The Travel Industry Council of Ontario (TICO) has entered a stage of transformation as it begins an end-to-end review of its funding framework, services and Compensation Fund.
As PAX reported on Wednesday (Sept. 21), TICO, Ontario's travel industry regulator responsible for consumer protection laws, has hired consulting agency Optimus SBR to oversee the comprehensive study – the largest third-party review TICO has done in its 25-year history.
The recommendations, following consultations with registrants, stakeholders, and government, will take a full year to implement, says TICO, pegging Fall 2023 as a deadline.
TICO is also reinstating registrant fees next year after waiving them, and Compensation Fund contributions, during the pandemic thanks to temporary funding provided by the Ontario government.
Fees will return on April 1, 2023, reverting to the structure that was in place prior to the pandemic until a new framework is announced.
“Not because that's the preferred model we would like to have, but quite the contrary, we think the whole revenue/fee model needs to change,” said Richard Smart, TICO’s president and CEO, meeting with trade media on Thursday (Sept. 22).
One reason for reinstating fees, beyond the fact that provincial funding is winding down, is that the market is seeing pent-up demand, which is translating into bookings and signalling a recovery.
The bottom line?
“We've got to find a way of getting back to a self-funded model moving forward,” Smart said, noting that “all options are on the table,” including a possible consumer pay model.
Will fees go up?
PAX asked the question of what this means for Ontario-based travel advisors.
Will TICO’s fees go up in 2023 and beyond?
“I think it's too early to tell,” Smart said. “One of the parameters of this study is that a lot of regulators are trying to move to risk-based pricing and risk-based outcomes. There are some travel agencies and tour operators that ought to pay more because they're a higher risk to consumers through their internal controls and through the marketplaces they serve.”
“Just like insurance on your house or car, if you’re a higher risk, you pay more.’
Looking ahead, Smart believes some registrants might pay more and others could pay less.
“Depending on the growth of the industry, if the marketplace gets back to where it was in 2019 and grows, the aggregate amount of revenue collected by TICO may go up,” Smart said. “But I think on an individual basis, we hope to get to a more risk-based pricing model for the future.”
Ontario’s Compensation Fund is also being reviewed.
The Fund, which is financed by registered travel advisors and wholesalers in Ontario, reimburses customers in situations where, for example, a client has paid for travel services that were not provided, and the payment was made through a TICO-certified business.
It also covers situations where an end supplier or cruise line is insolvent or bankrupt.
The fund’s current balance $23.5 million and it is generally considered a last resort.
A consumer must first seek reimbursement from their agent or agency, through travel insurance, or their credit card company, before TICO considers a claim.
TICO says that over the course of 25 years, the fund has assisted 24,037 customers, paying out almost $15 million dollars.
That number may jump off the page, but in the grand scheme of things, it isn’t a whole lot. Which TICO recognizes.
“I’m not taking anything away from being able to assist those consumers, but when you compare that to the number of travellers over 25 years, it's a drop in the bucket,” Smart said.
Compensation payouts reached an all-time high during the 2021-22 fiscal year when pandemic-related cancellations and refund requests swelled.
During that period, 376 customers were assisted by the Fund, amounting to $428,812 in total claims paid.
In 2020 and 2021 (which was, understandably, a year of low activity), just seven customers were helped, amounting to $3,388 in total claims paid.
The Crystal Cruises fallout
Claims for 2022-23 are picking up again, especially as TICO and others deal with the fallout of Crystal Cruises, which ceased operations in February 2022 following a string of financial and legal problems.
(The luxury brand has since been acquired by A&K Travel Group Ltd).
On this file, Smart said it’s “a real dog's breakfast trying to understand what the consumer recourse is.”
There's a bankruptcy proceeding going on in Florida. And another regulator, the Federal Maritime Commission, has a compensation process of its own. Credit card companies, too, have their own policies.
For those reasons, it’s “too early” to talk about the Crystal Cruise file, said Smart, noting that “we've had a large number of consumer claims come in for that.”
The case raises another question about the Compensation Fund’s relevancy as luxury cruises with Crystal are priced well above the maximum payout of $5,000 per person.
“If we get through this pandemic and there aren’t a lot of claims on the Fund, there's a message there. We have to understand why that is and what that means for the Fund’s future,” Smart said.
Business is good, but not great
Smart also took time yesterday to outline TICO’s data on agency closures and recovery.
From the start of the pandemic to now, TICO has seen 480 registrant closures. On a gross basis, that’s a 20 per cent reduction of members since the onset of COVID-19.
As of August 2022, TICO’s total number of registrants was just over the 2,000 mark, Smart said.
But the “good news,” he said, is that TICO is seeing more people enter the industry.
“There’s opportunities out there,” he said, noting that TICO has already seen 70 new registrations this year, which is 20 more than last year’s total.
And most of those newcomers are people who are new to the industry.
Not reinstatements, Smart clarified, as TICO was flexible in allowing businesses that closed shop during COVID to reactive their certification without charge.
As for how travel businesses in Ontario are doing, it’s not as robust, or recovered, as some may think.
While news headlines have noted the pent-up demand for travel, Smart says Ontario registrants are generating sales that are 50 to 55 per cent of what they were in pre-pandemic times.
Mind you, that’s a loose calculation because not all sales are recorded equally.
An agency or tour operator may not record revenue until a passenger has departed, or has returned home, for example. Others might recognize revenue at the time a booking is made.
At any rate: “We're not seeing what the newscasts are suggesting – that business is going through the roof,” Smart said.
“The labour shortage is real"
TICO is doing what it can to tackle the travel industry’s labour shortage.
One initiative is a new video series aimed at travel and tourism students that promote positive aspects of the sector.
The Association of Canadian Travel Agencies (ACTA) has been on a similar mission to recruit fresh faces as the industry recovers from the effects of the pandemic.
Does this mean TICO is now a recruitment agency? Not exactly.
Smart says “there's a bit of a judgment call” there, as recruitment doesn’t fall into TICO’s realm as a regulator.
Rather, Smart views the effort as being part of a solution that promotes a “vibrant marketplace” by continuing to promote the flow of new advisors.
This, in turn, helps TICO deliver its message of consumer protection to the masses, he said.
“The labour shortage is real,” Smart said. “And in order for consumer protections to be understood by consumers, we're relying so much on the travel advisor. If there aren’t any travel advisors to deliver the message, then consumers are worse off for it in the long run.”
Refresher courses still on the table
Smart also addressed the possibility of TICO introducing mandatory “refresher” exams for registrants, a topic that was first raised at the regulator’s AGM in 2021.
Judging by the negative comments that flooded PAX’s Facebook page at the time our coverage of the AGM ran, ongoing exams (and the potential fees associated with them) may not sit well with some travel advisors.
Smart, however, believes continuous education is “what's missing” from Ontario’s regulations.
He confirmed that mandatory courses are “very much” on TICO’s radar these days.
“I think the pandemic has acknowledged the value of a travel advisor,” Smart said. “There's more support to have a licensed regime, just like a real-estate agent or car salesperson. With licensing a travel advisor would come continuous education.”
Fees for refresher exams would “never be remotely close” to what doctors, lawyers or accountants pay, he said.
“We haven't nailed down what that number is,” Smart said. “But it's something we're looking at as we look at what the revenue model is.”
“It would be a future revenue stream. We can't ignore it.”