Why the price of sun holidays is likely to rise next year

Sun holiday prices could rise next year as regulators bid to replace cash paid from a fund to compensate consumers for failures such as Lowcostholidays.

The Commission for Aviation Regulation (CAR), which oversees travel companies, confirmed that it paid €3.5 million to Irish people stranded by the collapse of Spanish-based Lowcostholidays last summer.

According to a commission spokesman, that and other payouts have cut a fund used to compensate holidaymakers when travel companies collapse to €1.8 million from €7.5 million.

He said that to replace the cash, the watchdog is considering levying extra charges on travel agents and tour operators, who are likely to pass this cost on to customers, pushing up package holiday prices from next year.

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Pat Dawson, chief executive of the Irish Travel Agents' Association, predicted that most of its members would pass on the cost of any extra charge imposed by the regulator.

“With bonding and the other regulations that are already there, people are paying about €3-€5 a person,” he added.

Travel agents pay 4 per cent and tour operators pay 10 per cent of their turnovers in bonds to the CAR to compensate customers should their businesses fail.

However, the commission wants to top up the Travellers’ Protection Fund, used to compensate consumers when the agents’ or tour operators’ bonds fall short, which happened in Lowcostholidays and other cases.

Collapsed agents

The fund was built up through a levy on the industry in the 1980s that no longer applies. It stood at €7.5 million in 2007/2008 and began falling when a number of agents went out of business during the recession.

Lowcostholidays, which folded suddenly 12 months ago and left 15,000 Irish people out of pocket, was one of its biggest payouts. Just €1.8 million was left in the fund at the beginning of this year.

“We want to be able to afford the same level of protection to people who book holidays through travel agents and tour operators that they have always had,” the CAR’s spokesman explained.

He added that the commission was weighing a number of options for this, including an extra charge on the travel industry or increasing bond payments. “There are many different ways of doing it,” he said.

The regulator, led by commissioner Cathy Mannion, will publish details of a review that it is now carrying next month and will ask travel agents, tour operators and the public for their views.

Mr Dawson said his industry has already proposed a new system under which all travellers from the Republic would pay 50 cent on top of their outward fare.

This would cover holidaymakers against all possible business failures, travel agents, tour operators and airlines, which are not covered though the current system.

Mr Dawson argued that it would not need to be levied indefinitely, as it could be lifted once the new fund was deemed to have sufficient cash.

He blamed Lowcostholidays, which was not a member of his association, for the problems now facing the Travellers’ Protection Fund. “Lowcost was underbonded,” he said. “We would like to know how that was allowed to happen.”