Impact of the Package Travel Directive on hotels: understand your obligations

Who should consider PTD2?

It is not just traditional travel agents and tour operators that need to consider the implications of these new rules. Businesses that typically fell outside of the scope of the previous regulations – hotels for instance - could be covered by the new, broader rules, particularly at a time when more players in the travel sector are seeking to be a traveller’s ‘point of entry’, not only for their own services but for ancillary offerings as well.  Read on to find out how this important piece of legislation may impact you and understand how you can ensure compliance.

What qualifies as a 'package' under the new rules?

You need a combination of at least two different types of travel services for the purpose of the same trip, where either:

1. Those services are combined by one trader and a single contract for all services is concluded; or,

2. Irrespective of whether separate contracts are concluded, those services are:

• Purchased from a single point of sale and are selected before payment; or

• Offered, sold or charged at an inclusive or total price; or

• Advertised or sold under the term "package" or similar; or

• Combined after conclusion of a contract by which a trader entitles the traveller to choose among a selection; or

• Purchased from separate traders through linked online booking processes where the name, payment details and email of the traveller are transmitted and the second contract is concluded within 24 hours.

This is broader than the old definition, which only really required a pre-arranged combination of transport, accommodation and/or other tourist service(s) to be offered at an inclusive price.  Travel businesses looking to enhance loyalty by acting as the primary point of engagement for the traveller may now find themselves offering 'packages' when also selling ancillary services. 

A new type of package: a 'linked travel arrangement'

PTD2 now introduces a different type of 'package' to capture – and protect – trips packaged up by travellers themselves. An LTA requires there to be at least two different types of travel services purchased for the same trip, which don't constitute a package, but which result in separate contracts with individual service providers. A business will be offering an LTA if it facilitates:

• on a single visit to its point of sale, the separate selection and separate payment of each travel service; or

• in a targeted manner, the procurement of at least one additional travel service from another trader within 24 hours of the booking confirmation of the first travel service.

What does this all mean for hotels?

In a drive to be competitive and claw back margins lost to intermediaries, many hotels are investing in customer loyalty programmes to encourage and reward customers for booking directly. In an effort to attract and retain these customers, many are increasingly offering access to other services, such as flights, car hire or excursions. Hotels with reciprocal referral or booking arrangements with airlines or car hire companies, and those offering other travel experiences to its customers - such as organised tours - may now find that they fall within the scope of PTD2. 

How to tell the difference: some examples

The new rules can be a little hard to navigate so here are some examples to help you decide if you might be caught by PTD2.

Example 1:

Q: On a Friday evening, a traveller accesses a hotel's website to book an upcoming trip, and uses the 'search for room plus flight plus car' option, which enables selection of all elements before payment. How is this categorised under PTD2?

A: This is considered a package. It is a combination of at least two different types of travel services for the purpose of the same trip. Whether or not separate contracts are concluded, the traveller selects all services before payment and concludes the transactions from a single point of sale.

Example 2:

Q: On a Friday evening, a traveller accesses a hotel's website and uses the 'search for room' option to book a room for an upcoming trip.  The booking confirmation email includes a "Book your car hire" button which links through to a partner rental company. The traveller hires a car via the link within the hour. How is this categorised under PTD2?

A: This is considered a LTA. The traveller procured an additional travel service (i.e. rented a car) from another trader, which was facilitated in a 'targeted' manner less than 24 hours after the booking confirmation of the first travel (i.e. the hotel room).

Example 3:

Q: On a Friday evening, a traveller accesses a hotel's website and uses the 'search for room' option on a hotel's website to book a room for an upcoming trip.  The booking confirmation email includes a "Book your car hire" button which links through to a partner rental company. The traveller thinks about it over the weekend, researches other options, and then on Monday morning decides to hire a car via the link. How is this categorised under PTD2?

A: This is neither a package nor a LTA. Although the traveller procured an additional travel service (i.e. rented a car) from another trader, which was facilitated in a 'targeted' manner, more than 24 hours has passed since the booking confirmation of the first travel (i.e. the hotel room), so it is not considered a LTA.

What are your obligations?

PTD2 divides businesses involved in the sale and delivery into four categories:

• The Organiser of a package

• A Retailer of a package

• A Facilitator of a LTA

• A Provider of a travel service

PTD2 can appear unclear as to how these four categories are applied in various scenarios but the obligations under each category are dependent on your role.

If you are the organiser of a package, as in example 1 above, your obligations are the most demanding. You:

• are responsible for proper performance of the package;

• must have insolvency protection in place for the refunds of payments received and ensure that security is provided for refund of all payments made by or on behalf of travellers;

• must provide information to travellers; and

• must provide assistance in certain circumstances.

If you are the facilitator of a LTA, as in example 2 above, then you:

• must have insolvency protection in place to the extent you receive payments from travellers; and

• are also subject to information obligations.

If you are the retailer of a package you:

• must provide information to travellers; and

• Member States have discretion to make you similarly responsible as the organiser for proper performance.

Some of these obligations can be onerous.  For example, under the UK implementing regulations, organisers are responsible for the proper performance of a package, regardless of whether the individual elements (e.g. flight, hotel, car hire) are provided by third parties.

On the other hand, some of the obligations, that on their face appear to be quite straightforward, may be difficult to comply with in practice. For example, the second trader in an LTA may have to inform the first trader that an LTA has come into being. That in turn requires the second trader to know that the traveller was directed to the second trader's services in a targeted manner, when, and by whom but the facilitator may only become subject to security obligations upon entry into the second contract. Likewise, the facilitator must inform the traveller that no package will arise before any contract is entered into, and must therefore second-guess the likelihood that the traveller will enter into the second contract. Failure to resolve these issues may mean that obligations which arise upon creation of a LTA may not be discharged.  For that reason, businesses working with others in circumstances where LTAs may come into existence should address mutual responsibilities and notification obligations in their contracts. 

As we have previously noted here and here, a number of ambiguities remain in the text of the PTD2 and implementing regulations and to date, we have not seen much helpful guidance on these points. For example, there is no guidance on what "targeted" means for an LTA;  if a traveller books a hotel room and clicks through from their booking confirmation to book a day trip at their destination, is it sufficient for the email to simply say "book a hotel", or does it need more, for example by suggesting specific trips at that destination? Businesses are currently trying to decipher what this terminology means.

Next steps for you

It is important for all hotels to review their operations to assess whether they fall in scope of the new PTD2 and if so, what their obligations are and how they can ensure compliance.  To find out more about how PTD2 impacts your business and understand how we can help, please do get in touch.