Travel firms could be withholding more than £1 billion due to customers in refunds for holidays affected by the coronavirus crisis, consumer watchdog Which? has said.
Which? estimates more than £8 billion worth of package holidays have been cancelled since the start of the pandemic, at least £1 billion it believes is still with travel firms.
The watchdog has called on government to outline how it will support travel through the rest of the pandemic, and to introduce a "travel guarantee fund" to help package providers that are struggling to fulfil their refund obligations to customers.
A Which? survey of more than 7,500 people who have had packages cancelled found that more than one in five (21%) requests for package refunds were outstanding as of the start of October.
In total, 9.4 million people are estimated to have had a package holiday cancelled since the pandemic reached the UK in March, leaving firms unable to cope with the refund backlog.
Which? said some package operators had reported delays receiving pipeline monies from airlines, meaning they have only so far been able to process partial refunds.
The Civil Aviation Authority is monitoring airline refund practices, with several airlines having made commitments to the regulator on refunds.
Elsewhere, Which? found the average amount of time consumers were spending contacting package firms about cancelled trips ran to more than 15 hours.
And for more than four in 10 (43%) of cancelled holidays reported to Which?, customers had to wait for more than a month to get their money back.
The Which? survey found that more than a third (37%) of those who have had a package holiday cancelled since the start of the pandemic said the experience had a negative impact on their confidence in the travel industry.
Which? has called on the government to outline how it will support the travel industry through the rest of the pandemic.
It has also urged Westminster to introduce a travel guarantee fund to support package holiday providers struggling to fulfil their legal obligations to refund customers.
Additionally, the watchdog has called on the government to review passenger protections in light of the Covid crisis.
Earlier this year, the Competition and Markets Authority (CMA) secured commitments from some firms to improve the refund practices, but Which? has urged the CMA to more closely monitor firms to secure further undertakings "and prevent trust in travel being damaged any further".
Which? travel editor Rory Boland said: "It’s simply unacceptable that some of the UK’s largest operators are still getting away with breaking the law, but without meaningful intervention from the government and the regulators in this space, many people will struggle to get their money back.
"The CMA must take firm action against any operators that are continuing to drag their feet on refunding holidaymakers, and the government must urgently set out how it will support travel companies in fulfilling their legal obligations to passengers."
Between 25 September and 1 October, Savanta surveyed 7,572 consumers who had package holidays cancelled by their provider on behalf of Which?, with respondents reporting experiences of 8,783 cancelled package holidays in total.