COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESMENT Accompanying the document on package travel and assisted travel arrangements, amending Regulation (EC) No 2006/2004l and Directive 2011/83/EU and repealing Council Directive 90/314/EEC - Hoofdinhoud

COUNCIL OF Brussels, 12 July 2013

THE EUROPEAN UNION (OR. en)

12257/13

Interinstitutional File: ADD 1

2013/0246(COD) i

CONSOM 140 MI 635 TOUR 3

COVER NOTE

From: Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt: 9 July 2013

To: Mr Uwe CORSEPIUS, Secretary-General of the Council of the European Union

No. Cion doc.: SWD(2013) 263 final

Subject: COMMISSION STAFF WORKING DOCUMENT IMPACT

ASSESMENT Accompanying the document on package travel and assisted travel arrangements, amending Regulation (EC) No 2006/2004l and Directive 2011/83 i/EU and repealing Council Directive 90/314/EEC i

Delegations will find attached document SWD(2013) 263 final.

Encl.: SWD(2013) 263 final

12257/13 ADD 1 LL/ll

DG G 3A EN

EUROPEAN COMMISSION

Brussels, 9.7.2013 SWD(2013) 263 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESMENT

Accompanying the document

on package travel and assisted travel arrangements, amending Regulation (EC) No 2006/2004l and Directive 2011/83 i/EU and repealing Council Directive 90/314/EEC i

{COM(2013) 512 final i} {SWD(2013) 264 final} {SWD(2013) 266 final}

EN EN

Contents

1. I NTRODUCTION ............................................................................................................ 2

1.1. Policy context .............................................................................................................. 2

1.2. Organisation and timing ............................................................................................ 2

1.3. Different categories of travel products- definitions ................................................ 3

1.3.1. Consultation and expertise ........................................................................................ 4

1.4. Consultation of the Impact Assessment Board ........................................................ 6

1.5. Specific characteristics of the package travel and the legal framework in place . 6

2. P ROBLEM DEFINITION ................................................................................................. 8

2.1. Context of the problem definition- changes in the travel market .......................... 8

2.1.1. The EU travel market ................................................................................................ 8

2.2. The travel market has outgrown the existing legislation – an introduction to the problems in the existing package travel market ................................................... 10

2.3. Key problems faced by businesses .......................................................................... 11

2.3.1. Absence of a level playing field ............................................................................... 11

2.3.2. Unnecessary/unjustified compliance costs ............................................................. 12

2.3.3. Legal discrepancies between the Member States leading to additional costs and obstacles to cross-border trade ............................................................................... 14

2.4. Key problems faced by consumers ......................................................................... 17

2.4.1. Consumer detriment suffered by users of combined travel arrangements ........ 17

2.4.2. Specific problems of consumers detriment stemming from unclear and outdated rules ........................................................................................................... 18

2.5. Baseline scenario ...................................................................................................... 20

2.6. Does the Union have the right to act? .................................................................... 20

3. P OLICY OBJECTIVES .................................................................................................. 21

4. P OLICY OPTIONS ........................................................................................................ 22

4.1. Identified policy options .......................................................................................... 22

4.2. Discarded policy options .......................................................................................... 26

4.2.1. Option 8 “Travel Directive” .................................................................................... 26

5. A SSESSMENT OF I MPACTS ......................................................................................... 27

5.1. Assessment of Option 2 - Guidelines and Better Enforcement of Existing

Legislation (PO2) ...................................................................................................... 27 5.2. Assessment of Option 3 – Introduction of a "Package Travel Label" (PO3A)

and/ or "This is not a package" disclaimer (PO3 B)- add-on option to other policy options ............................................................................................................ 28

5.2.1. Sub-option A: Package Travel Label ..................................................................... 28

5.2.2. Sub-option B: "This is not a package" disclaimer ................................................ 29

5.3. Assessment of Option 4 – Repeal of the Directive ................................................. 30

5.4. Assessment of Option 5 – Modernisation of the Directive and coverage of "one trader" packages (PO5) ........................................................................................... 32

5.5 Assessment of Option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6) ............... 38

5.6. Assessment of Option 7 - Modernisation of the Directive and coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7) ............ 41

6. C OMPARATIVE ASSESSMENT OF POLICY OPTIONS .................................................... 42

6.1 Preferred Policy option ............................................................................................ 46

7. M ONITORING AND EVALUATION .......................................................................................... 46

