The basic purpose of this Bill is to provide in law for measures to govern and regulate the operation of the Irish travel industry and to protect the interests of the travelling public. As Senators will note, the measure before the House is an enabling Bill, which when enacted, will enable the Minister for Transport to introduce the protective measures provided for by way of order or regulation.
The House will be well aware of some of the difficulties experienced by customers of the travel trade in the past couple of years. The question of the regulation of the travel trade in the interests of the travelling public has been an ongoing issue for some years now. The ideal situation would be one where governmental regulation could be avoided. With that end in mind successive Ministers for Transport have, in recent years, urged the trade to aim at a high degree of self-regulation in the interests of both the trade and the public. The trade, through the medium of the Irish Travel Agents' Association, did establish a fund which was used in the case of the failure of two relatively small companies and was also drawn on in the arrangements in which the ITAA participated in relation to Bray Travel clients who were abroad on holidays at the time of that collapse. However, the fund never reached a level sufficient to deal with a major collapse in the trade such as occurred in December 1980 in the case of Bray Travel. I acknowledge that, particularly in the wake of the Bray Travel collapse, the trade took upon itself in a more serious way to protect its customers by voluntary bonding arrangements and so on. Nevertheless, events have demonstrated that a need exists for Government-sponsored arrangements based on legislation to protect the public.
There were detailed consultations with the travel trade in the preparation of this measure. The input made by the trade was of great assistance and the Minister for Transport has asked me to take this opportunity to express his thanks for the encouragement and assistance received from the trade during the consultations.
The Bill before the House is a broad enabling measure that will provide the framework within which the travel trade can be regulated and the public protected. Senators will note that the Bill embraces all forms of transport and applies to both tour operators and travel agents. It would be the intention to proceed on a gradual basis. This may involve the application initially of the measures proposed to travel by air which is by far the medium of transport most used by package holidaymakers. Similarly the Bill gives the Minister for Transport scope to apply the measures proposed to tour operators at first and to travel agents later on. This may be necessary from an administrative and practical viewpoint in order to provide protection as quickly as possible for as large an element of the total market as possible.
The Irish travel trade consists of tour operators who negotiate, organise tours, arrange travel, book hotels, publish brochures and so on and travel agents who are the retail outlets for the sale of holiday packages, airline tickets, sea voyages and so on on behalf of tour organisers and transport carriers. At present there are about 30 tour operators in Ireland advertising to more than 100 destinations. There are, in addition about 200 travel agents in the country, many of whom, although primarily concerned with the retail of packages on behalf of various tour operators, organise weekend tours to London, Amsterdam, and so on. The majority of tour operators— travel agents are members of the Irish Travel Agents' Association.
The person buying a holiday is in the unique position of paying in full and in advance for a very perishable product available outside the jurisdiction almost entirely on the basis of descriptions of the product contained in a holiday brochure. The vast majority of Irish tour operators and travel agents are responsible individuals. However, there is at present no ban on entry to the trade and no criteria or qualifications to be met by new entrants. At present a person can rent a basement flat or shopfront, set himself up and advertise as a tour operator or travel agent and proceed to accept large sums of money over the counter for a service that may or may not materialise depending on a whole range of factors. The Irish Travel Agents' Association have only limited means of enforcing consumer protection measures on their members and, of course, have no function or power whatever in relation to non-members or new entrants to the trade.
I am aware that some retailers, particularly smaller ones are concerned about the question of having to secure licences and provide bonds. The Minister for Transport is conscious of this and in that regard, has asked me to clarify the position. The Minister acknowledges that retailers, members of the ITAA, have a good track record. However, the question of new entrants to the trade or retailers who are not members of the ITAA is a matter which needs to be considered. The Bill is an enabling one and application of its provisions to retailers is a matter to be discussed and decided in due course. Consultation with the trade was an integral feature of the preparation of this Bill. Those consultations will be continued through the implementation process and the question of requiring retailers to procure licences and bonds can be considered at that time.
