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“There will be growth in the ‘sharing economy’, where people rent out a


Let’s hope all IAG Group staff are rewarded similarly after these amazing results from companies that were

fighting for survival very

recently (“IAG’s Walsh awarded bumper pay rise”, Alison Hurd

Times they are a changing, eh, Mr O’Leary? (“Ryanair returns to GDSs with Travelport deal”, While this is a welcome change of policy from the man who has never made a secret of his loathing for agents, it is also a sign of the distribution challenges faced by any principal. Agents, particularly the larger ones, can and do make a big difference. They should use this opportunity to have a say in the terms of any sales agreement presented by the new agents’ friend. Andrew Durkin

Last week, we asked if you thought discounting in cruise was getting better or worse in 2014?


■ Better ■ Worse

35% 65%


MANAGEMENT Daniel Pearce managing director 020 3714 4101

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Collapse highlights the brutal life of bed banks

ON WEDNESDAY morning last week, you’d have been hard pressed to find a more ecstatic bunch of business owners than the OTAs. After five years trading blows legally, the bed bank Medhotels claimed a decisive victory in the Supreme Court against travel sector nemesis, HMRC. The top court in the land sided

with travel agents over the question of agency status and the application of Toms VAT on commission. With no further appeals possible, the tightening noose around the dynamic packaging business model seemed finally to have been loosened. Then, on Friday morning, March 7,

On Holiday Group Accommodation, the largest independent B2B bed bank in the UK, went into administration with the loss of 65 jobs and a string of unpaid hotel bills. In a twist dripping with irony, the

group laid the blame for the failure at the feet of HMRC for withholding £4.5 million of VAT reclaims in the belief OHG should be paying over Toms VAT on hotel commissions. It claimed that had the Medhotels decision come earlier, it could have saved them. In the days since the collapse,

HMRC has been widely depicted as reckless, gun-jumping zealots, but it’s unlikely we’ll ever really know whether they were responsible for

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Martin Alcock, Travel Trade Consultancy

On Holiday Group Accommodation’s demise, or whether they are a convenient scapegoat. While news of its demise sent

shockwaves through the industry, there was no surprise the next big failure came in the overcrowded bed bank space. Bed banks have always operated at the most brutal end of the commoditised travel sector. It’s where “differentiation” is virtually impossible and where only the leanest producer survives. The cashflow cycle is ridiculously tight; funds are usually received after check-in, as OTAs push risks down the supply chain by holding on to cash for longer. Given the only way to survive is to

shift large volumes, the biggest surprise to me was that no competitor wanted to take over the £19 million of On Holiday Group Accommodation’s pipeline bookings. So what does it mean for those

involved? For OTAs the fallout will hit them in the pocket. The Flight Plus Atol rules introduced in 2012 mean an agent combining an OHG bed with a flight will be fully liable under their Atol for replacing accommodation. Rebooking at over-inflated prices could be costly, with no guarantees of recompense from the administrators. The CAA will be looking to claim a

victory for consumer protection and will be anxious to ensure agents take care of their customers under the Flight Plus rules. There is also a risk of a ripple effect, so they will be monitoring their weaker Atol holders for any early warning signs. As for the remaining bed banks,

they may take solace in what happened to the chartered flight sector between 2009 to 2011 when a series of failures – Goldtrail, Holidays4U, and Kiss flights – released a pressure valve, removing excess capacity and shoring up the remaining providers’ profitability. Add in the Medhotels victory, giving certainty over the VAT, and life right now is as good as it gets.

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13.03.2014 25

room in their home to tourists or take part in car sharing schemes” BEST OF BRITAIN & IRELAND RESEARCH INTO NEW TOURISM TRENDS, P22

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