ANNEX 1 ................................................................................................................................. 48

T HE MAIN REQUIREMENTS OF THE P ACKAGE T RAVEL D IRECTIVE ...................................... 48

1. Information requirements ....................................................................................... 48

2. Binding prices ........................................................................................................... 50

3. Right to transfer the package .................................................................................. 50

4. Cancellation or change of contract terms .............................................................. 50

5. The organiser's responsibility and complaint handling ....................................... 50

6. Insolvency protection ............................................................................................... 51

ANNEX 2 ................................................................................................................................. 52

1. Problem definition-data tables and graphs ........................................................... 52

2. Estimation of the travel market segments ............................................................. 59

Estimation of the pre-arranged packages segment ................................................................ 60

Estimation of the combined travel arrangements segment .................................................... 61

Estimation of the market segments ......................................................................................... 61

Estimation of the total volume of the market ......................................................................... 62

Business trips ........................................................................................................................... 62 3. Overview of applicable legislation and rights ........................................................ 64

4. Gaps in the current legal framework for packages ............................................... 65

ANNEX 3 ................................................................................................................................. 67

S COPE AND DEFINITIONS ......................................................................................................... 67

1.1. Definition of "package" ........................................................................................... 67

1.2. Definition of "consumer" ........................................................................................ 70

1.3. Definitions of "retailer" and "organiser" .............................................................. 71

I NFORMATION REQUIREMENTS ............................................................................................... 71

Requirements for the brochure ............................................................................................. 71

How to provide the required information ............................................................................... 72

Last minute bookings .............................................................................................................. 72

Lack of sanctions for non-compliance with the information requirements ...................... 72

C ONTRACT CHANGES BEFORE THE DEPARTURE ..................................................................... 73

Price revisions ......................................................................................................................... 73

Significant alterations of essential terms before departure ................................................... 73

Significant price alterations .................................................................................................... 74

Cancellations of the contract before departure ..................................................................... 74

Cancellations before departure on the ground that there are too few participants ............. 75

Cancellations before departure due to force majeure ........................................................... 75

Transfer of the package before departure ........................................................................... 76

A LTERATIONS OF THE CONTRACT AFTER DEPARTURE ........................................................... 76

Cancellations after departure due to force majeure ........................................................... 76

Interplay with the APR Regulation ........................................................................................ 77

P ROBLEMS RELATED TO PERFORMANCE , LIABILITY AND OBLIGATION OF THE

PROFESSIONAL PARTIES ............................................................................................. 78

Who is the responsible party? ............................................................................................... 78

Compensation for damages .................................................................................................... 78

Type of liability ....................................................................................................................... 79

Conditions for liability ............................................................................................................ 79

N OTIFICATIONS ........................................................................................................................ 79 T IMING OF REPAYMENT ........................................................................................................... 80

I NSOLVENCY PROTECTION ...................................................................................................... 80

P RESCRIPTION PERIODS ........................................................................................................... 81

ANNEX 4 ................................................................................................................................. 82

1. Introduction .............................................................................................................. 82

2. Proposed legislative measures in option 5 - Modernisation of the Directive and coverage of "one trader" packages (PO5) ............................................................. 82

2.2.1. Including other (modern) channels of marketing communication ...................... 85

2.4.2. Liability for the proper performance of the contract ........................................... 90

2.4.3. Responsibility for providing prompt assistance if the consumer is in difficulty

(for other reasons than the organiser's improper performance) ......................... 91

2.4.5. Obligation to provide alternative arrangements ................................................... 92

2.4.6. Insolvency protection ............................................................................................... 93

3. Proposed legislative measures in option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6) .......................................................................................................................... 95

4. Proposed legislative measures in option 7 – Modernisation of the Directive and full coverage of both "one trader" packages and "multi-trader" travel

arrangements (PO7) ................................................................................................. 97

ANNEX 5 ................................................................................................................................. 98

Detailed assessment of policy options ................................................................................... 98

2.1.2. Compliance costs for businesses .............................................................................. 107

2.1.3. Administrative costs for businesses .......................................................................... 108

2.1.4. Impact on SMEs ....................................................................................................... 108

2.1.5. Impact on consumers and households ...................................................................... 108

2.1.6. Impact on public authorities .................................................................................... 108

3.1.4. Impact on consumers ................................................................................................ 110

ANNEX 6 ............................................................................................................................... 153

ANNEX7 ................................................................................................................................ 158 1. I NTRODUCTION