The collapses which have occurred have prompted the ITAA and individual operators to look closely at the degree of protection offered to their customers. As a result, the ITAA as a body and a number of tour operators individually secured bonds from insurance companies and banks which were widely advertised as offering safeguards to the public booking holidays on trust. Action along those lines, is, of course, to be commended; the pity is that it took a major collapse in the trade to spur the move. The bonding arrangements entered into voluntarily have been the subject of a study recently completed by Messers Craig Gardner, management consultants, on behalf of the Director of Consumer Affairs. The findings in that study, though necessarily tentative because of the nature of the exercise, pointed to some major shortcomings which I believe are or up to recently were fairly widespread in the trade. Chief among the shortcomings was the capital structure, with companies trading with a relatively low paid-up capital compared to the size of their turnover. A further indication of this inadequate capital backing can be found in the fact that only one of the companies surveyed owned their premises, with the remainder having their premises on lease. While this may be typical of service industries with little or no investment in fixed assets, the under-capitalisation which the survey revealed coupled with the absence of reserves or other readily liquifiable resources suggests a heavy reliance in the trade on credit and cash flow with all the dangers that such a situation holds for the consumer when things go wrong for an operator.
In the area of bonding arrangements, the consultants found that generally tour operators who are members of the Irish Travel Agents' Association were bonded individually to the extent of 5 per cent of turnover, backed up by a reserve fund of £50,000 and a group bond of £500,000 for the summer 1981 season. These arrangements are, of course, voluntary, and the consultants pointed out that it was very difficult for any trade association to regulate its members when all the regulations were voluntary. For these reasons the consultants concluded, among other things, that the only way to enforce the adequate bonding of tour operators was by means of legislation.
The basic elements envisaged in the present measures are: a bonding arrangemen for tour operators and travel agents for the protection of their customers; a back-up protection fund to be raised by contributions from tour operators on a basis to be determined by the Minister for Transport; a system of licensing to control entry to the trade.
The bonding arrangements, which would be inter-linked with the licensing system, would represent the first line of defence in the event of an operator or agent failing to meet his commitments and the protection fund would represent the reserve. Availability of an adequate bond would be an essential requirement before any operator or agent would be considered for a licence.
The Bill has a broad underlying philosophy. It seeks to prevent failures in the trade as well as to provide remedies where failures occur, to protect the consumer as well as to regulate the trade. Consumer protection is the major motive, but the licensing and bonding elements will have, as a major objective also, the imposition of certain rigours and disciplines designed to put the trade on a proper footing in time and in this way to seek to prevent failures. It is envisaged that the bonding requirement will lead to financial probes by underwriters who are expert at gauging risk, and tour operators who are seriously under-capitalised are likely to be faced with the choice of improving their financial position, paying a high premium or not securing a bond at all. In the same way it is envisaged that in vetting applications for licences the Minister for Transport will be able to call for details of financial resources, reports and balance sheets, and pay particular regard to the degree of capitalisation of applications and condition licences accordingly.
The three elements involved represent an intergrated package which draws on the best elements of protection in force in other European countries. A number of other possible options were considered by the Minister for Transport including the possibility of some form of insurance arrangements. However, such arrangements would not prevent the entry of undesirable elements into the trade and were accordingly discarded in favour of licensing and bonding arrangements of the type envisaged.
The Bill has been well received generally by the various interests concerned. The debate on the Committee Stage may reveal a need for some amendments, but these would be largely of a technical nature and would not affect the general thrust of the Bill.
In a statement issued on 22 September last, the Director of Consumer Affairs supported the proposals provided for in this Bill and indicated his belief that the measures involved offer the best hope of avoiding a repetition of the extensive losses which some consumers have suffered in recent times.
The travel trade itself has been among those most vocal in recent times in calling for legislation in this area, and I believe that the Bill is generally welcomed by the trade. I should remind the House that the present measure is an enabling one, and the House may be assured that the Minister for Transport will proceed with all possible speed to make the necessary orders and regulations to bring the relevant arrangements into operation. I can say now, however, that the practicalities involved in implementation and indeed the need for further consultations with the trade make it impossible to have all the protection arrangements involved operational for this winter season or possibly for the 1982 summer season. Indeed, even if the proposed measures could be brought into force overnight, it would take some time, for example, to build up the protection fund to a level that would be sufficient to deal with a major collapse. In these circumstances there is an obligation on the trade, in its own interest, both from a customer-relationship point of view and in establishing or maintaining credibility with banks and insurance companies, etc. to offer protection in the intervening period by maintaining or improving the existing bonding and other protection arrangements devised by the trade. The Director of Consumer Affairs in a recent comment on this suggested that a reasonable level of protection for the coming winter and indeed the 1982 summer season would be afforded by an individual bond for the duration of the season equivalent to 10 per cent of annual turnover, or a continuation of the association's scheme which involves a 5 per cent individual bond backed up by a group bond of £500,000 and a reserve fund.
The present measure is an important consumer protection measure and I am happy to recommend it to the House.