TICO President & CEO Richard Smart delivers report at last month's TICO AGM

Frustrations mount over elusive consumer-pay model: Will it ever happen?

This story originally ran in the July 11, 2019 issue of Travelweek magazine. To get Travelweek delivered to your agency for free, subscribe here.

TORONTO — Despite widespread support among travel retailers, wholesalers, ACTA and TICO to change the funding model for Ontario’s Compensation Fund to incorporate a consumer-pay element, once again the Ontario government did not move forward with that recommendation.

Enough is enough, says ACTA President Wendy Paradis, who pleaded the case at the AGM to Michele Sanborn, Assistant Deputy Minister, Policy, Planning and Oversight Division, at TICO’s AGM last month. Sanborn attended in lieu of Lisa Thompson, the newly appointed Minister of Government and Consumer Services.

“We have had no less than 20 meetings in the last six months with government officials, trying to express the sheer frustrations of businesses in Ontario and the burden we have financially with the Travel Industry Act as well as the administrative burden of trying to run a travel agency – whether it’s a small or large business – due to a number of legislation and regulations,” said Paradis. “We are now on our third Minister in this Ministry and we are frustrated in that we cannot get any movement.”

Paradis was actively involved as ACTA President in amending the Travel Industry Act in 2017, but tells Travelweek that overall she was “disappointed” with the changes outlined in Bill 166. This bill included law changes for event ticket re-sales, new home developers, real estate agents and more, and were implemented to meet three of TICO’s key priorities: enhanced consumer protection, reduced burden on Ontario’s businesses, and increased regulatory efficiencies.

What it didn’t include was a consumer-pay model for the Compensation Fund.

The idea of consumers paying into the Fund, a model similar to the one in Quebec where consumers pay $1 per $1,000 of sales, has been floating around for years. With registered travel agents and wholesalers in Ontario completely financing the Fund, as it stands currently, businesses pay $0.25 per $1,000 in sales. This means that larger agencies and tour operators are paying substantial amounts of over $100,000 per year into the Fund, notes Paradis.

“We believe that in the end, although there were some concessions, TICO and the Ontario Government added additional legislative and regulatory burden (like new administrative penalties, education standards and individual registration), and very little relief to Ontario travel businesses,” she says. “We are frustrated that a traveller-user pay model was not adopted. The industry and even TICO itself was in favour of changing the funding model and yet, once again, the Ontario Government did not move forward with that strong recommendation.”

Adding that most of ACTA’s members want out from under this burden, Paradis said the current model “doesn’t serve anyone well, not even the consumer.” She notes that the Travel Industry Act was written in the 1970s “when most consumers purchased travel through a travel agency using cash or cheque”, and that over 90% of travel purchases in Canada today are paid by credit card via multiple distribution channels.

Paradis also makes the argument that today’s regulations and funding for the Fund are not at all risk-based, creating unfairness between contributions and the risk coverage. “It’s like having life insurance with the same premium for a 19-year-old and a 90-year-old,” she says.

In short, the Travel Compensation Fund was designed for an industry model that no longer exists.

All of these arguments have been noted, and even shared by TICO over the years. President and CEO Richard Smart tells Travelweek that during the consultation period before Bill 166 was passed, TICO provided two submissions to the government – a consumer co-pay model was one of them.

“While the existing TIA has served consumers and the industry well, we have a unique opportunity, through the regulatory review, to look at the realities of today’s travel marketplace and offer modern consumer protection that is in line with current realities,” he says. “A consumer co-pay model is one option that would allow for expanded coverage and enhanced consumer protection by the Compensation Fund.”

Smart goes on to say that if a co-pay model becomes reality, TICO would have the ability to help more consumers who purchase travel from an Ontario-registered travel agency or website and find themselves impacted by the failure of an end-supplier, beyond what’s presently covered.

From a retailer’s and wholesaler’s perspective, a consumer-pay model would be a game-changer for all those involved, says Paradis: “It would relieve Ontario business from having to fund the Compensation Fund and all the operations costs of TICO – which are substantial – and place the burden on the travel consumer for a very small, nominal fee for each purchase. This would eventually allow TICO and the Ontario government to fully protect the consumer as they recommend and promote, which they cannot do today. The Association proposal actually enhances consumer protection over what is offered today.”

So if TICO, retailers and wholesalers are all for a consumer-pay model, and it’s working so well in Quebec (Quebec’s Compensation Fund sits at approximately $150 million compared to Ontario’s $21.7 million, as of March 31, 2018), why hasn’t it been passed yet?

“That is an excellent question and one that we keep asking,” says Paradis. “It’s probably because the Ontario government is afraid it will be seen as a ‘tax’. But it should be positioned as ‘insurance’, really, although you can’t call it that. There are many other user fee examples in Ontario, why not in travel where the travel consumer is the beneficiary?”

She adds that the government has asked the organization to “wait and focus on other burden reductions first”, but many of the regulations stem from the very existence of the Compensation Fund itself, says ACTA, which is why the Comp Fund issues need to be addressed first.

Right now the two sides are at a standstill, with the Ontario government in legislative recess. Little progress was made on the issue with former Minister Bill Walker, says Paradis, which means that newly elected Minister Lisa Thompson has her work cut out for her. But Paradis is more hopeful than ever that change will come.

“We very much look forward to working with Minister Lisa Thompson and hope to have an opportunity to explain our case to her in the near future,” she says. “We will continue to lobby both government officials and MPPs over the coming months to ensure that we do not lose focus on this very important message.”