1.1. Policy context

The travel market plays a central role in the European economy of today. It significantly contributes to prosperity and growth within the single market. Travel and tourism represent 7.8% of the EU GDP, supporting 18 million jobs, and their contribution into it is expected to

increase to 8.1% by 2021. 1 The European Union remains the world's No 1 tourist destination,

with 384.8 million international arrivals in 2011. 2

A key task for the European Union is to create a modern legal framework that offers the best possible conditions for the travel market to grow further, for the benefit of both businesses and 500 million consumers in Europe. This regulatory framework must provide sufficient protection for consumers so that they can confidently buy their holidays anywhere in the Union. At the same time, a level playing field for travel businesses must be ensured to

increase competition in the market. The adoption of the Package Travel Directive (PTD) 3 in

1990 made a significant contribution to the development of a single market for an important part of the travel market, and created important guarantees for European travellers.

The PTD applies to pre-arranged packages, typically consisting of transport and

accommodation (and/or other significant tourism services) sold together: 4 Nowadays, an

increasing number of consumers, in addition to buying pre-arranged packages at their travel agent's, put together their trips themselves according to their own needs based however on specific offers coming from one or more, commercially linked, traders. The applicability of the Directive to all these new travel products has become uncertain; in particular to those products sold on-line, while some are clearly not covered by the current scope of the Directive.

A modernisation of the PTD has repeatedly been asked for by the industry as well as consumer organisations. The revision of the PTD is also explicitly envisaged in the European

Consumer Agenda 5 and is mentioned in Annex II to the Single Market Act II. 6

1.2. Organisation and timing

1 World Travel & Tourism Council, Travel and tourism economic impact, 2011

2 UNWTO World Tourism Barometer, September 2012. http://media.unwto.org/en/press-release/2012-09-

12/international-tourism-track-hit-one-billion-end-2012

3 Council Directive 90/314/EEC i of 13 June 1990 on package travel package holidays and package tours, OJ L

158, 23.6.1990.

4 See Annex 1 for the detailed description of the PTD main requirements.

5 Communication from the Commission to the European Parliament, the Council, the Economic and Social

Committee and the Committee of the Regions, A European Consumer Agenda – Boosting confidence and growth, 22.5.2012, COM(2012) 225 final i.

6 Communication from the Commission to the European Parliament, the Council, the Economic and Social

Committee and the Committee of the Regions, Single Market Act II- Together for new growth, COM (2012)573 final i,: ANNEX II: "Single Market Act I: Status of Actions"

Lead DG: DG JUST. DG JUST liaised with relevant services through the Impact Assessment Steering Group (IASG), which was first convened in June 2009 and met twice afterwards (March 2010 and July 2012): The following services participated in the group: DG ENTR, DG MARKT, DG SANCO, DG CNECT, DG MOVE, DG TRADE, DG BUDG, the SG and the SJ. The legislative proposal is included in the 2012 Agenda Planning and Commission Work Programme (CWP), with reference 2010/JUST/273.

1.3. Different categories of travel products- definitions

Independent travel arrangements - a travel service, such as a flight, accommodation or car rental that is purchased as a stand-alone product, i.e. purchased separately and not offered in combination with other tourist services, even if the traveller uses several travel services for the same trip or holiday.

Pre-arranged package - a combination of travel services bundled in advance by an organiser and consisting of at least two of the following services: (1) carriage of passengers, (2) accommodation and (3) other tourist services not ancillary to passenger transport or accommodation and accounting for a significant proportion of the package (e.g. car rental).

Combined travel arrangements 7 - combinations of travel services where at least two of the

above mentioned services, such as flights, hotel stays or car rental, are purchased for a single trip or holiday either from the same supplier or from suppliers that use assisted booking processes and where the buyer can put together the relevant travel services according to his preferences (tailor-made). Combined travel arrangements are, contrary to

pre-arranged packages, dynamic by nature and can be divided into two main subcategories:

"One-trader packages": Consumers can customise the content of the trip or holiday according to their needs on one website or at one high street travel agent, while being free throughout the booking process to choose separate travel components. These travel arrangements are put together by one trader (including at the request of the traveller) and are offered or sold in a manner that is typical for packages, e.g.:

offered, sold, or charged at an inclusive price,

sold within the same booking process,

covered by one contract, or

advertised or sold under the term "package" or under a similar term;

"Multi-trader" travel arrangements:

