The new Package Travel Directive: Pre-departure changes to the Package
The original Package Travel Directive was transposed into UK law by the Package Travel Regulations of 1992 (the “PTR”).
Its introduction provided consumers with powerful and comprehensive legal rights which went a long way towards redressing the balance in the relationship between consumers and tour operators. One of the areas regulated by the PTR are the respective rights and obligations of the parties in the time between purchase of the package and departure, particularly the extent to which tour operators may change the terms of the package before departure.
The new Package Travel Directive was adopted by the EU on 25 November 2015 (the “New PTD”). It will have to be transposed into UK law by 1 January 2018 and be in force from 1 July 2018. It makes a number of significant changes to the rules and regulations concerning pre-departure changes. This article will explore these changes as set out in Articles 9 – 12 of the New PTD.
Transfer of package
Package holidays are typically bought many months before departure. In the intervening period, circumstances can change, which may be completely beyond the control of the consumer. The PTR recognises this and seeks to protect the consumer by allowing him/her to transfer the package to someone else.
The right to transfer set out in the PTR is a conditional right. The most significant of these conditions is that the consumer must be “prevented” from travelling. This is a term which is open to interpretation and is obviously designed as such so that the courts can take a pragmatic view depending on the circumstances of the particular consumer. Clearly, it is meant to cover serious illness, probably also that of a close family member, but it is not meant to cover the consumer simply changing his/her mind. The reality is that tour operators have been relatively relaxed about transferring the booking to a friend or a family member
provided that there is enough time to make the administrative changes before departure and that any costs caused by the change are met by the consumer.
The New PTD changes this conditional right into an absolute right, so that the consumer may transfer the package to someone else as of right and not merely because he/she is “prevented” from travelling.
One of the other conditions to the right to transfer under the PTR is the requirement for the consumer to give “reasonable notice” to the tour operator before departure. This concept of reasonableness is vague. It allows tour operators a degree of flexibility and the opportunity to define what this means. For instance, some tour operators may specify a time limit in the customer booking conditions (e.g. 30 days’ notice) even if this period may, on a strict legal analysis, be longer than what a court would ultimately consider to be reasonable in the circumstances (say, 14 days).
This flexibility is now significantly curtailed by the New PTD. It again requires consumers to give reasonable notice of a transfer, but goes on to say that 7 days will be deemed to be reasonable. This is a short timeframe which may put tour operators under significant time pressure if the travel arrangements are complex and require changes to be made with multiple suppliers.
Finally, in relation to transfers, as before the original consumer and the new consumer will both be liable for the costs of making the transfer, but the New PTD requires these costs to be reasonable and not more than the actual costs incurred by the tour operator in arranging the transfer, proof of which has to be provided to the original consumer.
Alteration of the price
One of the main provisions of the PTR seeks to control the practice of tour operators increasing the price payable by the consumer after the contract is made i.e. price surcharging. The PTR effectively introduced five conditions which had to be satisfied for surcharging to be permitted (note that we are dealing here solely with the PTR position, and not the more stringent position adopted by ABTA under its rules):
(i) The booking conditions have to allow for the possibility of upward or downward changes in the price;
(ii) The booking conditions have to explain precisely how the revised price is to be calculated;
(iii) The price can only be varied to pass on the impact of changes in transportation costs, certain taxes and fees, and exchange rates;
(iv) Price changes cannot be made within 30 days of departure; and
(v) There can be no price increase to pass on costs increases of less than 2% of the package price.
The New PTD essentially maintains this same scheme for surcharging but with some small and important changes.
One of the idiosyncrasies of the PTR is that the price revision terms are permissive. In other words, the relevant clause in the booking conditions only has to say that the tour operator may increase or decrease prices. The question as to whether the tour operator should do so in any given circumstances is left solely to the tour operator to decide. This puts the consumer in the worst possible position – tour operators may (and invariably will) pass on significant price increases, whereas they may (and invariably will not) pass on price decreases. The New PTD addresses this issue by making it mandatory for price decreases to be passed on to consumers, albeit tour operators will be entitled to charge their administration costs in doing so provided that (if the consumer asks) they provide proof of these administration costs.
