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Charter Holiday Industry

12.57 pm

Mr. Frank Roy (Motherwell and Wishaw): I am delighted to have secured this important debate on a subject that directly affects the lives of many people in the United Kingdom.

According to the Home Office's website, more than 38 million holiday trips were undertaken from this country last year, and of those more than 20 million were what is known as package or inclusive holidays. This week, airports throughout the UK will move vast numbers of holiday-making families to their dream destinations. The people taking those trips—to the heat of the Spanish costas, the fun of Majorca, the nightlife of Ibiza, the magic of Florida or wherever their chosen holiday resort lies—deserve the best value their money can buy.

Those people have worked hard all year. Many pay the cost of their trip with loans and will repay them in the next 12 months in time for next year's holiday. However, millions of them do not realise that they have been ripped off by greedy holiday companies. The phrases ripped off, fleeced, done, overcharged or taken for a ride all mean the same thing: people have not received value for money. Unfortunately, no one seems able or willing to give them the protection they deserve.

I do not intend to discuss the holidays from hell that we see commonly on television: the four-star hotels with no sanitation; the family rooms above a 24-hour discotheque; the half-built self-catering unit; the room with a view of the local rubbish dump; the pool with no water; the cruise ship with no hot water; and the villas flooded with too much water. I intend to highlight the need for regulation of the holiday industry to ensure a better deal for those who put their trust and hard-earned cash in the hands of holiday operators.

For some time, I have been appalled by the practices of the holiday industry, as they extract as much money from their customers as possible. However, I became even more appalled, and angry, when I discovered that those same companies paid no heed to the guidelines laid down by the Civil Aviation Authority on the serious matter of safety during flights. I quote from the CAA's "Flight Operations Bulletin on Cabin Safety":

That is very understandable. What family or parent would not immediately ensure their child's safety in the event of an emergency evacuation from an aircraft? The guidelines continue:

That is exactly what would happen if families were not seated together on their holiday flights. Undoubtedly, parents would not escape quickly from an aircraft if they knew that the rest of their family were sitting some rows behind them. They quite naturally would make their way back along the aircraft, against the flow of the other passengers, to ensure their family's safety. That delay,

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caused by seat separation at the check-in desk, could mean the difference between life and death for many people on a stricken plane.

In the same bulletin, the CAA states clearly:

Those are straightforward, unambiguous guidelines with no possible misinterpretation: for everyone's safety, families must sit together on aircraft. What do United Kingdom holiday companies do? That nice Mr. Thomson, not to mention Airtours, JMC and Global—in fact, nearly every charter company—charge us extra for the privilege of staying alive with our kids in an aircraft emergency.

During the past few weeks, my American intern, Jess Lorber, and I have contacted a number of well-known travel firms to find out whether they charge families for the privilege of sitting together on an aircraft. Almost 90 per cent. told us that, to guarantee a seat together, there would be an average charge of £10 per family member. However, they did not all charge £10: some gave discounted children's rates of £7 and £5. Kindness indeed. All the operators told us that that was an extra service, and the best way of ensuring that a family was seated together. One operator even told us, "Between you and me, we do it to remain competitive with other companies, as they all charge fees." Forget about safety, is not it comforting to know that some companies charge merely to remain competitive? That statement sums up the need for this debate and, more importantly, the need for stronger regulation of the holiday sector. Companies argue that they rip families off because their competitors do. That is an indictment of the holiday sector.

I have no hesitation in calling on holidaymakers to boycott companies that charge families for the privilege of sitting together on a flight to or from their holiday destination. There is no need for such charges, whether at the pre-booking or late-deal stages. Every company knows beforehand how many families will be travelling together and can pre-allocate adjoining seats, just as many scheduled flight operators do every single day of the week. I hope that the Minister will address that serious issue.

After the dreadful events of 11 September last year, every flight operator and airport rightly had to review their security procedures. The world had moved into a new era of asymmetrical threat from terrorist attack, and every innocent family became a potential target. I believe that every holiday company in the UK now charges a security surcharge of £7 per person. I presume that it is for the increased costs at airports and on flights, although one company representative stated:

Perhaps the Minister can tell us when the Government imposed such a charge. I suspect that he will be as puzzled as I am.

