Statement on the occasion of the public hearing on the “Amendment to the EU Package Travel Directive” in the Committee on Tourism

The VIR welcomes the fact that the Tourism Committee of the German Bundestag is addressing the amendment to the EU Package Travel Directive (PRRL), which the online travel industry views with great concern. Although the VIR has unfortunately not been invited to participate as an expert in the public hearing, we are taking this opportunity to once again state our position on the amendment to the PRRL.

To this end, you will find below a revised summary of our positions, distilled into three key points, which we will highlight once again with additional arguments during the public hearing. We also refer you once again to the position paper on the amendment of the PPRL issued by the Alliance for Tourism Diversity (ATV), which the VIR drafted in collaboration with 26 other tourism industry associations.

1) Including individual services leads to significant increases in costs and prices, as well as confusion among consumers and businesses

a) Preventing cost and price increases
In addition to the European Commission’s proposals, there is ongoing discussion in Germany regarding whether individual travel services should be regulated under the PRRL. We reiterate that including individual travel services in the PRRL regulatory framework is neither appropriate nor even harmful (see Chapters 4 and 7 of the ATV position paper).

As the trade association representing the German online tourism industry, the VIR also considers it a key priority to reiterate that the proposed expansion of liability for package tours will entail a tremendous burden and additional costs for all affected companies. Online travel agents (OTAs) are expressly not given preferential treatment over traditional tour operators. OTAs not only offer individual services but can also act as tour operators. Traditional tour operators, OTAs, travel agencies, and other tourism service providers therefore face exactly the same obligations and challenges under the PRRL.

We are particularly concerned that the inclusion of individual travel services in the PRRL will force small and medium-sized providers of such services to withdraw from the market or to limit their offerings to such an extent that “unintended” package tour is no longer possible because they cannot bear the administrative burden and financial liability risk of a package tour provider. This leads to less diversity in the market, job losses, and the erosion of infrastructure—particularly in rural areas—and, ultimately, to reduced tax revenues.

To illustrate the expected cost increases for businesses, we are providing the following projection:
According to the Research Association for Holidays and Travel (FUR), of the 113 billion euros in total spending on vacation travel in the German market, 55 billion euros are attributable to individual travel services. If these services now need to be insured due to their inclusion in the PRRL regulatory framework, a surcharge of approximately 1% for insolvency insurance and a surcharge of approximately 1% for risk coverage—such as assistance in the event of a consumer accident or extraordinary circumstances at the destination, point of departure, or place of residence—would need to be factored into the price. With a total of 55 billion euros for individual travel services, this would result in a cost increase of around 1.1 billion euros for companies, which would ultimately also affect consumers.

b) Providing clarity for consumers and businesses
According to the European Commission’s draft amendment to the Package Travel Directive, travel providers may be deemed package tour operators if consumers purchase a second travel service at a single point of sale within three hours of purchasing an initial travel service (“3-hour rule”). In practice, this leads to significant problems (see Chapter 4 of the ATV position paper). In particular, the disruption of the booking process sequence causes frustration for both consumers and organizers and should therefore be highlighted here once again as an example:

i. The original price of the individual services viewed by the consumer can no longer apply, as the provider must now factor in costs for insolvency protection as well as other expenses associated with the services included in a package tour.

ii. The terms and conditions, which previously applied solely to brokerage services, must be retroactively amended to reflect those of an event organizer, effective from the purchase of the first service.

iii. Following the planned revision of the PRRL, the down payment may not exceed 25%. If the first payment has already been collected in full, in most cases the consumer will be entitled to a refund because the first payment will already exceed 25%.

iv. The cancellation policies that previously applied to individual services for consumers must now be standardized.

Since all of these steps should actually take place before the price is displayed—so that consumers can see the correct price—all consumer inquiries regarding individual services would now have to be re-evaluated. This would entail a significant additional burden for both consumers and businesses.

Instead of simplifying definitions, the European Commission has, in many places, further complicated them in its draft revision of the PRRL, thereby creating ambiguities in the booking process. With regard to the new definition of a package tour, the European Commission should also remove the “24-hour rule,” under which linked travel arrangements are considered package tours pursuant to Article 3(2). This is because expanding this definition raises a number of implementation issues, such as the fact that package tour operators would have to track consumers’ search and purchasing behavior for up to 24 hours—a process that is problematic not least from a data protection perspective.

The points outlined above make it clear that the proposed amendment to the PRRL would cause significant confusion among consumers and businesses. Furthermore, small and medium-sized enterprises in particular would face significant challenges—even ones that threaten their very existence—in managing the booking process. For example, under the European Commission’s proposed changes, even the smallest campground operator would have to verify in the future whether a booking falls under the amended PRRL. Compounding the issue is the fact that there are neither studies nor consumer complaints regarding problems with the current regulation on individual travel services. This means that, through the planned amendment to the PRRL, the European Commission is creating significant problems for businesses and consumers without any apparent need for regulation.

Key message: The current regulations governing individual travel services have proven effective in practice and should therefore be retained.

2) Introduce mandatory vouchers in the first year to prevent bankruptcies

To prevent large-scale insolvencies in the event of future crises such as the COVID-19 pandemic, the draft amendment to the PRRL proposes voluntary vouchers as an alternative to refunds. The VIR has already pointed out during the pandemic that there is no need for legal regulation of such voluntary vouchers, as they can already be agreed upon between event organizers and customers.

For businesses, voluntary vouchers represent a significant source of uncertainty, as they rely entirely on the goodwill and acceptance of travelers. Small and medium-sized enterprises, in particular, would be at significant risk, especially in the first year. While we initially called for the introduction of mandatory vouchers (as outlined in Chapter 1 of the ATV position paper), we at VIR now have a compromise proposal—following further discussions with consumer advocates—to prevent bankruptcies:

Key message: In the first year, tour operators should be granted the right to issue mandatory vouchers. These vouchers will bear 2% interest to safeguard customer funds during this period.

3) Limits on advance payments threaten the packaged tour product

The VIR understands that consumers should be protected against unreasonably high advance payments. However, given the already robust safeguards for customer funds and the high level of consumer protection that package tours already offer today, this does not appear necessary. Furthermore, Germany has clear case law regarding down payments, and therefore we see no need to include this in the PRRL (see Chapter 3 of the ATV position paper).

We would also like to emphasize at this point that the entire tourism ecosystem relies heavily on the availability of working capital to cover costs. Any attempt to limit advance payments in one part of the ecosystem will place a significant financial burden on businesses. This, in turn, would ultimately lead to substantial price increases for consumers. The resulting decline in the appeal of package tours due to higher prices could ultimately lead consumers to book their travel services as individual components and forego the protections afforded by package tours altogether.

Regulators should instead focus on the air travel component of the travel package, as this poses the greatest risk to consumers. Neither the amendment to the PRRL nor the European Commission’s revised Regulation on Air Passenger Rights provides for protective measures in the event of airline insolvency. In contrast, under the PRRL, package tour operators are responsible for fulfilling the package travel contract, regardless of whether these services can be provided by the carrier or not. This not only leads to unequal protection for different categories of travelers (package tour travelers versus travelers who purchase their airline ticket as a standalone service) but also poses significant challenges for tour operators.

Key message: The terms and conditions governing advance payments should not be regulated by law. Instead, a uniform, mandatory EU/EEA-wide insolvency protection system for airlines should be introduced as part of the revision of the Air Passenger Rights Regulation in order to protect consumers’ advance payments.

Our statement is available for download here as a PDF.