EU tourism value chain and consumer protection: Why pre-payments are crucial

There is no other sector that offers its customers a higher level of consumer protection than the tourism industry with its package holiday. For this form of travel, pre-payments are crucial to offer attractive prices. In the workshop “Payment tourism value chain – where does the money go?” supported by MEP Istvan Ujhelyi, Ralf Pastleitner, Director for International Public Policy and EU Affairs at TUI Group, discussed the future of pre-payments in Europe with other EU and travel and tourism representatives. 

Pre-payments: Important part of the European package travel supply

Discussions during the workshop: (l. t. r.) Luís Canha Campos, Portuguese National Tourism Authority EU Delegate, Ralf Pastleitner and Matthieu Tétaud, Air France-KLM.  

As a result of the pandemic and the general crisis of the tourism industry, many questions arise regarding the flows in the travel industry of pre-payments made by consumers. Currently, proposals to reform the EU Package Travel Directive (PTD) are being discussed in Brussels, including possible restrictions on advance payments. 

Pre-arranged travel packages are an important part of TUI’s business and offering quality customer care and protection remains crucial in this highly competitive market. TUI negotiates with hoteliers to reserve a part of their peak season capacity under favourable terms. In return, an advanced payment is made to enable the hoteliers to modernise their hotels during the winter for the upcoming season. Similar deals exist with third-party airlines who deliver extra flight capacities in summer. For that, TUI requests pre-payments of 20 to 30 percent from the customers upon booking. The pre-payments also support our network of SME travel agencies und our own operations. Amounts received from customers are fully protected within the current regulatory framework, which is unique to the tourism sector. 

Package travel holidays in the EU: Preventing further limitations

TUI’s Ralf Pastleitner explaining the functioning of the travel value chain.

In past crisis situations, the travel industry has shown its great flexibility, also when it came to providing refunds during the pandemic. It is important to remember that this was an exceptional situation that should never be used as a benchmark for regulation in everyday business. In addition, Europe is now facing a period of high inflation, which limits the disposable income of customers, who in turn become increasingly price-sensitive. Therefore, it is now more important than ever to offer high-quality package holidays at a fair price.

Package travel providers and particularly global players like TUI are part of a highly competitive market in which also travel platforms from non-EU countries are present, quite often focusing on offering loose travel services with low customer protection. 

In this context, TUI warns against overly regulating the European package travel, especially through rules that would only increase costs without bringing any real benefit to EU consumers. Further restrictions on this form of travel will damage EU-based suppliers in direct competition – to the detriment of consumers.