The TCF is reborn

The TCF is reborn

As House of Travel's longstanding Executive Director, Barry Mayo, wraps up his time with the company, his swansong is the launch of the new TravelManagers Customer Fund (TCF). BRUCE PIPER digs deeper into the initiative described as the “crown” in TravelManagers’ extensive mesh of interlocking consumer protection measures.

EARLIER this year House of Travel announced the retirement of its local longstanding Executive Director, Barry Mayo, stepping down after a stellar career in airlines, then leading Harvey World Travel and for the last 15 years heading up House of Travel’s burgeoning Australian operations which have grown to include HOOT Holidays, Orbit World Travel and of course pioneering home-based travel advisor network TravelManagers.

Originally slated to retire in 2020, the onset of the pandemic led Mayo to stick around somewhat longer than he had previously planned, but it seems there was also something else keeping him coming to work: a cherished top secret project years in the planning. As a long proponent for travel industry consumer protection, it appears only fitting that his swansong has seen him be part of the launch of the new TravelManagers Customer Fund (TCF), an initiative described as the “crown” in TravelManagers’ extensive mesh of interlocking consumer protection measures.

The history of the “original” TCF

MAYO has been among several industry leaders outspoken about the importance of consumer protection, harking back to the now defunct Travel Compensation Fund – the government-backed entity disbanded in 2014 as part of the industry deregulation pursued by former AFTA CEO Jayson Westbury. While the arguments for the TCF to be wound up were incontrovertible and ended up winning the day, some were concerned that its role in ensuring payouts for consumers impacted by industry collapses played an important role in maintaining confidence in the travel agency distribution model.

The drawbacks of the original TCF were seen as manifold. Some of the claimed issues about the scheme included that it imposed levies on all participating travel businesses which effectively meant the healthy ones were paying for the misdeeds of failures. The fact that it was not a national scheme meant entities could avoid being part of the TCF simply by setting up in the Northern Territory. And its lack of applicability to foreign-owned companies made it more costly for Australian agents to compete with businesses registered overseas.

However despite these issues, Mayo was among voices stridently arguing for its retention in some form or other.

The reform agenda pursued by AFTA was successful in arguing for industry deregulation, removing the shackles of Government-backed oversight in favour of self-regulation which ultimately led to the creation of ATAS – recently rebranded by Westbury’s most recent successor Dean Long as the Australian Travel Accreditation Scheme. However unlike the TCF, there is no mechanism for consumer compensation under ATAS, and some have argued that the industry may have “thrown the baby out with the bath water”.

Barry Mayo with TravelManagers Executive GM, Michael Gazal

For all of its perceived shortcomings, the TCF did ensure that when a member business collapsed, either through poor management or in some cases deliberate malfeasance, consumers received any moneys owed immediately – giving them the option of rebooking holidays straight away (and ensuring that in many cases these stories did not end up with the type of excessively negative media coverage we have now become accustomed to over the last few years). In the case of the Ansett collapse, the huge losses incurred were able to be somewhat mitigated because the TCF was able to draw on additional backing from the Government. The costs involved in becoming a TCF member location also provided a somewhat higher barrier to entry for new travel agencies, helping protect the investment of existing players in the face of new competition.

A many-faceted solution

WHEN the original TCF was disbanded, Mayo and his TravelManagers team immediately started working on alternative options for consumer protection. “It led us to putting a number of steps in place to protect clients to the fullest extent possible,” according to the group’s Chief Operating Officer, Grant Campbell. “We had always operated a client trust account and had it audited – but we ramped this up by moving to quarterly auditing and started publishing the results on our consumer-facing website,” he said. The TravelManagers Client Trust Account has operated uninterrupted since the company was acquired by House of Travel in 2007, with the quarterly external audits published online since 2014.

The multi-pronged approach also led to the creation of TACTAFI – a specially negotiated Trust Account Fidelity Risk Insurance policy which protects client funds in the unlikely event that they are missing from, or not paid into the main client trust account as a result of fraudulent or dishonest activity on the part of an individual TravelManagers advisor. TACTAFI was the ultimate result of extensive negotiations with underwriters, with the group working hard to adapt and develop its internal procedures and policies in a way which ultimately saw the policy premiums assessed at a commercially realistic level for the business.

“All of these measures ensured we were doing everything we could to protect client funds while in our hands,” Campbell said. “It’s very transparent, and we believe we’re the only ones in the world to be operating under these types of practices.”

TravelManagers also turned its attention to protecting its own Personal Travel Manager members by developing its own in-house Credit Card ChargeBack Insurance (CCCBI) offering – meaning that if clients decided to initiate a chargeback because of a supplier failure the business and its members were protected. This platform operates in a similar fashion to the now defunct AFTA Chargeback Scheme, which was closed down in the early stages of COVID-19, a move necessitated because it was funded by a minuscule levy on credit card transactions, and with no transactions happening there was insufficient money available to pay the associated insurance premium.

