Questions and Answers - Making protection of package travellers more effective
Making protection of package travellers more effective
Today, the European Commission adopted a proposal for a Directive to amend the Package Travel Directive. The proposal aims to make the protection of travellers more effective, including in crisis situations.
The Package Travel Directive covers pre-arranged package holidays, but also customised packages, where the traveller chooses different types of travel services (transport, accommodation, car rental etc.), online or offline. Packages provide broad protection for the traveller, and the organiser of the package is fully responsible for the performance of all included travel services and is obliged to obtain insolvency protection to cover travellers' payments and their repatriation. Furthermore, the Directive provides certain protection for linked travel arrangements (“LTA”), for example where a traveller books a flight on one website and is then invited to book a hotel or rent a car on a different website.
Why is this revision needed?
Tourism is matters to Europeans. Before the travel restrictions due to COVID-19, 65% of Europeans made at least one tourism trip per year. Tourism plays an important role in the global economy, accounting for more than 10% of global Gross Domestic Product directly and indirectly.
The outbreak of the COVID-19 pandemic led to mass cancellations of packages, while no new bookings came in. Due to the ensuing liquidity problems of organisers, many travellers did not receive refunds of their advance payment for cancelled packages or received them only considerably later than the 14 days required by the Package Travel Directive. In May 2020, the Commission adopted a Recommendation on voluntary vouchers and on ways to make them more attractive for travellers, including by protecting them against the insolvency of the organiser.
An evaluation of the Directive also showed that the Package Travel Directive has only partially met its objectives and the needs of consumers and traders, and that there is room for improvement and simplification. The revision of the Package Travel Directive addresses identified gaps, legal uncertainty and excessive complexity.This is necessary to be better prepared for a future crisis but will improve the application of the Directive at normal times also.
What are the objectives of the Commission proposal?
The goal of the revision of the Package Travel Directive is to strengthen the level of consumer protection, at all times, including in the event of a major crisis, while improving the functioning of the internal market in the package travel sector.
What is a travel package?
Consumers book a package when at least two different types of travel services (e.g. flight or rail journey combined with accommodation or car rental) are combined for the same trip or holiday under a single contract. Packages are also a combination of travel service, whether there is one contract or several contracts, where one of the following alternative conditions is met:
- The travel services are bought at a single point of sale (shop, call centre or website) where the customer selects the services before agreeing to pay, i.e. before he/she concludes a contract or where the travel services are booked at one point of sale within a short period of time.
- The services are sold at an inclusive or total price.
- The services are advertised/sold as a "package" or under a similar term.
- Customers are entitled to choose from a selection of travel services, for example a travel gift-box.
- Combinations purchased from separate traders through linked online booking processes where the traveller's personal data is transmitted from the trader with whom the first contract is concluded to another trader or traders.
Packages provide a high level of protection: the package organiser is reponsible for the proper performance of all travel services included in the package and to make alternative arrangements if necessary. Travellers are protected against contract changes and may terminate the contract in certain situations, for instance where the trip is affected by extraordinary circumstances. Their payments are protected if the organiser becomes insolvent.
What is changing in the new proposal?
Clearer and simpler rules: travellers will receive clear information on whether a combination of travel services offered to them is a package, who is the liable trader and on their rights as package travellers. The current difficult distinction between packages and linked travel arrangements (LTAs) bought at a single point of sale, will be removed through adaptations in the definition of packages and LTAs. This will clarify the rights of travellers and ensure a level playing field for traders.
Stronger and clearer rights for travellers, also in future crises: prepayments for packages at the time of booking (downpayments) may not be higher than 25% of the price of the package, and organisers may not ask for the total payment earlier than 28 days (four weeks) before the start of the package. However, organisers may ask for higher downpayments in cases where this is necessary to ensure the organisation and the performance of the package.
Package organisers will be entitled to a refund from travel service providers within 7 days where a travel service is cancelled or not provided, to enable organisers to make refunds to travellers within 14 days.