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Perhaps the £7 charge pays for more controlled airport parking, perimeter fencing, CCTV, luggage and body scanners and more employees at airports. However, is not it strange that a company such as easyJet charges only £1.60 for the same services? The explanation on the company's website for imposing the charge is that, because of the incidents of 11 September, the cost of running a secure airline had risen and, although easyJet had tried to avoid incurring extra charges for its customers, a charge of £1.60 had been imposed to appease insurance syndicates. It assures customers that it

What happens to the difference of £5.40 between easyJet's £1.60 charge and the £7 charged by travel companies? Why is it charged? I certainly do not know why; perhaps a tougher regulator would be able to tell us.

Can we argue that a family of four should have to pay almost £30 for extra security at the airport and on flights? I doubt that we can, but BAA plc may be able to. However, its senior management told other Members and me last week that

By my calculations—according to the school that I went to—more than 20 million trips taken by holidaymakers at £7 per person bring in £140 million. For what? We know that the money is not going to BAA plc. It does not buy more controlled parking spaces, perimeter fencing, CCTV cameras, luggage and body scanners or more people. So where does it go? Are holiday companies ripping customers off as a result of 11 September? I sincerely hope not. Perhaps the Minister will give us his opinion about that.

Can the Minister explain the meaning of a holiday advertisement on Teletext a few days ago, which said:

In the interests of fairness, I shall repeat that more slowly:

I am sure that you know what that means, Mr. Deputy Speaker, but, with all due respect, I hazard a guess that the Minister would have been puzzled on reading it, as I was. It means that 14 days half board in Majorca for a family of four costs £1,500. Booking fees are £10 per person, which for a family of four is £40. Tickets on departure are £10 per person, which is £40 for a family of four. I shall refer later to DC/CCC. The new price is now £1,580.

There are more hidden rip-offs. The £7 per person security charge would cost a family of four £28. In late deals, transfer between the airport and the hotel costs £15 per person, which is another £60. Optional flight meals cost £10 per person, which is an extra £40. Even the 20 kg luggage allowance that used to be included now costs £15 per person, so that is an extra £60. All those hidden charges blow away the theory that we are still considering a package holiday. It is no longer a package holiday, but a fragmented rip-off. Our family of four, who were paying £1,500, now need to pay £1,768.

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What is the final rip-off? Every travel agent sets its employees targets to sell holiday insurance to unsuspecting customers. Even when free insurance incentives are offered, which are known in the trade as silver level, employees are ordered to sell gold-level insurance, which costs £10 per adult and £7.50 per child. That insurance is paid out against a holiday costing £1,500 per person. How many ordinary families in this country book a fortnight's holiday in Majorca at a cost of £1,500 each? Families are paying far in excess of what they need to pay. If a family of four are not offered free insurance, they pay the going travel agency rate of a staggering £31.99 per adult and £27.74 per child to cover the two-week holiday. Those inflated insurance charges add an extra £119.46 to the family's bill.

From the original price of £1,500, our family must now pay a new amount of £1,887.46. To borrow words from "Who wants to be a millionaire", "But we don't want to give you that. We want to give you DC/CCC at 2.5 per cent." That debit or credit card charge of 2.5 per cent. on £1,887.46 is £47.18. That brings the new grand rip-off charge for the £1,500 holiday seen on Teletext to £1,934.64. That is an astonishing hidden charge of nearly 30 per cent.—a rip-off in anyone's language.

I can highlight other rip-offs, such as cancellation fees. If a family buys out within 56 days, they pay £105 per person, so our family of four would lose £420. However, if the company cancels, it pays out only £20 per person, which would be a total of £80. There is an increase if the customer cancels 14 days before departure. They would lose 90 per cent. of their money, yet the company would pay only £40 per person if it did likewise. That means that if our family of four cancel, they lose £1,698.72, but in similar circumstances, the company is obliged to pay out only £160. I genuinely believe that consumers receive a raw deal from holiday companies. Their flagrant disregard for the Civil Aviation Authority's guidelines is scandalous. Their security fees must be justified, their hidden charging must be investigated and the rip-offs must stop.

While researching this matter, Jess Lorber asked me why British consumers do not complain more and insist on a higher level of service. He was right to ask that, and it is why I am complaining in this debate. I am looking for a far higher level of service and demanding tougher regulation of the holiday industry.

The examples that I have given reveal only the tip of an iceberg. We all know that there are many horror stories to be told about the charter holiday industry, so I call on the Government to launch an inquiry into the need for stricter regulation of that industry. I and 20 million others await with interest the Government's response.

