TTG sat down with Abta chief executive Mark Tanzer in December (pre-Brexit trade deal) to talk RCNs; consumer protection and cash flow; Abta salaries and performance; government; and the outlook for 2021. Jennifer Morris reports
Abta's chief believes the organisation is well positioned to facilitate industry consultations around consumer protection and cash flow post-Covid crisis, but warns we must “be careful what we wish for”.
Speaking during an exclusive interview in December, Mark Tanzer agrees both issues need to be examined in the year ahead.
“Abta is well positioned between the members, government, the various departments and the CAA to facilitate a proper consultation on [these issues],” he says.
“Different members might well like different models, so we need to consider how we come up with a solution that works for the whole industry.”
Tanzer added Abta itself was “very engaged” with financial protection, with £700 million worth of bonds and an insurance business.
He continued: “You can’t just flip a switch and change your whole trading practices and your balance sheet capitalisation overnight. So it’s not just the end point that needs looking at, it is the process for getting there.
“We’ve got to be careful we don’t lose what’s good about the package holiday – its protections. There’s a tendency to react to Covid by saying, ‘we need to deregulate it, the industry can’t provide these protections and the customer has to take the risk’. We need to get that balance right.
“I think what we would do is develop some models or hypotheses, and then really make sure we test those, so we understand what the pluses and minuses are for different members.”
Asked about travel companies historically using consumer cash as working capital, Tanzer gave a word of warning.
“It has actually worked in the past,” he insists. “It has been able to deliver lower costs for consumers, because I think if members had to build up all of those consumer flows and put them on their balance sheet, that would add to their costs, which would have to be passed on to the customer.
“And I think the system of bonding and the Atol scheme have actually protected those monies in the flow. Covid presented a unique challenge, and I don’t think we should leap to a solution that says ‘all money must be put into trust accounts and can’t be touched until the customers come back’ until we understand the full impact of that on costs and whether companies could do that.”
Abta members’ combined turnover pre-Covid was £40 billion.
“If you said travel companies have to build a balance sheet that can support £40 billion annual revenue, you’ve got a very different financial model.”
He said it could lead to a smaller industry as a result, adding: “So I think we have to be careful what we wish for here.
“But I do think this is an opportunity to really look at it afresh without any preconceptions and come up with a model that balances all of those risks in a way that’s best for the customers and best for the industry.
“We need to rebuild commercial links coming out of this and make sure everyone is happy with their level of risk.”
Asked about Abta’s decision to propose refund credit notes (RCNs) – which was met with push-back by some travel businesses, Tanzer insists he would make the same decision again, describing it as “unwelcome but necessary”.
“It has been a very unusual and difficult position for Abta because for years we’ve been seen as an honest broker between customers and members,” he ponders.
“We came up with a mechanism early on explaining to customers, ‘look members aren't in a position to pay the refund within 14 days, but here is evidence that the refund will be paid and if anything happens to that company, it's still protected by us’.
“Unfortunately the government took quite a long time to come out and back it, so Abta was left out on our own defending the fact that refunds wouldn't be paid immediately.
“And we took quite a lot of stick – and still are – from people who want their money.
“What we were trying to do is say, ‘look, this is the reality – when everything stops globally, people aren't in a position to pay simultaneous refunds’.
“It did bring some order to what would otherwise have been chaos, because every company would have been making up their own pieces of paper and arrangements.
“And it did give customers the protection that if the company failed, then they would still get their money back, which is the underlying promise of a package holiday.
“I think it was the right thing to do, but certainly, it was a challenge for us from a brand point of view to get that across. And I completely understand the frustration people had.”
Tanzer adds that underlying the move was a philosophy that “refund is due here”.
“Other people were out there saying, ‘well, we're not going to pay your refund because we can't get the money back’. We stuck through that, not just through RCNs, but through the whole pandemic.
“We've lost a couple of significant members over that issue.
“But I think sticking to the principle that where a holiday is cancelled a customer is due a full refund was really important for us to do.”
I ask what 2020’s impact has been on the Abta brand.
“It’s the consumer brand that is particularly important because that's one of the assets for members as well,” insists Tanzer. “It makes people confident to book with an Abta member.
“We had over a million people visiting our consumer-facing website on coronavirus. And I think we are very much seen as the voice of authentic information that customers trust.
“So I think that has reinforced Abta as a very important component of their travel experience, particularly when it starts getting difficult.”
Abta has conducted “pulse surveys” on the brand since the beginning of the pandemic, and Tanzer says 70% of people still associate Abta as “the brand in travel they really associate with trust and safety and security, which is testimony to what's been built up over many years”.
