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With Suppliers Reluctant to Negotiate Forward Pricing For 2023 What Options Do Businesses Have?

Updated: Nov 17

By Pru Goudie


Pricing

There is a surge in demand for holiday bookings for 2022 and beyond. However, some travel businesses are telling us that their suppliers are reluctant to negotiate certainty of terms with regards to pricing for 2023 due to ongoing financial uncertainty. What can travel business do?


Confirmation of the price to the consumer

UK businesses selling package holidays as the organiser, must comply with the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR.) The PTR requires that organisers give customers the total price of the package inclusive of taxes and all additional fees, charges and costs before the package holiday contract is concluded.


For non-package holidays any clause in relation to pricing must be fair to the consumer. A clause that allowed for infinite additional charges almost certainly would not be fair.


Surcharging

The PTR does make provision for organisers to charge a surcharge where the contract allows for this. The surcharge may be up to 8% of the total price of the package and only applies in very specific circumstances. Those circumstances are where the cost increases are due to:

  • An increase in the price of the carriage of passengers resulting from the cost of fuel or other power sources;

  • The level of taxes or fees on the travel services included in the contract imposed by third parties not directly involved in the performance of the package, including tourist taxes, landing taxes or embarkation or disembarkation fees at ports and airports; or

  • the exchange rates relevant to the package.

An increase of more than 8% would be a significant change to the contract and would, therefore, allow a customer to cancel with a full refund.


Organisers must also give their customers a price reduction of the same sum (less any administration expenses) should the price of the package decrease.


No surcharge may be charged less than 20 days before the start of the package.


If you are not selling a package you can charge a surcharge without the restrictions set out in the PTR so long as your booking conditions allow for this and provided that any clause allowing it is fair.


Practical tips

What can organisers of package holidays do to manage price increases by suppliers?

  1. Check booking conditions. Do the conditions allow for a surcharge? Make sure that they do and that, where it applies, the wording complies with the PTR (a term that does not comply would be unenforceable.) The earlier version of the PTR allowed for a surcharge of up to 10% so do make sure that the conditions have been updated.

  2. Build in flexibility. It sounds obvious but allow some wriggle room in your pricing. Most consumers know and understand that pricing is going to go up so will not be surprised if next year’s holiday costs them more.

  3. Check supplier contracts. Ultimately businesses want to keep suppliers but do consider whether contracts allow for significant price increases or not, and use this as a negotiation tool.


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If you have any queries about anything in this article please contact Becky Cackett becky.cackett@mb-law.co.uk


Please note this information is for general guidance only and is not intended to be a substitute for specific legal advice.


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mb LAW specialises exclusively in providing a full range of legal services to the travel industry. They focus on the legal and regulatory areas that impact our clients the most and enable them to achieve sensible, commercial and just outcomes across all areas of our specialist practice. We are trusted solicitors to a wide range of travel businesses advising on all issues affecting this industry, in recognition of which we are consistently rated as a leading firm in the provision of legal services to the travel industry by Chambers and Partners.


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