The Association of Canadian Travel Agencies and Travel Advisors (ACTA) says the Travel Industry Council of Ontario’s (TICO’s) proposed funding framework and fee review are nothing but “band aids on a broken system.”
Sharing feedback in a press release on Wednesday (Oct. 25), ACTA President Wendy Paradis, addressing TICO’s proposals for a future funding model, said TICO’s ideas, overall, are “essentially cosmetic changes.”
“The proposed funding framework is not based on the risk profile of the registrant, and the consumer is not legislated to contribute, leaving the burden squarely on the shoulders of Ontario travel agencies and tour operators,” Paradis stated.
She added: “The window to change the system is open now and it could be years before it is opened again. ACTA, our members and other industry associations need to continue to advocate to the Ontario government to finally fix this 40-year-old legislation and its regulations, which in no way reflect the environment of the Ontario Travel Industry today.”
The feedback comes as TICO, in the midst of its largest funding review since its inception, holds consultations with registrants and stakeholders – a process that will conclude on November 10.
Earlier this month, Ontario’s travel regulator released its proposal for a future funding model, which includes changes to the Compensation Fund, registrant renewal fees, and other process.
One suggestion in TICO’s plan is the elimination of non-contributing end-supplier coverage, such as for airlines and cruise lines, from the Compensation Fund (subject to government consideration and decision-making).
“Airlines and cruise lines are not part of TICO’s jurisdiction,” said TICO’s CEO Richard Smart at a press conference with trade media on Oct. 6. “We're looking to address what's been a long-standing issue where you've got two entities that don't pay into the Fund.”
TICO has also proposed to decrease Compensation Fund payments to $0.05/$1,000 from $0.25/$1,000 of Ontario Gross Sales, and double the maximum Fund payment per person to $10,000 from $5,000 for consumers.
Smart says that while this proposed change does represent a reduction in consumer protection, the Compensation Fund is not the only way consumers are protected when they book with a TICO registered travel agent.
“TICO is more than just the Compensation Fund,” said Smart. “A consumer should still feel confident that they're dealing with a regulated marketplace where there's a suite of consumer protections and compensation products.”
In addition, since TICO’s inception in 1997, only 14 per cent of Compensation Fund claims have been related to end-supplier coverage.
“We think in today's travel environment, there's good justification for this,” said Smart. “It really comes down to fairness and equity for the registrants.”
ACTA, however, notes that more than 95 per cent of transactions are using credit cards, which historically provides the primary consumer protection.
The risk lies with several possible parties, including registrants that accept cash or cheque, unregulated tour operators, and federally-regulated airlines and cruise lines residing outside Canada, the association said Wednesday.
Compensation Fund contributions should be paid for by the beneficiaries of the Fund, which ae consumers, ACTA says, arguing that registrant fees should also be based on the risk profile and “not a blanket approach.”
ACTA is urging it members to evaluate TICO registrant fees and Compensation Fund contributions together.
“The reduction in variable Compensation Fund fees is directly offset by permanent increases in registration fees based on sales volume, along with an increase in the fixed minimum registration fee,” the association said.
Individual results shared will remain confidential, ACTA said, with only aggregate information being used in its advocacy message.
TICO must reduce operating costs to the Fund
ACTA is also calling on the Ontario government to review all TICO expenses and what the Fund will cover in the future.
This, given that the TICO Report recommends a significant reduction in the Compensation Fund and no consumer contribution.
According to ACTA, approximately 72 per cent of TICO’s operation expenses are funded through the Compensation Fund, amounting to an average of almost $3M/year over 2016-2020.
“Without a significant reduction in the cost of TICO operations and expenses, this is not sustainable going forward,” ACTA said. “Even under the new proposal, we estimate that TICO will still take $1 million a year from the Fund to cover expenses.”
End Supplier coverage ending
The proposed removal of coverage of cruise lines and airlines, however, is a “positive step” toward change, ACTA noted, calling it a “national issue, not a provincial issue.”
It is important to note that Section 46 of the Travel Industry Act Regulations still states that if a registrant acquires rights to travel services for resale, and the supplier fails to provide the travel services paid for by a customer, the registrant is still liable.
Therefore, ACTA believes this section of the regulations must be updated “with more equitable wording.”
As well, while increasing the maximum Compensation Fund payment per person to $10,000 from $5,000 for consumers on the surface is an improvement, the remaining caps of $5M/event and $2M in repatriation “would leave consumers with cents on the dollar in the event of a large failure,” ACTA added.
TICO the payor of last resort
ACTA is also reminding its Ontario-based members that TICO is the payor of last resort with registrants being the first to reimburse, followed by credit card companies, and then insurance policies before claims ever hit the Ontario Compensation Fund.
“If the Ontario government remains motivated to legislate enhanced consumer protection to make the consumer ‘whole’ in the event of potential registrant bankruptcies or insolvencies, the only way this is sustainable is through a consumer contribution model,” the association said.
Registrants can complete an online survey and provide their written feedback on the proposals. Click here to get started.
The survey will remain open until Nov 10, 2023, and takes approximately 10-15 minutes to complete.