He admits, though, that the brand took a consumer hit over refunds “where customers were waiting for their money and they weren’t getting it quickly”. “Often they saw Abta as part of the problem rather than part of the solution,” he shares.
Tanzer adds not just Abta but the whole industry “has a job to do” to rebuild customer confidence, not just on financial protection, but safety to travel.
“We shouldn't underestimate that there'll be an overhang of customers thinking, ‘what am I going to get when I book?’, ‘will I be safe?’, ‘what happens if something goes wrong?’, says Tanzer. “And we need to be able to provide good information and support.”
Asked whether more widely there’s anything Abta would have done differently if it had its time again, Tanzer is confident.
“I don't think so, no,” he replies.
“I'm not being complacent here because you’d always like more or faster.
“I'd like to have got money back to customers faster. I'd like be able to pay claims where companies have failed more quickly. I'd like to have got more from government for members.
“So it's not a question of saying, ‘we did a great job and there's nothing left to be done’.
“I think we're doing a good job, but there's always more.
“The scale of the pandemic is just such that however much you do there's still a need for more. And I recognise that, but I think the approach we've taken and the kind of campaigns we've launched (Save Future Travel) to really make the case for how dire the situation is for members were right.
“And I think the support we've been able to offer members and customers on this has been valuable.”
Asked his opinion on the perception from some members that Abta hasn’t been doing enough for them, Tanzer agreed “perception is the reality”.
“If someone feels they haven't been supported, then they probably haven't been supported,” he admits.
“I think we have given a lot of support to members, not just the membership as a whole, but we've had three thousand people joining conference calls and webinars, but also on a one-to-one basis, helping members through some very, very tricky situations around their own finances around bond renewals.
“And I think members who have benefited from that would say they've had a lot of support from Abta and I'm glad about that.
“I'd like every member to feel they were fully supported by us.
“I think sometimes the frustrations members have are focused on us, but actually they can be frustrations with government as well, but we're seen as the people who aren't able to deliver what they'd like the government to do. And that's always a challenge with lobbying.
“You're out there, you're making the case, you're having campaigns, you're getting in the ear of members of parliament, but fundamentally you don’t make the decision about the level of support that is available.
“If members are worried about their businesses, they're scared about their businesses and they feel that the travel industry isn't being taken seriously enough by government, then it’s right that they look to their association to change that.
“And if we're not able to, then I can see why some would be frustrated.”
Tanzer adds that a lot of lobbying is not done in the “glare of public communication”.
“A lot of it is happening with quite sensitive conversations between us and officials and us and politicians, often with quite a technical nature.
“What we've learnt is that the government wants data and evidence.
“Going in and saying, ‘it's all very difficult’ doesn't help. They ask, ‘how much?’, ‘how many jobs?’
“They want to understand what is happening on the ground from a technical point of view and an operational point of view, and those conversations have been going on from the beginning of the pandemic, which may not be visible to members.”
I ask about his response to headlines earlier in the year about Abta staff salaries. The organisation’s accounts for the year to the end of June 2019, which are published on Abta's website, show its “highest paid director” received a gross salary and benefits of £276,000 for 2019.
“The way in which Abta’s costs feed back to members is through their subscription,” says Tanzer.
“The board of Abta were very quick in seeing that this  was going to be a very difficult year.
“We reduced the annual subscription by 50% for everyone and phased the payment of it. And we were able to do that because we'd been managing the finances of Abta quite prudently for a number of years in the event that there might be, if not a pandemic, certainly a rainy day.
“Members who have benefited from that reduction in subscription have been very grateful for it, and what they really judge us for isn't the salary of this individual or that. It’s whether they are getting the service that they need.
“A lot of members feel that they have had good value from their subscription, even if it'd been a full subscription.
“And to me that is a more important consideration for a membership association – are we able to deliver the services members need?
“And we've got lots of technical specialists, financial specialists, legal specialists, operational specialists, all of whom have different backgrounds and together that creates an entity which charges a subscription. And that's what pays for the services members get.”
Next I ask about increased Abta bonding last September, and suggestions it was a “bloodbath”.
“By law members have got to protect the money they have outstanding due to customers,” begins Tanzer.
“There's been a gradual build-up of the money that is due to customers. Because normally refunds would happen throughout a year. So actually what you're seeing is by deferring refunds, there's actually a bigger bubble of consumer money at risk.
“And it's not our decision, it's the law’s decision that you have to protect that.
“So it could well be that even though people's sales are flat, their actual customer monies have been building up. And that's what we reflect in our bonding.
“The package travel regulations say this has to be protected and that's how much of a bond we need.”
“I think words like ‘bloodbath’ don’t really help,” he adds.
“What is true is that it is a tight market. The bond providers have taken a hit on some of the companies that have failed. We've had 25 Abta members who have failed since the beginning of the pandemic, including some very old well-established names.
