‘Knowing your customer’ is probably the #1 rule in sales.
MISSISSAUGA — Following yesterday’s press conference at UP Express terminal at Union Station during which Tracy MacCharles, Minister of Government and Consumer Services highlighted changes to the province’s Travel Industry Act, TICO held an additional trade media briefing at its Mississauga office to “address any questions, myths and misconceptions” about the review process.
Among these was the proposal for a consumer pay model, which Richard Smart, President & CEO of TICO, said would be a “huge” benefit to the travel industry.
“The door is open for a consumer pay model. It’s been positioned as co-funded by both registrants and consumers. Right now, the thinking is that both sides would initially pay into it,” he said. “The industry has been calling for it for a long time. It’s not just a fee for the sake of adding a fee – we’re talking about expanding coverage.”
He added that the consumer protection fee would be nominal, “nothing like what you would pay for travel insurance today.” The amount of the fee, which will be mandatory, is still to be determined.
“If a consumer buys an African safari in Cape Town through a retailer, and the tour operator in Cape Town runs away with the money, absconds and goes out of business, even though the consumer booked through an Ontario retailer they’re not covered,” he said. “If you look at the Quebec fund, which has been consumer paid for years and covers everything – including even volcano ashes – their fund is over $150 million. So it’s doable.”
Dorian Werda, TICO’s Vice President, Operations, added that the idea of a consumer pay model isn’t just limited to the travel industry. “Currently in Ontario when you buy a motor vehicle, you pay a $10 fee – the Ontario Motor Vehicle Ministry Council fee – that you see on your invoice. It has to be identified. It’s over different industries, not just travel.”
TICO received 55 recommendations as part of the government-led Comprehensive Review of the Travel Industry Act, which was first written in the 1970s and last amended in 2002. “You can imagine how the industry has changed dramatically just in the last decade,” added Werda. “And so our legislation has become a little bit antiquated so we’re looking forward to getting it modernized.”
Here are just some of the key concerns and recommendations proposed:
Updates to definitions under the Act are being proposed to bring them up to date with respect to changes in the marketplace, said Werda, who added that 10-15 years ago, outside sales representatives and home-based agents weren’t so prevalent. “Now this is a growing area in the travel industry.” In addition, when the Act was first written, there was a clear definition between a travel retailer and travel wholesaler. “One did not do the other, but now those lines are blurred,” she said, especially with the introduction of the Internet. “There was a lot of feedback to support merging these two classifications that exist today because currently we only register retailer and wholesaler. We do not register individuals. But with that blurred line and registrants now conducting business in both categories, there is good argument to combine them into the definition of ‘travel seller’, which would encompass both of those activities.”
Smart also added: “There are a lot of smaller registrants that are doing both wholesaling and retailing activities, and today you’d have to hold two licences. So it would cost you two renewal fees a year, two security deposits, two applications fees, everything is double. In Quebec, they have one licence – a general licence – that just captures the travel seller. We got a lot of feedback about the financial burden of having to maintain two licences.”
The government is also proposing to define the term “selling”. Currently, “travel services” is defined in the Act, as well as “travel agent” and “travel wholesaler”, but not the actual act of “selling” travel services. Said Werda: “To put some clarity around it, the government would like to capture individuals or companies that arrange travel in exchange for payment, go through a process of payment, those that have a place of business or those that have individuals in the province selling on behalf of businesses that perhaps may not be located in the province.”
Werda went on to note a dramatic increase in what TICO calls “special interest travel”. “You’ll have everyone from a scuba shop to a yoga studio, any like-minded interest groups who plan a trip and do it on their own without going through a travel agency, and in essence they’re acting as an unregistered.”
A key recommendation outlined in the Comprehensive Review is strengthening advertising. Currently, advertising requirements only extend to registrants under the Act, which include retailers and wholesalers. It does not, however, extend to companies outside the province that may be targeting or advertising in Ontario to Ontarians. It’s now being proposed that any advertising made for Ontarians, from anywhere outside of the province, must adhere to the new rules.
Werda noted how with all-in pricing coming into effect at the beginning of this year, the government is hoping for a level playing field. “If someone out of the province doesn’t have an all-in price, of course their offer is going to look a lot more appealing to a consumer. This puts our registrants at a disadvantage.”
New disclosure requirements to TICO registrants are also on the table. Currently, the law requires them to display their TICO registration number but not the logo. “We’ve always encouraged displaying the logo because we want consumers to understand the benefits of purchasing services from Ontario registrants because as soon as they don’t, they forfeit that consumer protection.”
Added Smart: “Today, sometimes that registration number is 18 clicks buried on page 96 of a website. This says the logo and registration number need to be displayed prominently, not necessarily on the homepage but one or two clicks away.”
Under the current legislation, if a registrant generates under $10 million in sales they have to file a review engagement. If they’re over $2 million, they must file financial statements. At the smallest end, a review engagement costs around $3,000, but can be priced as high as $20,000.
“We’ve had registrants strongly express the burden on their business of filing financial requirements,” said Werda. “The government listened and is proposing to amend the current requirements for registrants that have sales under $2 million to provide them the ability to file internally prepared financial statements instead of a review engagement.”
Smart added that 90% of registrants are under $10 million in sales, with many not employing a full-time accountant. “The cost of these engagements is going one way – up. There are new standards coming out later this year, and I’m hearing cost increases of 25-30% for a review engagement. We hear from a lot of these smaller registrants who say they only require them for us. They’re of limited use to the business, and they wouldn’t be doing it if it wasn’t for us.”
Working capital requirements are currently carved in stone in the legislation, but an update has been proposed. According to Smart, TICO studied IATA’s model to see how they approach their working capital requirements.
“Small business are going to applaud this because our lowest threshold is $5,000. This basically says that for really small, one-person offices, they have to keep $5,000 in their account doing nothing, which must be there at all times, 365 days a year,” he said. “A lot of small businesses are saying they need to put that money to work. Recommendations are going forward, we’re just looking for positive working capital which means something greater than 0.”
The government is proposing to grant TICO the authority to issue monetary administrative penalties. Currently, TICO can simply suspend and revoke registration – nothing in between.
Monetary administrative penalties is another term for fines, said Smart. “We get registrants who are constantly late filing their financials and form 1 assessments. We’re not looking to make a money grab out of this because the money is going to go into awareness and education. We wanted to create a disincentive for the bad players to stop taking advantage of the system, where the majority are good players who are working honestly and complying.”
Also being proposed is strengthening TICO’s inspection powers to grant them the ability to enter the premises of non-registrants. The abilities under the current Act allow TICO to inspect registrants only.
“If there was a large tour operator failure and they voluntarily terminate or have their registry revoked, they’re no longer a registrant,” said Werda. “Therefore, for us to get inside to look at their books and records and see how consumers are affected, we’d have to ensure that the principal is cooperative and wants us to come in and look at those books and records. Normally they do but on occasion they don’t, and if they don’t want us to enter their premises to assist with consumers that are in destination or otherwise, this can pose a problem.”
The Ontario government is giving consumers until July 24 to submit feedback about the changes to the Travel Industry Act. TICO expects to hear back from the government about submissions by end of summer.
To read more about the Travel Industry Act review and other key issues raised by TICO, go to: travelweek.ca/news/year-accomplishments-highlighted-ticos-annual-general-meeting/, travelweek.ca/news/ontario-govt-puts-consumer-pay-model-table-compensation-fund/ and read the lead article in the June 29 issue of Travelweek: travelweek.ca/Directories/travelweek/TW20170629/index.html