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Comment: Expedia’s Add-On Advantage could shine light on the virtues of tighter package rules

Posted by Lee Hayhurst on
Comment: Expedia’s Add-On Advantage could shine light on the virtues of tighter package rules

Expedia launched a new TV campaign this week that coincided with new package travel rules that came into force in Europe at the weekend.

The EU Package Travel Directive (PTD) became law on Sunday July 1, considerably expanding the scope of rules governing the sale of holidays in a bid to keep pace with the online sector.

In the UK the government estimates that the new regulations will mean 10 million more holiday sales will enjoy added consumer protection, either financial or product liability.

However, the rules allow for a form of sales that fall short of the new definition of a package called Linked Travel Arrangements (LTAs).

These are sales of separate components when one product is bought and a second added via a targeted marketing click through as long as the second sale takes place within 24 hours.

Outside of this 24-hour period the components are considered to have been bought in totally separate transactions.

LTAs are a more loose arrangement than the so-called Flight-Plus holiday that has been legal in the UK since a revision to the Atol financial protection scheme in 2012 and were not considered to be full packages but have now been subsumed by the new PTD.

There are other additional rules governing what data can and can’t be passed from one vendor to the other to ensure the arrangement fulfils the criteria for an LTA.

However, the key thing with LTAs is they provide a much lower level of protection for the consumer than a package and therefore can be sold at lower cost by the retailer who avoids the full legal and customer service responsibilities of a tour operator or organiser.

No experts on the regulations in the UK believe LTAs offer a viable way to avoid the heavy hand of the new laws, although German legislators have taken a completely opposite view – one which is expected to be referred to the European Court of Justice and defeated.

Expedia, which has in fact most recently been extolling the virtues of booking more than one travel product at the same time on its site, chose Monday for a high profile TV launch of a slightly different take on self-bundling product, the Add-On Advantage offer.

This guarantees the booker of a flight a discount on a subsequent hotel room booking right up to the point of departure. Expedia insists Add-On Advantage ensure customers are not rushed into booking their hotel having secured their flight.

Another way of seeing this move by Expedia is that it’s their way of reassuring its bookers who prefer to buy components separately and at different times that they can continue doing so despite the new rules.

These “relaxed” bookers who like to take their time compiling the elements of their trip will always fall outside of the regulations because they will be considered to have entered multiple individual transactions and therefore not bought a package.

The EU package law change generated plenty of press over the weekend and, while it’s still perfectly legal to sell multiple travel product in this way, it’s clear regulators would prefer it if customers were buying holidays with protection.

After all, specific laws on holiday sales exist, when they don’t in other sectors where customers pay upfront for something they don’t receive immediately, because law makers want there to be an entity in the consumer’s legal jurisdiction taking responsibility for the product in case of any issues.

Following Sunday’s law change Which?, the powerful UK champion, declared “package holiday regulations have finally been dragged out of the dark ages”. Travel editor Rory Boland said: “These new rules mean far more holidays will be classed as packages, giving holidaymakers protection when something goes wrong.”

Unsurprisingly Expedia’s Add-on Advantage campaign has come in for criticism from the traditional tour operator community, this time in the form of Aito, the Association of Independent Tour Operators.

It claims the OTA is urging customers to book in a way that affords them less protection and is “cynically” guiding them to book in ways in which they miss out on “gold-plated” protection.

It’s worth pointing out that Expedia is the UK’s fourth largest Atol holder, licenced by the Civil Aviation Authority to carry 1,416,227 Atol-protected customers a year.

Assuming each of those pays the full £2.50 Atol Protection Contribution fee Expedia contributes a maximum of £3.5 million each year to the trust fund that provides a pot of money to pay for Atol claims and repatriations in the event of company failure.

Last year that fund was forced to fork out £60 million to fund a massive repatriation when charter airline and tour operator Monarch Group went bust leaving 110,000 holidaymakers stranded overseas.

Expedia’s big rival, on the other hand, Booking.com and its associated brands in the Booking Group have no Atol licences because it has not, until recently at least, promoted the virtues of bundled components to its customers.

However, its new push to position itself as a “one stop shop” for travel having integrated its ground transportation (Rentalcars) and flights (KAYAK and Momondo/Cheapflights) divisions may change all that under the new rules.

To a large extent what lies behind this is a pretty well-informed bet on how consumers want to behave when booking their travel, and a stab at making it so easy that they are encouraged to opt for the options they find most convenient and good value.

Do holidaymakers really prefer to buy their components over an extended period risking the possibility that after securing their flight they can’t find the right accommodation? It’s unlikely, but then not all of Expedia’s clients are classic beach holidaymakers.

What’s not in doubt is Expedia has a dedication to a test-and-learn philosophy that will see it use the enormous amount of data it collects on customer behaviour to hone the experience it offers.

Customers are perfectly at liberty to choose to buy holidays in ways that turn out not to be optimal for them if something goes wrong.

What the new EU package rules have done is gone some way to clear up a grey area where previously it was unclear precisely what protections consumers were entitled to and who was vouching for the product on sale.

Despite the criticism from operators, Expedia’s Add-On Advantage campaign should serve to highlight the now clear difference between buying a package or not, as long as regulators ensure sites are open and transparent about the protections offered.

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