Travel Plays By Its Own Rules with Damaging Results

How can you offer refunds when you’ve already spent the money or need every available dollar just to survive? That appears to be the dilemma facing some of Australia’s leading travel companies with the industry coming under sustained attack for its “read the fine print” approach to clients during the worst pandemic in 100 years.

Two companies – Flight Centre and Intrepid Travel – have hugged  recent headlines and encapsulate the brand risk in putting business cash flow first and customer needs second, especially when recent history shows that this strategy is doomed to failure in the court of public opinion. There is no way you can hold back the tide.

However, this is what Flight Centre and Intrepid Travel attempted to do. Flight Centre, which for years through founder Graham Turner rejected the notion of travel agent charges, slugged customers up to $300 per person for trips they couldn’t take because of travel bans and in many cases were no longer able to afford due to lost jobs, something Flight Centre understands after sacking 6000 staff late March.

Flight Centre’s money-first approach caused uproar and ran counter to the prevailing sentiment – which is that being kind and fair to fellow Australians has never been more important. And though it was legally able to charge a cancellation fee, over the weekend Flight Centre bowed to pressure from the ACCC, Australia’s competition watchdog, to waive charges and refund customers.

ACCC chair Rod Sims said it has received numerous complaints about travel companies. “We are continuing to discuss issues in relation to refunds and cancellations with the travel sector, and encourage travel providers to treat customers fairly in these exceptional circumstances,” Sims said. 

In the end it was an inevitable outcome and one Flight Centre could easily have avoided by charging more reasonable fees or waiving them altogether.

Meanwhile, the reputation of Intrepid Travel, which aggressively promotes its socially responsible credentials, took a big hit when it changed the rules it applied to bookings by launching a back-dated a ‘no refund, credit only’ policy that not only alienated customers but also ran counter to its corporate persona.

Two tortuous weeks later,  Intrepid Travel CEO James Thornton issued a “we could have done things better” apology that read more like a justification for its actions than a mea culpa. It also exposed the company’s seemingly soft financial underbelly (though the circumstances are extreme): 35,000 cancellations and a 4% profit margin. “When we sell a trip for $2,000, we make around $80,” he said.

Thornton also claimed that “none of the decisions we have ever made as a business, and especially over the past six weeks, have been motivated by money” while at the same pleading for customers to take a credit over a refund to help the business.

“If you can, please take the 110 per cent credit voucher,” he said “We understand that some of our customers have also lost jobs and income as a result of the pandemic and a credit simply won’t cut it. We are not denying those people refunds and their well-being is extremely important to us.

“But for those customers who can afford it: giving those refunds now will make it much harder for us to get back on our feet when this is all over, much harder for us to get back to work, much harder for us to do anything.

“It isn’t your money, for money’s sake, that we’re interested in. It’s what your bookings and your commitment to travelling with us means for our staff, our local guides around the world, our suppliers, the communities we visit, and the social and environmental causes we believe in.”

Lofty rhetoric but given that the apology did not detail any substantive change in approach from Intrepid – beyond forming a critical response team to speed up processes – it’s unlikely to appease their customers.

Actions speak much louder than words and the biggest obligation any business has is managing the cash of its customers and dealing with them in a fair way. Everything else is window dressing when push comes to shove.

Flight Centre and Intrepid aren’t the only travel companies struggling with refund/credit policy and cash flow. There have been many.

This week Luxury Escapes came under the spotlight for denying a $10,000 refund while Airbnb, and Expedia have all had to work through their own cancellation issues.

Despite the pushback, industry groups remain steadfast in their support for member actions. The Council of Australian Tours Operators (CATO) has been pushing the credit over refund while the Australian Federation of Travel Agents defends the right of its members to charge cancellation fees.

Legal complications already loom with the ABC reporting that, “Law firm Slater and Gordon announced on Monday they would be pursuing a class action against major travel providers including airlines, travel agents and tour companies, to investigate whether they had breached legal obligations to customers.”

As this story shows, it is also arguable some travel companies have breached their moral obligations by putting their own interests ahead of their customers.

This is not a sustainable approach and when the dust settles, the industry needs to rethink its relationship with customers, its outdated cancellation policies, and strengthen a financial model driven by discounting and knife-edge profit margins.

Otherwise, this will happen all over again.

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One thought on “Travel Plays By Its Own Rules with Damaging Results”

  1. ACCC are behind half of the problems here.

    They have been approached by businesses to offer advice on their practices of issuing credits instead of refunds. There is a “frustration of contract” that occurs when government rulings prevent operators delivering the product they sold, and the ACCC needs to publicly explain this to customers. The ACCC advises businesses that they are well within their rights to continue issuing the credits only, but they advise this with vagueries that gives them a get-out clause should the ACCC wish to change their mind at a later date.

    They then use the media to pretend they are the champion of the customer, and contradict the advice they give business. So of course now the abulance chasers are involved because ACCC has failed to lead dring the crisis, and it’s the travel companies that wear ALL the bad publicity.

    The ACCC have got to come out and protect busines interests. They would have been better putting their resources into guiding businesses through this process rather than asking consumers to complain to them more and more.

    I agree that you need to treat your customers in a fair manner here. But the ACCC has to let the public know what ‘fair’ looks like in the event of a Global Pandemic.

    Its my view from the outside (I have no inside knowledge) that Flight Centre did not bow to ACCC pressure at all (and were very happy with their legal position a week ago), but they changed their policy because of negative PR which hurts their ability to rebound.

    Your point that “Flight Centre could easily have avoided (this) by charging more reasonable fees” is on the money. They had a ‘One-size fits all’ policy and this, coupled with the ACCC’s lack of backbone has been their undoing.

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