New report finds £781m of consumer cash locked up in ‘refund credit’ from COVID-19 cancelled holidays
A new white paper exploring the impact on consumers as a result of holidays cancelled due to COVID-19 has been published today.
As YouGov data on the volume and value of Refund Credit Notes (RCNs) that are currently in circulation comes to light, the paper – which was commissioned by one of the UK’s largest holiday companies, On the Beach, and has been written by financial broadcaster, journalist and consumer expert, Georgie Frost – has revealed that a whopping £781.5 million of consumer cash is currently tied up in said RCNs, or “IOUs” with many travel companies.
It also shows that 43% of the consumers surveyed who accepted an RCN were not offered a full cash refund when their holiday was cancelled, despite this being their legal right.
As a result of the findings, On the Beach has set out five recommendations to help restore consumer trust in the industry – including a call for holiday companies to proactively contact their customers still holding RCNs from 2020 and offer them a full cash refund.
The beach holiday expert is also encouraging consumers currently holding an RCN but don’t want one, to contact their holiday provider now and ask for a full cash refund.
It’s estimated that around 8.1 million people had a package holiday cancelled due to COVID-19.
Only half of those with a cancelled holidays received a full cash refund, and 851,000 (nearly 11%) accepted an RCN rather than cash, with the white paper outlining that over a million people with an RCN or rebooking were not offered a cash refund at the point of cancellation, even though this is a legal requirement.
What’s more is that 52% of consumers surveyed were unaware of their legal right to cash.
“It’s sad to think that a family who has saved for months or even years for their one summer holiday abroad has had to fight to get their money back, and in many cases have not been provided with full and transparent information of what they are entitled to when their holiday was cancelled.” said Anna Richardson, who has written a foreword for the white paper.
“Looking forward to your holiday is a massive part of the whole experience, but while there is still so much uncertainty and disruption, people are understandably lacking the confidence to plan and book again because they’re unsure of their rights if it gets cancelled.
“The smoke and mirrors being used by some holiday companies is wrong.
“I urge people who had their holiday cancelled to use their right to a full cash refund and contact their travel provider today to ask for their cash.”
Simon Cooper – Chief Executive of On the Beach – added: “COVID-19 shocked the travel industry and it was challenging for everyone in the early months to manage the disruption and volume of cancellations.
“We’re over 14 months on now and yet the knock on impact of refunds on consumer confidence continues to affect the industry. Even now, only a third of people say they would consider booking a holiday to a green list destination, so we have to do something to restore their confidence.
“Without it the industry will continue to be in trouble.”
He continued: “There are millions of people still holding these IOUs, in some cases over a year later with very limited opportunity to go on holiday [and] this is all because some travel companies actively avoided offering cash and used their customers’ money for future holidays as cash flow. No one would expect to receive a loan for this long and pay no interest, so why should these companies continue to hold onto their customers’ money for future holidays?
“To begin regaining consumer confidence and trust in the industry, we want those people with refund credit notes from 2020 to be refunded in full.
“We’re also urging regulators to enforce that holiday companies and airlines hold their customers’ money in separate, regulated trust accounts until the date of travel.”
Why are RCNs not in the best interests of consumers?
Where consumers are not aware that RCNs can be exchanged for cash, RCNs hold them to one travel provider, which means that they don’t have their own cash in the bank to spend as and when they want, or put into a savings account earning interest.
RCNs remove the consumer’s ability to shop around for the best holiday deals and dates when they want to rebook.
It’s also reported that 6% of all vouchers issued in the UK go completely unused.
What does the report recommend?
On the Beach has set out five recommendations in the white paper to help rebuild consumer confidence in the travel industry, which are:
- Automatic Refunds: Automatically refund customers in cash when RCNs have been held for a year.
- Proactive Contact: Customers holding RCNs from 2020 should be contacted proactively, notified of their rights and offered a full cash refund.
- New RCNs Offered Fairly: Any new RCNs offered to customers who have holidays cancelled in the future must be accompanied with the alternative choice of a full cash refund, with equal prominence.
- Financial Protection: Greater protections for customers’ money with ring-fenced trust accounts should be a requirement for all ATOL holders and airlines.
- Greater Transparency: Regulators to report on the number and value of RCNs in circulation, allowing potential customers to make informed decisions on who to book future holidays with.
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You can find more information, and access advice and assistance regarding RCNs from OnTheBeach here.
Featured Image – Unsplash / Dan Gold