'We Don't Hide Anything': Advisors and ASTA React to USA Today's 'Ponzi-Scheme' Claims

ASTA yesterday issued a statement in response to a recent USA Today article, which claimed that many travel agencies have been misusing travelers’ deposits.

The article, entitled “Coronavirus has exposed a secret underbelly of the travel business: Ponzi-style schemes to pay bookings," claims that many travel agencies were operating Ponzi-style schemes in which one traveler's deposit pays for a previous traveler's tickets and accommodations, and so on.

ASTA quickly came to the defense of its member advisors, citing the protections and standards in place to prevent this type of misconduct. 

“To suggest that this is the business practice of all travel agencies is categorically false,” said ASTA in a statement.

“When travel agencies join ASTA, they pledge to abide by its 12-point code of ethics, which prohibits business practices like the ones described in this article. Members found to have violated the code can be, and have been, expelled from the association. That being said, the number of legitimate consumer complaints against ASTA member agencies warranting the imposition of discipline is extremely low.”

Rachelle Settle, cultural and adventure travel specialist for Wanderlove Travel, told Travel Market Report that traveler’s deposits should always be used to pay suppliers, and go directly toward the cost of the trip, and maintaining transparency regarding the process goes a long way towards fostering trust with clients.

“I only use traveler’s credit cards to pay directly to suppliers, and after the deposit has been placed, I send an updated invoice showing that the deposit went right to the supplier,” said Settle. “On the consumer side, the question is where is this money going? Just like it would be for any other deposit on a purchase… [and] if you’re not putting a deposit towards an actual trip, than you really don’t know where that money is, and it can be used for other things. If you’re going to collect a deposit, and it’s just sitting there, it can be misappropriated.”

“That’s just a bad practice, I would never take a client’s money with the promise of it going somewhere and me holding on to it. It isn’t transparent, and also I won’t be able to show them that that money went directly to their trip.”

ASTA alleges that the article made sweeping claims about the standards and business practice for travel industry that wasn’t representative of the overall agent community.

“As with any industry, a few bad apples are not reflective of the whole batch, and the actions taken by the agencies cited in the piece are anything but representative,” said ASTA. The association also emphasized that travel agencies have to follow DOT, FTC and local and state regulations when selling travel, and that ASTA member agencies follow strict ethical guidelines which prevent this type of misconduct.

Sue Rice, owner of New Era Travel says it’s all about transparency when dealing with clients. They need to be able to know they can trust you with their travel plans, their money and their safety while they’re abroad.

“With our clients, we don’t hide anything. Everything we do is shown straight away, and every charge is transparent,” said Rice.

“The right way to conduct business is to take a deposit for what your suppliers require, taking extra money to fund your business is not fair to the client. I’m really not aware of anyone doing that, and I’m really shocked because that’s really dishonest.”

“That’s dangerous for multiple reasons. If they take deposits and are stockpiling in a bank account, and something happens to their business, where does that leave the client. I think it’s very important that advisors disclose what they’re doing. If they’re charging a service fee, disclose it, if they paid their [tour] operator, disclose it, because at the end of the day, as travel advisors, we want to make sure that what we’re doing is on the up-and-up and that it’s all fair.”

According to Sofia Markovich, owner of Sofia's Travel LLC, an American Express Travel Insider, it's an easy accusation to address.

“First and foremost, agencies don’t hold on to deposits but apply them directly with the vendors they are booking for their clients. I'm not sure who the The USA Today reporter met with or where they got their information but it is not reflective of the business practices of the travel industry.”

Markovich said more research needed to be done by the outlet to “uncover these actions are not the foundation of the travel industry but reflective of unscrupulous characters which exists in many different industries. Our business is building on relationships, trust and loyalty with our clients, supplier partners and affiliations.”