EU review of package travel regulations could impact on accommodation businesses

The EU is currently reviewing the Package Travel Directive. This Directive was introduced in 1990 to "protect consumers who contract package travel in the EU”. With a few exceptions, these regulations apply to the sale of all travel packages that contain two of the following three elements – transport, accommodation and significant tourist activities.

The regulations, among other things, require that companies selling packages have a payment protection scheme in place so that customers are protected if the company goes bust. They also make the company selling the package legally responsible for all components of the package (even those they don’t own or operate).

The problem for customers with these regulations is that they do not cover “dynamic packaging” – this is where the customer creates the package rather than buys a pre-made package. For example, if you book both a flight and accommodation on Expedia, you have created a dynamic package from the separate components listed for you to choose from.

The result is that if two people travel to Spain on the same plane and stay at the same hotel, one might be protected because they purchased a package while the other wouldn’t be protected because they made the package – even if both people bought the holiday from the same company using the same website. You can see how this is confusing to the customer and why the EU wants to review the Directive to ensure that customers who create dynamic packages are also protected.

However, while the Directive was broadly intended to protect people taking package holidays in foreign countries within Europe, in undertaking this review the EU is considering options that could widen the scope of the Directive to significantly affect small accommodation providers.

One option being considered is that any link from one business’ website to another business’ website would constitute dynamic packaging. This could severely affect the ability of accommodation providers to recommend local businesses such as restaurants, golf courses, stables or taxi firms, for instance.

A second, even more worrying option being considered is that all single item tourism bookings would be covered - including accommodation bookings. The main problem with this is that it would require accommodation providers to either be bonded or establish trust accounts where clients’ payments could not be accessed until after they left. The cost and cash flow implications for businesses if this were introduced are significant.

As a consequence of these potential impacts, UK trade associations are moving to help ensure that the EU comes to a sensible conclusion that protects accommodation providers from unnecessary regulation.