Where travellers or organisers cancel a package, travellers will receive clear information on their rights in relation to vouchers, including on their right to accept a voucher or to insist on a refund within 14 days.
It is specified that vouchers and refund rights are covered by insolvency protection. Member States may set up insolvency back-up funds, where appropriate, to strengthen their national insolvency protection systems.
How will the proposal benefit consumers and travellers?
The proposed amendments will clarify and strengthen the rights of travellers and will ensure better preparedness for future crises.
Travellers will be less exposed to risks, as advance payments to organisers will be limited. They will be better protected in case of insolvencies and larger crises, through strengthened insolvency protection, and clear guarantees for vouchers offered by traders as an alternative to a refund. For example, vouchers will be protected against the insolvency of the issuing organiser, travellers will be informed that they do not have to accept a voucher and will get their money back automatically if the voucher is not used during its period of validity. Overall, travellers will be better informed on their rights, including on whom to contact if there are any problems.
Can travellers be required to accept vouchers under the new rules?
No. Travellers will have the choice to accept a voucher which can be used for a package to be taken in the future, or to insist on a refund within 14 days. The new rules clarify that vouchers and refund rights are protected against the insolvency of the issuing organiser.
How will consumers be covered in case of insolvency of package organisers?
The proposed amendments to the EU Package Travel rules will also strengthen the already existing protection of travellers against the insolvency of package organisers. The changes will clarify that vouchers and refund rights will be covered by insolvency protection.
Does the proposal benefit SMEs? How do you ensure that the burden is not too high for them?
Most of the package organisers (99%) are Small and medium-sized enterprises (SMEs). The Commission assessed carefully the burden on businesses, including SMEs, and chose measures that avoid or minimise burden for businesses.
Many of the measures included in the proposal directly benefit package organisers – and hence SMEs – at least to some extent, for example:
- The new business-to-business refund right within 7 days will result in increased liquidity for organisers.
- The new rules on vouchers will also have a positive impact on the liquidity organisers as organisers will gain time before having to make a refund. In addition, the coverage of vouchers by insolvency protection is expected to lead to more travellers accepting a voucher instead of a refund.
- Clarifications in the definition of packages and linked travel arrangements (LTAs) will lead to significant simplification for organisers (and time gains) and fairer competition between businesses. For instance, the number of information forms for LTAs will be reduced from 5 to 2. This is expected to result in yearly gain to all organisers of approx. EUR 181.4 million.
Where there are cost increases for organisers, those will be minimal. For instance:
- Under the proposed rule on the limitation of downpayments, organisers will be able to increase downpayments to cover expenses they need to make at the moment of booking, even if they higher than 25% of the package price. Therefore, there will be no negative impact on their liquidity.
- No administrative burden will be added in terms of information to be provided to travellers and reporting.
How is this related to other initiatives on passenger, consumer rights or insolvency?
The Commission is also proposing to revise the passenger rights regulatory framework. That revision comprises reimbursements for cancelled flights booked via intermediaries. In addition, the Commission will look into the protection of passengers in the event of insolvency of air carriers and major crisis in the context of the Air Services Regulation (Regulation (EC) No 1008/2008).
The aim is more consistency between the Package Travel Directive and EU passenger rights, for example, by bringing rules on vouchers for cancelled packages and rules regarding refunds from service providers to package organisers into the Package Travel Directive. The proposed rules on advance payments for packages take into account that there is no limitation of advance payments in the EU transport legislation.
The Package Travel Directive is covered by the Consumer Protection Cooperation Regulation (CPC Regulation), which provides for joint enforcement actions of national authorities against non-compliant traders, and the Representative Actions Directive (RAD), which protects travelers' and consumers' collective interests, both at national and cross-border level. These tools contribute to the effective enforcement of the Package Travel Directive.
For More Information
Improved rights and better travel information for passengers – Press release
2023 Proposal to amend the Package Travel Directive
Webpage - Package travel directive
