The £2.2bn Brexit opportunity

Tourism Alliance director Kurt Janson explains how redefining ‘package travel’ could unlock the domestic sector’s potential. 

If someone said to you, we are going to introduce new legislation that is detrimental to your customers and will cost your industry £2.2 billion in revenue and 40,000 jobs, you would be outraged.

If they then said that this is EU legislation and will come into effect just six months before the UK leaves the EU, you would think that they were insane.

Yet this is what is being proposed under the new Package Travel Regulations that the government is presently consulting on.

Don’t get me wrong, there is much to commend the Package Travel Regulations (PTR). You only need to look at the unfortunate bankruptcy of Monarch this week, which stranded 110,000 people overseas, to recognise the importance the two central protections of these regulations – repatriation if your tour operator goes bankrupt while you are overseas and being able to seek legal redress in the country you purchased the product if something goes wrong while you are overseas.

Yet, as much as the PTRs are hugely beneficial for customers purchasing package travel, they are equally detrimental to both the UK domestic tourism industry and to UK consumers wanting to undertake a domestic holiday.

Defining package travel

The reason for this is that the EU definition of a package includes “value-added” products. To clarify, a value-added product is where an accommodation provider works with a local attraction or activity operator to provide a discounted product.

This includes promotions such as: “stay at my B&B for £100 and get two tickets to the local historic house”; or “Stay at our guesthouse and we’ll give you a £40 voucher to spend at the local restaurant”; or, “We are running a Watercolour Weekend where the price includes painting lessons with a local artist”.

Because of the poor definition in the EU Directive, these products are deemed to be package travel and the businesses that offer them are therefore deemed to be tour operators. This was never the intent or purpose of the directive and causes significant problems for the 170,000 SMEs and micro-businesses that comprise the UK domestic tourism industry.

The main problem is that because these products are deemed to be package travel, the B&Bs, guesthouses and hotels become legally responsible for all components of the product. So, if the customer falls down the stairs at the historic house, gets food poisoning at the restaurant or is charged by a bull while painting a landscape, it’s the B&B owner that the customer sues.

Making accommodation providers legally responsible for the actions of other businesses prevents small local businesses working together to provide value-added products for their customers. As a result, UK residents miss out on lower-cost domestic offers.

Yet there is no benefit to the customer in including value-added products in the Package Travel Regulations – they don’t have to be repatriated because they already live in the UK and use their own transport to get to the destination.

And, outside the PTR, the businesses that developed the product would be separately liable for their component of the product so the customer knows who to seek redress from.

Survey findings

The Tourism Alliance has undertaken a survey across a broad range of tourism businesses – from accommodation providers, attractions, DMOs, restaurants and pubs. Of these businesses, 60% generated revenue of under £1 million per annum, while 40% generated more than this amount.

The main findings of the survey are:

• 47% of domestic tourism businesses stated that they never offered value-added products to their customers.

• 61% of the respondents stated that complying with the Package Travel Regulations was the reason why they did not sell packaged products

• 74% of business said that they would supply value-added products to customers if these products were removed from the scope of the Package Travel Regulations – only 2% said that they wouldn’t.

• On average, businesses thought that being able to provide Value-Added products would boost their income by 9%.

The UK domestic tourism generates around £24.8 billion per annum. Therefore, a 9% increase on this figure would mean an additional £2.2 billion per annum in domestic tourism expenditure. This is sufficient to create an additional 40,000 jobs, which would be spread across the UK.

Fulfilling potential

What is needed is to free the domestic tourism industry so that it can provide the products and savings that domestic consumers want while, at the same time, continuing and strengthening protection for UK consumers undertaking holidays in Europe and retaining reciprocal arrangements for EU visitors holidaying in the UK.

Achieving this couldn’t be simpler – all that is needed is for the government to insert a clause in the new PTRs to the effect that, when the UK leaves the EU, the definition of a package under the regulations will change so that it must include transport.

Doing this doesn’t even require a change in UK government policy. The UK government’s position during the development of the new Package Travel Directive was that the definition of a package had to include transport – a position it took precisely because it recognised the detrimental impact the regulations were having on the UK domestic tourism industry.

One of the main reasons the UK government gives for leaving the EU is to free UK businesses from costly and unnecessary European red tape.

It would therefore be perverse in the extreme if we were to leave the EU and the UK government were to decide not to remove such an obvious example of unnecessary European red tape.