Another change introduced by the New PTD is to abolish the 2% rule (see (v) above). In its place there is a rule which says that if a price increase exceeds 8% of the total price of the package, the consumer will be entitled to cancel the package. This compares to the previous position whereby the consumer had to rely upon the more generalised right to terminate in the event of there being a “significant alteration” to the package (which was generally taken by many tour operators and ABTA to be a price increase of 10%).
Finally, price increases shall now only be possible if the tour operator notifies the consumer no later than 20 days before the start of the package and also provides a calculation and a justification for the increase.
Alteration of other terms of the package
The PTR also controls the extent to which tour operators can make other changes to the package before departure. Minor alternations are permitted, but significant changes to essential terms are only permitted where the tour operator is “constrained” to make such changes. Where the tour operator is constrained to make such changes, it must inform the consumer about the change as quickly as possible. There is then a right for the customer to accept the change; or to withdraw from the contract and take a substitute package (if the tour operator is able to offer one, and a partial refund if the substitute package is of a lesser quality) or a full refund. The customer is also entitled, if appropriate, to be compensated unless (amongst other matters) the change is due to force majeure.
The New PTD maintains much the same scheme. However, where there is some uncertainty in the PTR as to what constitutes an essential term of the contract (because this is nowhere defined), the New PTD bring some clarity to this issue. The phrase “essential term” is redefined as “main characteristics” and this is defined to include matters such as:
(i) The travel destination, itinerary and periods of stay (with dates);
(ii) The means, characteristics and categories of transport, the points, dates and time of departure and return;
(iii) The location, main features and tourist category of the accommodation; and
(iv) The meal plan.
A significant alternation to any of these matters will give rise to similar rights as before, so too will be a failure to fulfil any of the consumer’s special requirements which the tour operator has accepted.
Termination of the package and the right of withdrawal before its start
The PTR gives consumers rights where a tour operator cancels the package before departure for any reason other than the fault of the consumer. As with the regime for significant changes to essential terms, the consumer is entitled to take a substitute package (if the tour operator is able to offer one, and a partial refund if the substitute package is of a lesser quality) or a full refund. The customer is also entitled, if appropriate, to be compensated unless (amongst other matters) the change is due to force majeure.
The New PTD introduces controls over the situation whereby the consumer cancels the package. The consumer will now have the right to terminate the package before departure without having to pay a cancellation fee in the event of force majeure occurring at the place of destination or its immediate vicinity which significantly affects the performance of the package. This is clearly very wide-ranging and open to different interpretations, particularly regarding the issue of how close does the event need to be for it to be within the “vicinity” of the holiday resort booked by the consumer.
The New PTD also states that a consumer shall be entitled to cancel the package at any time before departure. Moreover, in those situations, the tour operator will only be permitted to charge “appropriate and justifiable” cancellation fees. The New PTD recognises the validity of the usual pre-determined range of cancellation fees which increases the nearer to the date of departure the cancellation is made. However, if this (or any other calculation) is used to determine the cancellation fee, the New PTD requires tour operators to calculate the cancellation fee by taking the cost of the package as a starting point and then deducting from this any cost savings and income from alternative deployment of the travel services. The tour operator will have to justify such cancellation fees upon request from the consumer.
The PTR has long been in need of a reboot and now we have one with the New PTD, which will be in force by 1 July 2018 at the latest. However, whilst the travel industry will no doubt welcome clarification of some of the vagaries of the PTR, it will not welcome the clarifications which move the balance further in the favour of the consumer. The consumer now has far more flexibility to transfer packages to another, and to cancel, both potentially at great expense and inconvenience to the tour operator. There is also now the obligation to pass on price decreases to the customer, a prospect which will fill the hearts of many finance directors with horror.
Rhys Griffiths is a Partner and Head of the Travel Group at Fieldfisher LLP.
He can be contacted at: Rhys.Griffiths@fieldfisher.com