Friday, 10 April 2020 13:49

Prepayment refunds – ‘It’s the customer’s money, not yours!’

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There is currently no insurance covering tour operators and/or destination management companies for a pandemic like COVID-19, therefore South African-based suppliers should consider that they are legally obligated to return money for prepayments of services that were not rendered.

This is the view of Jochen Grossmann, owner of the iNTABA tour operating company based in Germany, following a recent Tourism Update article in which a Cape Town-based DMC warned that suppliers could risk losing business if they did not repay the prepaid funds.

MD of Fairfield Tours, Juliane Loubser, echoed what Grossmann said, noting that many of the prepayments were to transport operators who only incurred costs during the actual tour and therefore had no reason to hold on to the money.

“There is really no choice. Either suppliers are legally complying by paying back the prepayments or they’re acting illegally,” reiterated Grossmann, pointing out that if everyone on the supply chain behaved correctly and reimbursed money for which they currently could not provide a service, the tourism supplier chain worked.

“If one link in the chain keeps the foreign money to itself, the chain breaks forever,” he said, adding that the issuing of credit notes didn’t help anyone, as clients were insisting on a full refund. “This is because, basically, no one can give guarantees at this stage that they will be able to survive this massive crisis.”

Grossman said neither tour operators nor DMCs were ‘banks’ that could borrow money, and pointed out that  even in Europe there was very little support from government to cover the tourism industry’s losses.

“The simple question everyone in the tourism chain needs to ask themselves is: who owns this money that we are sitting with? Answer: the guests do!”

Tourism consultant and product owner, Alan Roxton Wiggill, believes it all comes down to survival, and by asking the suppliers to refund prepayments is simply transferring the pain from one part of the supply chain to the next.

“The whole supply chain should be sharing the pain and, as an industry, we need to convince the travelling public that holidays will happen again and that they should postpone their dream holiday until they can travel safely – not just tell suppliers to refund all the money,” he said.

“The reality here is that all but the well-established cash-flush suppliers can refund their clients’ cancelled bookings. The small and medium suppliers have already lost all their business, don't know when it will start to return and have had to pay back some cancellation fees in most instances. They will simply never come out of the starting blocks again.”

Wiggill said bankrupt suppliers couldn’t worry about their product’s future since there is none. “So let’s look at working together and all take the pain and let’s convince travellers that they should also support the industry by postponing their holidays.”

Grossmann said, as tour operators, they did work very hard trying to convince guests to reschedule their trips. “But we must all realise that this simply serves a promise but not a final booking as most guests will have to review their personal financial situation once this crisis is over.” He said any postponement to a new travel date meant a new date of payment.

Source: TU

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