The collapse of Thomas Cook is the biggest failure to date of a UK package holiday company. Besides leaving approximately 600,000 holidaymakers stranded abroad – it also leaves thousands of hotels with cancelled holiday bookings and potentially unpaid fees. If your hotel is among the affected ones, what happens now?
“Thomas Cook Group, including the UK tour operator and airline, has ceased trading with immediate effect,” the UK aviation regulator CAA said in a statement. “All Thomas Cook bookings, including flights and holidays, have now been cancelled.”
The first thing you should know is that package holidays are protected under the UK Atol scheme, which guarantees the bookings of package holidaymakers. Atol covers holiday accommodation as well as return flights if customers are abroad at the time of a collapse. Future bookings are also protected. In some circumstances, Atol may appoint what it calls a fulfillment partner to provide the holiday instead, although this is more likely for holidays booked further in advance.
The total cost of holidaymakers’ guarantees to be paid by the Atol scheme – underwritten by the Civil Aviation Authority watchdog – is an estimated £600m now that the company has gone bust.
As of March 2018 the Air Travel Trust fund, which finances Atol payouts, had a surplus of £170m, and a £400m insurance policy of its own in place to handle events such as the collapse of Thomas Cook. But it will still be a major test for the fund. The good news is that Atol is run by the government-backed CAA, so the government would be under intense pressure to step in and cover the claims.
It is expected that two of the largest consulting companies – Alix Partners and KPMG, will be appointed as trustees of different units in the group.
Hotel groups are generally paid by the tour companies 60 to 90 days after the travelers have already taken their holidays but in some cases the payments are delayed for even longer. This will lead to significant losses incurred by the hotels and many local tour businesses. In many countries the state authorities are discussing to file collective court trials against Thomas Cook. In any case the losses are very likely as the banks and state authorities will have a preference over other creditors and the company does not seem to have enough assets to cover for all.
It has been reported that some hotels have been asking holidaymakers either to leave or pay extra to remain in the hotel. You should refrain of such actions and wait a national policy has been made up.
UPDATE 26 Sept 2019
Thomas Cook’s German, Austrian, Dutch and Polish subsidiaries have announced they are also filing for insolvency after the collapse of the UK parent company.
How have businesses around the world been affected?
There is concern in a number of countries that local businesses could be financially impacted by loss of tourism. Here are the latest updates:
- The Gambia’s government has held an emergency meeting. There is concern that Thomas Cook’s collapse will hurt tourism, which provides about a third of the country’s GDP
- Bulgarian Minister of Tourism quoted about 50 million Euro losses from unpaid fees to less than 100 hotels for July, August and September. Side effects can easily double this amount.
- In Egypt, Thomas Cook operator Blue Sky said reservations until April 2020 have been cancelled. The company runs many charter flights from the UK to Sharm El-Sheikh and officials say resorts there will be affected
- In Cyprus, the loss for hoteliers and the wider economy is about €50m, according to deputy tourism minister Savvas Perdios. Hotels are owed money for July, August and September, he added
- Greek tourism minister Charis Theocharis has said hotels expect losses on payments from recent months. He said they would attempt to recover money from Thomas Cook in court.
The Greek Finance Ministry will exempt hotels hurt by the Thomas Cook collapse from the payment of “stay-over tax.” A relevant Legislative Act is underway and it will refer for the time period from September 23 to October 10, that is for as long as the repatriation operation by the British Civil Aviation Authority continues. - In India, Goa’s Travel and Tourism Association said that the loss of Thomas Cook is a “big, big, blow to the industry”
- Spain’s Balearic Islands faces losses running into millions of euros. Thomas Cook has a tax office in Palma with hundreds of employees, and also works with hotels in the Balearic Islands and Canary Islands
- Turkey’s Hoteliers Federation (TUROFED) has warned that the country could miss out on up to 700,000 tourists a year due to the collapse.
According to Financial Times the Turkish culture and tourism ministry warned hotels that those who demanded payments from customers or tried to evict them would be prosecuted. It has also promised a €50m loan support package for businesses that are hit by the collapse in a bid to limit the damage to a pillar of the Turkish economy, which brought in $29.5bn in revenue last year.
(… to be updated)
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