1.15 pm

The Minister for Employment Relations, Industry and the Regions (Alan Johnson) : I congratulate my hon. Friend on securing this debate, which is topical as we are now in the holiday season. He raised important issues and made typically shrewd observations on the travel industry and the need to protect holidaymakers.

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I shall speak first about the holiday market in the United Kingdom, which is one of the largest and most diverse in Europe with about 20 million packages sold every year and a turnover of around £8 billion. The traditional holiday market is changing and, increasingly, the familiar package is just one of a number of holiday products from which consumers can choose. Before focusing on my hon. Friend's concerns, I want to outline the protection available to the travelling public in the United Kingdom.

There is already a considerable body of regulations governing holidays, especially package holidays. Package travel law recognises the great diversity of the market from the largest operators, which are household names, to the smaller, independent businesses and one-person operations. The key legislation is the package travel regulations, which implement the 1990 package travel directive. One of the main reasons for the introduction of those regulations was to enable dissatisfied holidaymakers to pursue their case with a single supplier. Previously, aggrieved holidaymakers had to pursue their case with hoteliers and transport providers in a foreign country. The important protection is that the regulations place on tour operators a wide range of obligations to their clients, and ensure that when things go wrong consumers have adequate means of obtaining redress. The regulations also require tour operators that become insolvent to be able to repatriate and refund holidaymakers.

Another important protection for consumers is provided by the Civil Aviation Authority's licensing regulations. The majority of package holidays sold in the United Kingdom involve air travel, and the package travel regulations require organisers to hold a licence issued under the Civil Aviation (Air Travel Organisers' Licensing) Regulations 1995. Those licences are administered by the CAA and provide financial protection arrangements for air packages.

Other consumer legislation also applies to the sector, including the Trade Descriptions Act 1968, misleading prices law, the Unfair Terms in Consumer Contracts Regulations 1999 and the Control of Misleading Advertisement Regulations 1988. They provide protection against misleading statements by tour operators about the holidays they provide, and apply to all holidays, not just packages.

The package holiday market is also self-regulated, primarily by the codes of practice operated by the Association of British Travel Agents. Those codes of practice have been tried and tested over a long period. ABTA operates an independent arbitration scheme to resolve disputes between holidaymakers and ABTA members, who sell more than 90 per cent. of packages in the United Kingdom.

The fact that there is a strong body of legislation does not mean that things do not go wrong. As my hon. Friend said, things can go awry even before a holiday has started, and he highlighted problems arising from lack of transparency when consumers are given misleading or confusing information.

The travel industry is dynamic and constantly changing in response to consumer demand and other less predictable events. Since 11 September, the tourism industry has been through a difficult time. Recovery has been slow since consumer confidence took a blow.

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Bookings for the next year are down on previous years, and the industry has been going through some restructuring; it has cut capacity in an effort to face new challenges. Some costs, such as aviation insurance and airport security, have become more unpredictable.

As I said earlier, other market developments include an increasing trend away from package holidays. Instead, consumers put together elements of holidays from sources other than traditional travel agents by, for example, looking for the best deals on the internet. The phenomenal rise of the no-frills airlines has been part of that trend, and it is set to rise further. However, the great majority of British family holidaymakers continue to look for conventional packages, and the variety of deals and prices on offer can be bewildering.

As my hon. Friend emphasised, changing trends can bring problems as well as increased choice for consumers. The regulatory bodies report significant numbers of consumer complaints about this sector, and we take that very seriously. The levels of protection for consumers vary according to the methods by which consumers book their holidays; the rules are extremely complex. There are concerns that consumers may not know their rights despite the efforts of the regulator, industry bodies and consumer groups, which is why my Department is taking steps to improve the information available to consumers.

Holidays that go wrong can be particularly distressing for consumers. My hon. Friend described several specific problems encountered by consumers when they try to book holidays. I shall briefly address each of those.

As regards security charges, I appreciate the concerns about the levying of yet more charges on holidaymakers. However, the industry is best placed to make a commercial judgment as to what extent extra security charges need to be passed on to the consumer. The Government have the same concerns as my hon. Friend. If additional security charges are levied, they should be fully justified and presented in a clear and transparent manner so that holidaymakers know what they are paying for at the outset and can make a choice of whether to use a particular operator or to go elsewhere.