With travel bookings made in advance there is still the key issue of Forward Delivery Risk.

However the unique way that the travel industry operates, with customers making payments sometimes years in advance, means there is still the key issue of so-called Forward Delivery Risk (FDR). “Under the former TCF, we knew that whenever funds were transferred to a supplier they were safe, because they were covered by the Government-backed arrangements in place at the time,” Mayo said. It’s been a very long road, he confirmed. “The original Travel Compensation Fund was powered by legislation so there were a lot of things the Trustees didn’t have to worry about – for example whether payouts are taxable in the hands of recipients,” he said. The pre-2014 TCF also had the option of being able to tap the Government on the shoulder if there was ever a shortfall of funds, and significantly different compliance requirements compared to a privately established fund. “That’s why it took so long,” Mayo said, with the replacement TravelManagers Customer Fund soft launched internally in December 2019.

So how does it work?

THE new TravelManagers Customer Fund has been established as a separate legal entity, whose “sole purpose is the responsibility of holding funds and paying out claims based on the rules,” Campbell said. “The fund has been ringfenced from TravelManagers’ general accounts by the establishment of a separate company with its own directors – an important element which upholds our commitment to governance and fiscal responsibility,” he added. Money has been accumulating in the new fund for the last two years – despite the pandemic – and there’s currently $650,000 in it and projections it will reach $1 million by the end of 2023.

Regular contributions into the fund are made from TravelManagers’ own head office revenue – which also internally pays the premiums for the TACTAFI and CCCBI products without imposing additional levies on transactions. The rules governing the fund are publicly available, both to customers and Personal Travel Managers. Mayo noted that while the money in the fund is relatively small compared to the $30 million held by the original TCF, based on the size of the TravelManagers business and the thousands of members in the TCF pre-2014 it’s actually a comparable amount.

“Based on our experience over the last 15 years we believe it should suffice,” he said.

While individual TravelManagers members are not restricted as to which suppliers they can work with when booking travel for their clients, there is an official list of partners such as tour operators, airlines and wholesalers who are protected by the TravelManagers Customer Fund. This list is publicly available, and members are advised of changes any time a supplier is removed. “Generally these are suppliers that have a partnership agreement with TravelManagers,” Campbell confirmed. In the unlikely event that there is not enough money in the fund to cover a major collapse, the TCF rules would see it make pro-rata payouts, he added.

Benefits for the business

MAYO and Campbell are adamant that their key aim in establishing the various elements of TravelManagers’ network of protections is to protect client funds. “It’s all about trying to give the consumer a similar amount of protection to what they had with the original TCF,” Campbell said.

However there’s no doubt they hope the combination of TACTAFI, CCCBI, trust account audits and now the new TCF – collectively referred to as the TravelManagers ‘Peace of Mind’ promise – will make a difference to the overall business. “It gives more security, it’s a strong point of difference for us when dealing with customers, and it gives clients confidence in our Personal Travel Managers,” Campbell confirmed.

More than that, having developed the suite in collaboration with those Personal Travel Managers it has become increasingly clear that it’s good for them too. “In the event of a supplier collapse or the disappearance of client money, it’s travel consultants who have to deliver the bad news to the customer. In many cases they’ve had client relationships lasting many years, I can only imagine how stressful that is,” the TravelManagers chief said. “We’ve appreciated how much it’s meant to our Personal Travel Managers not to have to have those discussions.”

The TravelManagers Peace of Mind promise has already been exercised this year, with the collapse of Crystal Cruises’ parent Genting Hong Kong leaving several clients significantly out of pocket. The combination of CCCBI and money available through the in-house TCF meant all customer funds were repaid – a happy ending which is a stark contrast to the experience of some other Aussie agents whose clients have effectively become unsecured creditors of the failed cruise operator.

Mayo spreads the love

AS HE steps away from the business, it’s certain that Barry Mayo will be a keen observer of the comprehensive new consumer protection system he has helped create. Despite his outspoken criticism of the 2014 TCF closure, he is still an ardent supporter of the ongoing work of AFTA.

“We never thought of the original TCF as being perfect – but we thought there was plenty of scope to remodel it and fix the inequalities,” he said. “As a business we truly valued the protection it offered.”

He added that TravelManagers is also highly cognisant of AFTA’s work in promoting industry self-regulation, saying the group had acknowledged the reasons the TCF was discontinued and was subsequently endorsed by the AFTA Travel Accreditation Scheme which succeeded it. However “the resulting reduction in consumer protection motivated us to create our own, additional system of protections in support of AFTA’s position on self-regulation. That’s what we’re doing – providing our own comprehensive solution,” Mayo noted.

“It’s nice to see it come to a conclusion,” he said.

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