On the Beach calls for travel industry to return cash refunds to customers

On the Beach is calling for rivals to return cash refunds to customers who have been dished out refund credit notes instead to help restore confidence in the struggling industry.

A white paper exploring how cancelled holidays had hit travellers confidence reveals that £781million of cash is locked up in these IOUs.

They are essentially documentation which details the value of a cancelled booking – but is not a cash refund.  

An estimated 851,000 consumers are still holding on to credit notes more than a year on from the start of the pandemic, data from YouGov for the online travel agent shows. 

Currently, £781m of consumer cash is locked up in RCNs or ‘IOUs’ with many travel companies

An estimated 8.1million people had a package holiday cancelled due to Covid-19 with only half receiving a full cash refund. 

The white paper outlines that 43 per cent – over a million people – with a credit note or rebooking were not offered a cash refund at the point of cancellation, despite this being a legal requirement.  

More than half of those surveyed were also unaware of their legal right to cash.

Millennials were the most affected – fewer people in this age group were offered a cash refund or aware of their right to one than anyone else.

Today, On the Beach, who commissioned the white paper, has set out five recommendations to help restore consumer trust in the industry, including a call for holiday companies to proactively contact their customers still holding credit notes from 2020 to offer them a full cash refund.

The firm, which said it always refunds in cash in full and never with vouchers, also encourages consumers currently holding an IOU who don’t want one, to contact their holiday provider now and ask for a full cash refund – as is their legal right.

43% say their provider didn't offer the option of a cash refund when their trip was cancelled

43% say their provider didn’t offer the option of a cash refund when their trip was cancelled

Simon Cooper, chief executive of On the Beach, said: ‘Covid-19 shocked the travel industry and it was challenging for everyone in the early months to manage the disruption and volume of cancellations.

‘We’re over 14 months on now and yet the knock on impact of refunds on consumer confidence continues to affect the industry.

‘Even now, only a third of people say they would consider booking a holiday to a green list destination, so we have to do something to restore their confidence. Without it the industry will continue to be in trouble.’

He said millions of people are still holding IOUs, in some cases over a year later with very limited opportunity to go on holiday. 

Cooper said this is because some travel companies actively avoided offering cash and used their customers’ money for future holidays as cash flow.

‘No one would expect to receive a loan for this long and pay no interest, so why should these companies continue to hold onto their customers’ money for future holidays?

‘To begin regaining consumer confidence and trust in the industry, we want those people with refund credit notes from 2020 to be refunded in full, in cash, now. 

‘We’re also urging regulators to enforce that holiday companies and airlines hold their customers’ money in separate, regulated trust accounts until the date of travel.’

On the Beach said that, where consumers are not aware credit notes can be exchanged for cash, the notes hold them to one travel provider, meaning they don’t have their own cash in the bank to spend as and when they want.

Credit notes also remove the consumer’s ability to shop around for the best holiday deals and dates when they want to rebook with 6 per cent of all vouchers issued in the UK going unused.

Last month, the Competition and Markets Authority threatened legal action against Teletext Holidays unless it returns over £7million worth of refunds.

Hundreds of people contacted This is Money with their own Teletext Holidays refund woes, totting up to a quarter of a million pounds.  

White Paper Recommendations

On the Beach has set out five recommendations in the white paper to help rebuild consumer confidence in the travel industry.

1. Automatic refunds: Automatically refund customers in cash when credit notes have been held for a year.

2. Proactive contact: Customers holding credit notes from 2020 should be contacted proactively, notified of their rights and offered a full cash refund.

3. New credit notes offered fairly: Any new credit notes offered to customers who have holidays cancelled in the future must be accompanied with the alternative choice of a full cash refund, with equal prominence.

4. Financial protection: Greater protections for customers’ money with ring-fenced trust accounts should be a requirement for all ATOL holders and airlines.

5. Greater transparency: Regulators to report on the number and value of credit notes in circulation, allowing potential customers to make informed decisions on who to book future holidays with.

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