“And bond providers will have taken a hit on that and other financial providers as well. So they're looking at the travel sector and going, ‘I’m not sure how much I want to be in this’.
“So I would say the difficulty isn't of Abta’s making. It’s the fact that the market is very tight and we've been working with our members through the bond renewals in September.
“We're very far advanced in that and we’re out the other side of the process. But yes, it's been a difficult year for that for sure.”
I ask whether Tanzer thinks the government has done a “good job” for travel during the pandemic, to which he says it has been a “mixed bag”, with testing a failure.
“Furlough, I would say a big tick – although I appreciate it doesn't address all the issues because we've had to have people in the offices and refunds and so forth.
“Business loans was a semi-tick. It was good in principle, but the actual delivery of it was quite slow and cumbersome. And the actual terms of the loans weren't as generous as they could've been, but there was some money there.
Tanzer describes testing as having been a failure.
“Test and trace hasn't worked and the lack of any kind of real testing regime or framework for the travellers stops people traveling as well.
“That's sort of been addressed belatedly through test and release, but again there are issues around that.
“The blanket imposition of travel advisories against travel obviously hurt us really badly. And we were arguing for a long time that the government should be more specific about which countries they were advising us travel to.
“And they’ve started doing that with the Canaries, which is good. But again, initially that was a real barrier.”
Tanzer reiterates that in terms of sector specific support Abta would “like more”.
“I don't think the government has understood how public health policies around quarantine advisories effectively choked off demand, which to me is the same as shutting supply.
“So it's the same as saying, ‘you can't open your shop’.
“We have been making the case for specific grants for travel agents and for the tour operators whose volumes are down by 90% on last year… and that's directly as a result of decisions the government – for good reason – has taken.
“But we need to make that case and continue to make it.
“We really have to now push on testing. And, of course, the vaccine roll-out is going to be critical as we go into the year.”
Tanzer adds there’s “always been a slight bias against outbound travel politically”.
“People wonder whether it is that important in the national scale of the emergencies and say it would be better if everyone took a holiday in the UK rather than traveling overseas.
“So we've always had that hill to climb. And we've been making the case about how many jobs in the UK are supported by the outbound sector, with £38 billion of GDP and so forth.
“We have to keep reminding the politicians of how important it is to the UK economy that this sector flourishes. And we'll keep the efforts up.”
Tanzer adds he has “a lot of respect for the tourism minister” (Nigel Huddleston).
“He'll say there's a long queue of different industries, all saying ‘we are very important’. But we will definitely have to keep up the pressure over the winter to get support.”
Tanzer rejects suggestions the industry has failed to speak to government with “one voice”, highlighting Abta’s formation of the Save Future Travel Coalition, which brings together the BTA, Advantage, the SPAA and others, as well as its work with Airlines UK and the AOA.
“So I don’t think the fact that we may not have been able to get out of the government the money that we want is due to them being able to say, ‘well this group is saying this and that group is saying that, and it's not consistent’.
“I think we have actually been consistent about the impact on the industry that this has created, and presented data that proves that it's effectively killed off aviation and tourism overseas.
“So I think we have been unified on this.
“People have often said to me the industry doesn't speak with one voice, but that’s partly because it's a sector rather than an industry.
“And between the particular lobbying priorities and demands of an airline and a high street travel agent, there's quite a big difference.
“So it's a question of finding the areas where we have common cause and where we can present the evidence and the weight of the arguments together. And we do that. And I think we've done that through Covid.
“But, we've got to keep the pressure up.”
Tanzer adds while he would never “rule anything out”, he doesn’t believe a professional lobbyist would help the industry’s cause.
“We use lobbyists for Brussels and so forth, because it's about getting access, it's about contacts that you may not have and it's very useful to have someone to guide you. In the UK, I'd say we do have those contacts at the official level within departments and also directly with MPs.
“And, as I said, what they're looking for isn't the kind of professional lobbyists. They're looking for data, expertise.
“Often in government departments, the officials can move around quite a lot, and you need to have the experience of years of having seen how this works. And I think they do respect Abta as having that, and having the credibility to talk to government.
“I can't quite see how [a professional lobbyist] would help.”
I ask whether Tanzer supports calls for a dedicated outbound tourism minister, but he is not convinced.
“In defence of the current minister, he does understand the outbound side because he used to work in it, and he understands it probably better than many of the other tourism ministers I've met.
“I think the problem isn't one of a dedicated ministerial position, it's that our brief is spread across quite a number of different departments by its nature. So you're dealing with the aviation sector, the FCDO, the home office, the treasury. And I don’t think that having a single person would change that. I don't think you could bring all of those different aspects of travel into one department because they actually belong in those other departments.
