplier Defaults
If a cruise line ceases operations, as in the case of Cruise West, consumers may have financial protection under the Federal Maritime Commission (FMC). The Commission requires ship lines to maintain surety bonds for cruises scheduled to board passengers in U.S. ports. However the Commission warns that reimbursement from third-party insurers and credit card issuers may be faster than for claims submitted through the FMC process.
(To file a claim through the FMC claims process for Cruise West sailings scheduled for U.S. ports, clients may do one of the following: 1) send an e-mail to firstname.lastname@example.org; 2) mail a request to Cruise Claims c/o Wells Fargo Disability Management, Box 1567, Abingdon, VA 24212; 3) call 877-371-9700, Ext. 6059, or 4) fax 276-676-0152).
If a client’s trip is interrupted or cancelled because the supplier has filed Chapter 7 bankruptcy, advise the client to file a claim and offer to assist in the process. If the supplier owes you commission, you too should file a proof of claim form.
Finally, if you sell travel on a supplier that is reorganizing under Chapter 11 bankruptcy, be sure to inform the client of the vendor’s status.