We are liaising with trading standards officers on concerns about pricing practices in the holiday industry. The law is clear: prices that include security charges must be made transparent. We are ensuring that this sector operates in that manner.

Concerns have been raised that consumers are inadequately protected because they are increasingly buying holidays that are not packages and so fall outside the scope of the regulations. That issue was covered in a recent European Parliament report, which proposed a fairly wide-ranging review of the package travel directive. The origins of the report lie in earlier work carried out by the Commission on the implementation of the directive by all member states.

There is a trend among tour operators to add a number of supplementary charges to the price of a package, and my hon. Friend has given some examples of that. Others include charges for collecting tickets at

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point of departure, and even for using the resort swimming pool. We believe that holiday operators should ensure that all charges are made clear to the consumer at the point of sale, so that people know what they are buying. My hon. Friend was worried about the practice of some operators of charging for pre-bookable seats. That is a matter of concern, particularly as the CAA recommends that in the interests of safety families should be seated together. I shall return to that point.

The recurring problem of misleading prices in brochures or shop windows is often highlighted in the media. Trading standards officers keep those practices under close scrutiny, and have initiated discussions with the industry about pricing. A particular problem is the way in which holiday prices are generally presented, with the use of discounts, fluid pricing and, last but not least, the increasing use of supplementary charges or optional extras, to which my hon. Friend has referred.

What are the Government doing about those criticisms? There are mechanisms in place for dealing with misleading statements. In addition to powers under the Trade Descriptions Act 1968, trading standards officers are empowered to take action when they consider that a misleading price indication has been given. Any suspected breaches of pricing law fall within the scope of part III of the Consumer Protection Act 1987, and should be reported to the trading standards service so that it can investigate as appropriate. My Department is in close touch with the trading standards service on matters relating to that legislation, and trading standards takes a keen interest in such issues.

Seating arrangements on aircraft are such an important matter that the Under-Secretary of State, Department of Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), who has responsibility for competition, consumers and markets, will be discussing it in more detail with the scheduled tour operators. That is in response to criticisms voiced by my hon. Friend the Member for Motherwell and Wishaw, not least at DTI questions recently.

My hon. Friend referred to the powers of the Director General of Fair Trading under the Control of Misleading Advertisement Regulations 1988. He does have such powers, but they are used only as a last resort. Advertising and sales promotion in the printed media in the United Kingdom are largely controlled by self-regulation. We would prefer businesses to use that means to ensure that their advertising material does not offend or mislead. The Advertising Standards Authority

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is responsible for ensuring compliance with the British code of advertising and sales promotion. It is to that organisation that concerns about misleading advertisements in the printed media should be directed.

That system of independent scrutiny, set up with the support of commercial businesses, shows why it is important to examine ways of tackling problems through self-regulation, such as improvements to codes of practice or information and advice, so as to arm consumers better when making decisions about holiday bookings. More regulation is sometimes the answer, but I hope that I have reassured my hon. Friend that the market is already well regulated and monitored. Given the circumstances that my hon. Friend described, I suggest that the travel industry should take primary responsibility for fulfilling its obligations to its customers, and should do so well and within the prescribed legal limits. If the industry fails to do that, it runs the risk of facing legal action.

Having said that, I recognise that the operation of legislation benefits from fresh consideration and review of its effectiveness. We are aware of the European Commission's interest in reviewing package travel and timeshare law. The Commission has said that further work is needed, for example, to clarify the definition of a package holiday. A recent European Parliament report recommended that the term "package" be redefined. We shall have to consider whether widening the scope of the directive would be appropriate and would address some of the concerns that my hon. Friend has raised.

We are ready to play a full part in ensuring that the travel market works properly, and we want to develop a dialogue with key players in the industry, with regulatory authorities and with key consumer bodies. The latest Commission initiative may provide the opportunity to resolve once and for all some of the issues surrounding the protection of consumers buying package holidays. By their very definition, the matters that we are discussing are wider international concerns, not just domestic issues. That initiative builds on work already done by the Commission and others. The market is changing, and traditional consumer attitudes to holidays, including the way in which they book them, are changing. The Government must ensure that consumers are protected in that constantly changing market, but consumers have a responsibility to be careful when buying one of the many types of holiday now on offer.

I congratulate my hon. Friend once again on raising an important matter. I hope that I have reassured him that there is work in progress to address the real concerns that he has raised this afternoon.

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