Aito says the Package Travel Regulations are “no longer fit for purpose” at this time of crisis, and place hundreds of businesses in an “untenable position”.

The association has also urged the government to ensure merchant acquirers – which provide credit and debit card facilities – to “moderate” amount of cash withheld from tour operators and travel agents to mitigate their own risk.

“It is not only airlines and giant tour operators deserving of government support,” said Aito, which represents more than 120 small- and medium-sized enterprises, including specialist operators and agents, adding these businesses “formed the backbone” of the outbound travel industry.

UKHospitality chief executive Kate Nicholls, meanwhile, said the government’s decision to advise Britons to avoid pubs, restaurants, hotels, theatres and other hospitality and leisure businesses would be “catastrophic” for businesses, which she said had been left in limbo with no access to insurance, and jobs.

Chancellor Rishi Sunak last week announced a range of new measures to support small businesses in his first Budget, which included suspending business rates for a year for small businesses.

However, the government is expected to outline further financial support for businesses on Tuesday (17 March) after the UK’s response to the coronavirus outbreak was significantly stepped up on Monday.

‘Failure to act will cost government dear’

Following a meeting of its board, Aito is seeking urgent government backing to support its members, and relief from the measures outlined by the Package Travel Regulations.

Aito’s head of commercial Bharat Gadhoke and director of industry affairs Noel Josephides said: “The 2018 Package Travel Regulations, or PTRs, are quite simply no longer fit for purpose.

“The rules, designed to cover normal trading circumstances, cannot function in the current extreme situations in which we find ourselves. We have no option but to add our voice to that of others in the industry to demand government action to protect our long-established specialist businesses.

“Having to adhere to the PTRs, which require tour operators to refund consumer payments in full should the holiday company prove unable to fulfil a package, places hundreds of companies in the simply untenable position of being a lender of last resort.”

‘Invest in long-term survival of SMEs’

Gadhoke and Josephides said while Aito members pay in advance for airline and accommodation services, it was “extremely unlikely” they would receive refunds from suppliers at this time.

“In this global crisis, it would be unreasonable to expect [them] to abide by the requirements of the PTRs, which were not designed to cope with a disaster affecting every country and every destination worldwide,” said the duo.

“To do so would lead to innumerable company collapses and the loss of many thousands of jobs, which would cost the government dear for many decades to come.

“We urgently call on government, instead, to invest significantly in the long-term survival of SME tour operators and travel agents by altering the scope of the PTRs to enable agents and operators legally to defer planned holidays – or at least to refund only monies suppliers have refunded to them, having first taken a reasonable margin to cover the initial work involved in organising the holiday.”

According to Aito, EU members are considering alternative refund requirements, and the association has called for "urgent confirmation" from the UK government it is involved in such discussions.

Additionally, Aito has asked the government to ensure merchant acquirers do not withhold excess sums from tour operators and agents.

“The extent of the merchant acquirers’ action on this front is already having a serious and deleterious impact on the cash flow of such tour operators and travel agents,” said Gadhoke and Josephides.

Hospitality industry ‘in limbo’

Nicholls, meanwhile, said government advice to avoid pubs, restaurants, hotels, theatres and other hospitality and leisure businesses, would be “catastrophic for businesses and jobs”.

“The government has effectively shut the hospitality industry without any support, and this announcement will lead to thousands of businesses closing their doors for good, and hundreds of thousands of job losses,” she said.

“Over the past few weeks the industry has suffered unprecedented drops in visits and many business are already on their knees. This latest advice leaves the industry in limbo, with no recourse to insurance.

“The government must act now to stop them going under and protect the people’s jobs. These venues play a unique role as community hubs and it’s in all our interests to protect and preserve them, so they are still there once we emerge from this crisis.

“We need immediate and far-reaching support from the government, and meaningful business continuity measures.”