“So I don't think it's a priority for us that we have a dedicated outbound minister, but what is that the current minister is very aware of the issues that the outbound sector has with Europe and helps facilitate that triage to be able to come up with a package that is going to work for British tourists overseas.
“I can assure you I'll be working closely with the minister as we go into the year to make sure that happens.”
I ask Tanzer how the industry can be better prepared for any future crises.
“The major learning is that a global pandemic is not only something we've never experienced before, but something that overwhelms all the existing structures that support travel. Any kind of major pandemic is a pretty toxic event for the travel industry.
“From Abta’s point of view, we're right in the heart of financial protection and obviously that's been a very central topic with cancellations and refunds.
“The third thing – I don't know if it's a learning or maybe just a reminder – is the amount of care and attention that the industry has given to customers from the beginning of this.
“I've seen members large and small – they've got problems on their own and they're worried about their own businesses and redundancies – yet they are really going the extra mile for their customers. And it's a credit to the industry that that's the way they reacted.
“That gives me great optimism that customers will come back because fundamentally they feel that by going with a travel organiser they've had much more support than they would have had if they’d done it on their own.”
Tanzer adds that while “Abta is always changing” in response to what the members’ business models are, the organisation will look at what the priorities of the members are over the next two or three years and “make sure that we're able to deliver those services at a price members are able to pay”.
“So there'll be certainly introspection and adaptation in line with what emerges from Covid.”
He adds: “It’s not just about Covid either. Before the pandemic, the big challenge was sustainability and carbon reduction and impact on the environment and those haven't gone away.
“So making sure we're continuing to not just drive change, but help members embark on that change journey is really important as we start to get back to what I hope would be a more normal situation.”
Tanzer adds his hope that what we've learnt about testing and quarantine periods isn't forgotten coming out of this.
“Because then even if you have a local health problem we will be able to immediately put in place communications and testing and structures that dampen down the stop start nature we've experienced this year.
“We've talked about financial protection, we'll look at whether that can be done in a better way as well. So I think there are opportunities to learn from Covid.”
Tanzer won’t “tempt fate” by replying to my question about whether there will be further financial collapses in the near future, but admits “it's going to be a tough winter”.
“Even though the vaccine has helped enormously and we're starting to see confidence feeding through, the final balances don't get paid until the summer.
“And so a lot of travel companies are still having to look very hard at all the cash they've got to be able to get through this. We're there to support them, but it's going to be difficult for a number of them.
“I'm hoping that because of the steps I know a lot of them have taken – and they're doing incredible things, taking other jobs, doing anything they can just to get new cash in – will help him through.
“I also hope financial providers, banks and other shareholders, if they start to see an order book and future bookings coming, then that will give them more confidence that they can see that there is going to be a business coming out of this, whereas three months ago they couldn't see even the beginning of that.
“So I'm optimistic, cautiously, that it will get better as we go into the year and it will get easier, but I'm not underestimating how difficult it is at the moment for companies.”
Tanzer adds his belief that vaccines are going to co-exist with testing for a while.
“People’s understanding of how that works and how they can get released from quarantine earlier and so forth will help.
“The industry is there, they're ready. I think forced abstinence [last year] has actually increased people's desire to travel, certainly our consumer research suggests that, and to revisit places they've missed or to try completely new experiences that they really appreciate now. So I'm not worried about the demand, it's how we remove the obstacles to customers.
“2021 probably won't be a smooth ride, but I think it will be a ride heading in the right direction. And so I wish everybody the best success for the year ahead and obviously for all of our members, we're here to support you in any way we can.”
Speaking to TTG after the Brexit trade deal was agreed on Christmas Eve, Tanzer said while businesses will need to adapt to changes, it was good to see that vital transport links, including point-to-point air links and third-country coach access, will be maintained for UK operators.
“We are also glad to see the news that existing EHICs issued by the UK will remain valid until expiry, and the statement from the UK government that they intend to agree a replacement regime (the UK Global Health Insurance Card).
“There are, however, some major issues that still need to be addressed including the ability to send UK travel and tourism workers abroad for temporary periods, as was provided under the Posted Workers Directive. This has been a big part of Abta’s lobbying activity on Brexit and will continue as this year progresses.
“Abta has published an initial assessment of the deal for members and is continuing to assess the full agreement in detail, recognising that there will be further updates from the government on various matters.”
Abta has also updated its guidance for customers at abta.com/brexit, which includes the need for passports to have at least six months’ validity.
“As travel to Europe evolves, Abta will continue to work with the UK and national governments to encourage pragmatic solutions to minimise disruption for tourism workers and holidaymakers, while also updating information for our members and their customers as required,” Tanzer added.