11 DECEMBER 2002

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Refalo calls for think tank to find solutions for tour operator failure

Addressing the 2002 European Tourism Forum in Brussels, Tourism Minister Michael Refalo called for a co-operation in thought and action between EU states on the development and viability of tourism represent. Dr Refalo said that there was need for a structure that could accord protection from the commercially fatal effects of tour operator collapse.

He said this affected the financial sustainability of SMEs, which included the majority of tourism operations and the industry’s providers and suppliers.

"The Commission should consider the establishment of a think tank or task force to look into the damaging effects of tour operator failure on the very survival and sustainability of SMEs, and subsequently, to the creation of an EU-wide mechanism that offers adequate protection to, and reduces the negative impact on tourism related businesses."

Dr Refalo said the collapse of tour operators are always a possibility, especially in times of global uncertainty and difficulties in a region’s economic climate.

"These conditions are heightened by international events, such as the Gulf War and the 11 September atrocities, and their prolonged aftermath. Despite the industry’s known resilience, these abnormal conditions impact and negatively impinge on tour operators’ narrow financial base, and therefore, on their ability to honour financial commitments."

Mentioning the cash flow problem within the hotel and travel industry, Dr Refalo said that delayed payment to hoteliers by travel agents and tour operators has a damaging effect. He mentioned that the accommodation sector and its various suppliers and providers of goods and services are mostly affected when the credit line is placed under severe strain.

"In some instances, national legislation accords partial solutions to this problem, but in my view, they are simply not enough. While organisations such as ABTA and ATOL in the United Kingdom and the DRV’s insolvency insurance scheme in Germany, provide consumers with adequate safeguards for repatriation and deposit refund in cases of tour operator and airline collapse, no similar bonding measures, insurance structures and remedies comfort the hotel sector and, not least, the hundreds of ancillary operations, mainly SMEs, that depend on a healthy and vigorous tourist industry."

Dr Refalo concluded by saying that while this proposal could be described as a mechanism to limit exposure to normal business risks, special conditions such as differences in time and distance, the industry’s job generation potential, and diverse business practices, make a convincing case for the Commission to give consideration of this problem and possible solutions.

"This would ensure a Europe-wide mechanism that would accord SMEs some protection for the risks and effects of tour operator collapse."


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Editor: Saviour Balzan
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