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Massive collapse puts spotlight on consumer protection

July 20, 2016 Headline News 1 Comment Print Print Email Email

egtmedia59More than 110,000 travellers have had their holiday plans thrown into chaos following the failure of an online travel firm that launched a cut-price “60% off” sale just hours before collapsing into administration.

The failure of online travel firm Lowcostholidays means that thousands of clients currently on holiday will have to pay the full cost of their accommodation again – despite having paid Lowcostholidays in full. Those waiting to travel may find their accommodation bookings have been cancelled.

Travel agents who have used lowcostholidays to secure rooms for their customers are also likely to face big bills following the closure.

Holidays in jeopardy

Holidays in jeopardy

 

As one of the biggest online booking firms operating in the British market, Lowcostholidays, which operated from Spanish jurisdiction, also had an Australian website (www.lowcostholidays.com.au). It apparently appointed an Australian general manager in 2014. It employed about 450 staff globally (all of whom have now lost their jobs) and it dealt mainly with British and Irish clients.

Run by controversial business tycoon Paul Evans, Lowcostholidays prolonged a sale promising up to 60% off trips in the northern summer.

The Daily Mail said the holiday firm’s site posted an advertisement online boasting: “Our holiday sale has been extended for a limited time only. Grab your lilo and go.”

Less than 24 hours later, the firm posted a message on Facebook saying: “We deeply regret to announce that the lowcosttravelgroup (LCTG) ceased to trade on July 15, 2016.”

Company logo

Company logo

 

Lowcostholidays currently has 27,000 customers overseas on holidays, and a further 110,000 who have booked trips, the Mail reported.

Evans moved the firm’s offices from Britain to Spain in 2013, which means British holidaymakers won’t be protected by the UK’s compulsory travel industry insurance scheme ATOL.

British holidaymakers enjoy better protection than their Australian counterparts.  Since 1973, by law, every UK travel company which sells air holidays and flights is required to hold an ATOL, which stands for Air Travel Organiser’s Licence.

If a travel company with an ATOL ceases trading, the ATOL scheme protects customers who had booked holidays with the firm. It ensures they do not get stranded abroad or lose money.

The scheme is designed to reassure consumers that their money is safe, and will provide assistance in the event of a travel company failure.

The safety-net doesn’t work if a company moves overseas, however.

Because Lowcostholidays moved its base to Spain, many British customers will not be protected. If there are Australian victims, they are likely to have lost their money. The case shows the ease with which consumers can lose their money and their bookings – without hope of recompense – in regimes where consumer protection is not in place. It also shows that British and Irish travellers are better protected in such events than their Australian counterparts.

ATOL, the British travel consumer safety net, carried the following statement yesterday:

We understand the Spanish travel group Lowcostholidays has ceased trading.

The Low Cost website states that this includes the following companies:

  1. Lowcosttravelgroup Ltd
  2. lowcostholidays Spain S.L.
  3. Hoteling.com part of Lowcostholidays Spain S.L.
  4. Lowcostbeds.com A.G.

Although this company was not ATOL protected and the CAA is not responsible for protecting its bookings, we have received enquiries from consumers and members of the travel industry regarding the situation and this information is provided for further clarification.

Am I ATOL protected if I booked with the Low Cost Travel Group?

The company was not part of the UK’s ATOL scheme. It was based in Mallorca and was registered with the Balearic Islands authorities. We understand that the Balearic Islands authorities are responsible for the holiday protection arrangements for the company’s customers. We advise you to review the Low Cost website for more information on making a claim: www.lowcosttravelgroup.com

Accountancy firm Smith & Williamson has been appointed administrator of the firm.

The latest word from the administrator is that customers of the failed company are likely to receive just GBP 7.50 (AUD 13.15) each compensation. That’s because Lowcostholidays had lodged a bond of only EUR 1.3 million with the Spanish travel agency regulator, even though the company had a turnover of about EUR 596 million (AUD 877 million) a year.

The Irish Times said as many as 15,000 Irish holidaymakers had been hit by the sudden collapse but people who booked package holidays – including flights and accommodation – would be covered under the auspices of the Commission for Aviation Regulation (CAR) as the travel agent was bonded under Irish law.

Details of CAR can be seen here: http://www.aviationreg.ie/

Irish consumers should thus fare better than British or Australian consumers.

Anyone who booked hotel accommodation only through the website, however, must pick up the tab themselves and try and get money back via their bank or credit card company.

The Irish Times quoted Pat Dawson of the Irish Travel Agents Association (ITAA) saying that travel agents would have booked flights directly with airlines and booked accommodation with lowcostbeds.

“People overseas are now being told their rooms have not been paid for so travel agents will have no choice but to absorb that cost which could run to hundreds of thousands of euro,” Dawson told the paper.

The demise of the company has led to calls for a fresh look at consumer protection, particularly when travel companies are based overseas. The same issue is relevant in Australia, though Australian exposure to the collapse is likely to be small.

British travel agents working to clear up the mess have received reports of holidaymakers being woken up in resorts by hoteliers demanding payment. Room rates have in some cases risen, so hapless clients are being asked to stump up more than the price at booking.

Lowcostholidays’ Australian website, www.lowcostholidays.com.au, carried the following notice today:

We deeply regret to announce that the lowcosttravelgroup (“LCTG”) ceased to trade on 15 July 2016, following exhaustive attempts by the group’s directors to rescue the group, which were hampered by the recent and ongoing turbulent financial environment.

 This notice applies to the following companies and brands: 

  1. Lowcosttravelgroup Limited 
  1. Lowcostholidays Spain S.L. 
  1. Hoteling.com part of Lowcostholidays Spain S.L. 
  1. Lowcostbeds.com A.G. 

Licensed insolvency practitioners from Smith & Williamson LLP and CMB Partners UK Ltd have been appointed as administrators of the following four group companies, with effect from 15 July 2016: 

  1. Lowcosttravelgroup Limited (In Administration) 
  1. Lowcostaviation.com Limited (In Administration) 
  1. Lowcostbeds.com Limited (In Administration) 
  1. Lowcostholidays Limited (In Administration) 

On behalf of LCTG, the directors wish to profusely apologise for the inconvenience and distress that this will cause to customers. 

The site then provides information which the firm says will assist customers, agents, suppliers and creditors. 

Anyone wishing to read that should see the www.lowcostholidays.com.au site.

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. AgentGerko says:

    ATOL rhymes with TCF.

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