Why do so many holiday companies go bust?
First, not many do; the Holidays 4U collapse is the biggest of the year (so far), yet its 50,000 customers represent only about one quarter of one per cent of Britain's total mainstream holiday business.
Next, the travel industry is based on optimism. People stump up cash in the expectation of a well-deserved holiday, and almost always get it. On the other side of the bargain, travel companies expect that they will attract enough customers at the right prices to make a profit. So they sign contracts with accommodation providers and airlines. Sometimes, their optimism is misplaced. Like other companies before it, Holidays 4U it was unable to take in enough money to pay the bills from its suppliers.
How can I be sure my money is safe?
In the narrow sense of getting a refund if the holiday company fails, it's easy. Book a package holiday covered by an Air Travel Organiser's Licence (Atol), for which you pay a £2.50 "Atol Protection Contribution". Then, if your tour operator follows XL, Goldtrail, Holidays 4U and many others into financial oblivion, you can join the long queue of people who are guaranteed a refund from the Civil Aviation Authority, which administers the Atol scheme. Call the organisation on 0844 4933 037, or visit atol.org.uk.
However, the process will take months rather than weeks, and if you scrabble around to find an alternative holiday, you can be fairly sure that the cost will have increased. There is plenty of capacity around this summer, which is one symptom of the problems in the industry. But when a substantial collapse takes place, other holiday companies take advantage of the subsequent spike in demand to raise prices.
If you buy flights and accommodation separately, and your flight tickets turn out to be worthless, the accommodation provider is not obliged to repay you.
Financial certainty is one thing, but how can I ensure I get the holiday I booked?
Look at the recent history of big collapses: Holidays 4U, Goldtrail and XL. All focused on low-budget holidays to the eastern Mediterranean. Their final days were characterised by massive discounting in a bid to drag in cash to pay bills – not a sustainable strategy. If you seek a cheap last-minute holiday to Turkey or Greece, you might opt to travel with a large tour operator such as Thomson, Thomas Cook or Monarch. Of course, there are plenty of smaller, reputable operators who are also in good shape, and personal recommendation remains valuable.
It's worth paying a bit more to book through a travel agent. A good agent is well tuned to the market, and can detect danger signals that may indicate trouble at a particular tour operator. These include being slow with refunds, demanding payment for future bookings with increasing urgency, or cutting prices to plainly unprofitable levels in a bid to raise cash. The agent may stop selling that operator's product, or at least warn you of the risk.
If my travel company goes bust, won't my travel insurance cover me for any losses?
I don't know, because I haven't read your policy. If, like me, you have bought cheap annual insurance to cover you mainly in the event of medical emergencies, the answer is probably "no". Some policies cover "supplier failure", but many don't. Similarly, there is no consistency about the response to volcanic ash, snow at Heathrow or striking air-traffic controllers. All the more reason for booking a proper package, where the tour operator is responsible for sorting out any logistical problems.
If my holiday company goes bust while I'm abroad, what should I do?
Stay by the pool and order another drink, so long as you are on an Atol-protected package holiday. The Civil Aviation Authority will organise "rescue" flights, with most passengers arriving back at the right airports at approximately the right times. You should not have to pay again for the hotel; if you do, send a claim to the CAA when you get home.Reuse content