Travel credits and refunds... do they make you angry?

Travel credits and refunds... it’s the hot topics in the travel industry at the moment.

Why travel credits rather than refunds? And why are refunds taking so long to be processed?

Dennis Bunnik, chariman of the Council of Australian Tour Operators (CATO) tackles those questions and explain the complexities of the tourism “ecosystem” in a comprehensive Q&A published below.

COVID-19 The Answers on Travel Credits & Refunds

Our members create, supply and deliver the travel experiences that you buy through travel agencies.

I'd like to start by saying how sorry I am that your holiday plans have been cancelled for this year. All of us in the industry are absolutely devastated by the events of Covid-19, and the fact that none of us can travel.

We know how important holidays are to us, and can only imagine how important they are to you.

Now, there's been a lot of debate and discussion recently about travel credits over refunds and, where refunds are being issued, why they're taking so long to be processed. In this video, I'd like to tackle those questions and provide some answers.

Before I do that, I would like to first touch on the size on the industry.

Last year in 2019, 6.5 million Australians travelled overseas on a holiday. Globally it is estimated that 1.4 billion people travelled outside their home country for a holiday. On top of that is business, educational and travel for other reasons. The travel industry is huge.

In Australia, it's estimated that 1-in-13 jobs is impacted directly or indirectly by travel and tourism. So, we all know somebody whose livelihood is dependent in some part on the travel and tourism industry.

So, let's have a look at why travel credits rather than refunds are being issued in a lot of instances.

This has both to do with the size of the industry and the complexity—remembering that each one of the 6.5 million holidays we take are individual and unique.

When you look at a typical three-week European tour, there will be dozens of individual components that make up that tour ranging from hotels, to tour guides, transportation, meals, entry fees and special experiences such as cooking classes. Now, all of these components are pre-paid, some of them a year in advance. A good example is priority group entry into major tourist attractions—tour operators need to buy those well in advance for the entire year.

Trying to unwind this to obtain a cash refund for each one of those individual components from overseas is pretty much impossible. And where it is possible, it adds a load of extra costs thereby putting even more pressure on jobs in the industry.

This is why credits rather than refunds are so important.

When a credit is issued, it's generally for 100% of what you paid, meaning that you can take a holiday at a future date. Any costs associated with rearranging your travel and re-doing that work is being absorbed by the travel industry. But, most importantly, what you're doing by postponing and not cancelling, is you're helping to protect jobs in the travel industry.

The vast majority of Australians are electing to take travel credits and, for that, the industry is extremely grateful, and we want to thank you.

CATO members are fully aware and understanding of the fact that, for some people, a travel credit is just not an option at the moment. And in those cases we're working with the customer, our suppliers and our travel agency partners in order to maximise the refund and minimise costs.

So, where refunds are being issued, why are they taking so long to be processed?

I can tell you from an industry perspective, we're as frustrated about this as you are.

We want these refunds to be processed quicker, too. But it comes down to the system—just as your car is far more efficient going forward, and has far more functionality than when it is going backwards, it's exactly the same with the travel industry. The system wasn't designed to work in reverse.

In terms of numbers, the best example I can give you is Emirates. They recently reported that they have a backlog of 500,000 refund applications. Now, their normal processing capacity pre-Covid was 35,000 refunds a month. Emirates are desperately trying to increase that capacity at the moment, despite the fact that they've got massive disruption within their business, from 35,000 to 150,000 refunds a month. But even at that level, it's still going to take them several months to get through those refunds. And by then, they'll no doubt have a lot more.

It is frustrating, we understand that, and we are working really hard to try and fix those bottlenecks and get the refunds moving.

So, in the meantime, what we're asking for is a little bit of patience and a little bit of understanding. Give us the time to work through the processes, to work through the system, and it will work out OK.

We are on your side in this. We understand it's difficult and we're all finding ourselves in a position at the moment that we don't want to be in.

None of us like having our wings clipped. And we understand that travel is such an important part of Australian culture. It's who we are, it's what we do, it's as much a part of our culture as going down to Bunnings for a sausage sizzle.

But for that to continue once this is all over and the borders are open again, we're going to need a strong and vibrant Australian travel industry. Because without it, our wings are all clipped permanently. And none of us want that.

So, let's work together, let's get through this and support each other the same way Australians have always supported their mates, each other, through tough times. We saw that earlier this year with the bush fires. it's now time with Covid to do that again, and see how, in the meantime, we can fix some of these system problems and some of the processes, and come out far better and stronger in the end.

Thank you for your support. All the very best for the coming months, and let's all keep our fingers crossed that we will all be able to fly again soon.

Dennis Bunnik Chair of the Council of Australian Tour Operators - CATO

ABOUT CATO

CATO is the representative body for Tour Operators and Wholesalers that supply travel product for Australians travelling to domestic and international destinations.

Membership of CATO is a hallmark of competence and integrity with CATO inspiring members to deliver innovative and sustainable travel.

For more information about CATO and its members, visit cato.travel and to watch a video of the Q&A head to Youtube