Article by David Brice – Lecturer in Travel and Tourism
This week saw the news that The Lowcost Travel Group has ceased trading. Whilst this does not surprise me, the timing of the failure does. The company owned several brands including Low Cost Beds which was used by the travel trade. This time of year is when most travel companies have most cash flow, so there must have been something wrong for the company to fail. Their CEO, Paul Evans, has blamed the failure on Brexit but there must be more to it than that. My guess is that fierce competition is the main cause as well as the falling value of the British Pound against the Euro. You would think that with an alleged 110,000 forward bookings a company would be thriving but the company relied heavily on advertising with margins very thin in the travel industry costs are very high too. I have seen many companies cease trading for similar reasons over the last 20 years because they based their success on growth rather than profit.
The Lowcost Travel Group were based in Palma, Majorca although they also had offices in London, Switzerland and in Poland. The reason that they set up base in Spain was because they wanted to get around the UK ATOL regulations. This is because they were selling flights and separate accommodation without an ATOL that they would need in the UK. The problem is that most of those people who booked did not realise they were booking with a company who offered no financial protection. Those people who have booked with Lowcost Travel will now realise the importance of booking a holiday with financial protection as they are faced with having flights booked but with no hotel. It will mean that they will have to pay again although some may get their money back if they paid on a credit card.
I have been saying for many years that the UK government does not have strong enough laws on holiday protection. Despite an ongoing low key campaign on the benefits of ATOL the message is lost as some companies take advantage of the lack of consumer knowledge on ATOL financial protection and continue to sell flights and accommodation as if it is a package holiday.
Whether this failure will make consumers more aware of booking with an ATOL bonded tour operator remains to be seen as travel is a price driven product. Of course, many people book their own separate flight direct with an airline and book their holiday accommodation on the Internet and this type of arrangement is never covered by ATOL financial protection.