"Multi-trader packages": the difference between a "multi-trader package" and a "one-trader package" is that a "multi-trader package" is put together by

7 Combined travel arrangements are often referred to by the industry as dynamic packages. The term combined

travel arrangements is therefore a synonym to dynamic packages and will be used interchangeably throughout the document in particular when referring to the results of Study on Consumer Detriment in the area of Dynamic Packages.

several traders and the arrangement has at least one of the characteristics that are typical for packages, as indicated above under "one-trader packages", or when the traveller's name or particulars needed to conclude a booking transaction are transferred between the traders at

the latest when the booking of the first service is confirmed;

"Multi-trader assisted travel arrangements": are combinations of travel services where one trader facilitates in a targeted manner the procurement of travel services from another trader, during a single visit of a point of sale or through linked online booking processes. In such cases consumers conclude separate contracts with the relevant service providers and no elements typical for a package (see above) are present.

See also annex 8 for a glossary of abbreviations used in the text.

Figure 1 Distinction between combined travel arrangements and pre-arranged packages

Pre-arranged packages:

Pre-packaged arrangements by tour operators

Little flexibility as to the dates and prices; multiple choices but limited customisation ability

Combined travel arrangements:

Packaging is done by the customer in real-time on basis of available components;

Enhanced customisation ability of the customer;

Real-time availability and real-time booking;

Source: E-Business Watch, ICT and e-Business in the Tourism Industry, Sector Report No .8/2006

1.3.1. Consultation and expertise

In the first public consultation in 2008, the Commission received more than 80 contributions to its 2007 working document from all relevant parties (business stakeholders, consumer organisations, lawyers, academics and 14 MS). In January 2009, it launched the "Consumer

Detriment 8 Study in the area of Dynamic Packages" (Consumer Detriment Study). The study

covered 17 EU countries and was based on interviews with a sample of 500 consumers. Against this background, the Commission initiated the formal impact assessment process in June 2009. The consultation dialogue and evidence gathering was carried out with the assistance of an external contractor, the Risk & Policy Analysts (RPA) in consortium with London Economics and You Gov.

In October 2009, a second public consultation was published, consisting of five on-line questionnaires targeted at different stakeholders (consumers, consumer organisations, businesses, industry associations and MS authorities). The Commission received 161

8 Consumer detriment is defined as negative outcomes for individual consumers, relative to some benchmark

such as reasonable expectations. It focuses on ex post outcomes for those consumers who have a negative experience. It may comprise both financial and non-financial detriment, with the latter including loss of time. More information about the methodology for assessing the consumer detriment can be found at: http://ec.europa.eu/consumers/strategy/docs/study_consumer_detriment.pdf.

contributions from a wide range of respondents. 89% of MS authorities, 70% of business associations, 64% of businesses and 96% of consumer organisations supported a revision of

the Directive. 9

A full-day Member States' workshop was organised on 27 October 2009 to discuss problems

and policy options. 16 Member States and one EEA State attended it 10 .

The Commission also set up a subgroup within the framework of the European Consumer Consultative Group (ECCG) comprising representatives of consumer organisations. It

adopted its opinion on 21 April 2010 11 .

A one-day stakeholders' workshop was organised on 22 April 2010 to discuss the impacts of

the identified policy options. Almost 100 stakeholders took part in it 12 .

More than 15 interviews with key industry representatives were conducted from September 2009 to October 2010.

In March 2012 the Commission outsourced to an external contractor, TNS European Behaviour Studies Consortium, a study to test a Package Travel Label and consumer behaviour when purchasing dynamic packages. The results of this study contribute to the assessment of policy option 3.

In June 2012 the Commission organised a workshop for Member States and a stakeholders' conference to further discuss the revision process and the main pending issues, as well as to

present the results of the behavioural study 13 .

It can be concluded that stakeholders (including Member States authorities):

• are in favour of clarifying and updating the Directive to address new market

developments;

• are mostly in favour of extending the scope of the Directive to cover combined

packages as well as streamlining and modernising the information requirements;

• are divided as to which party should be liable for the proper performance of the

contract and for assisting a consumer in difficulty;

• are strongly against setting up a pan-European insolvency fund and support instead

flexibility for Member States to decide what kind of insolvency scheme they set up, as

long as there is mutual recognition of the different schemes across the EU;

• are also divided on the idea of introducing a Package Travel Label. Some consumer

organisations and businesses originally strongly supported it, provided there are strict and clear rules for its use. On the other hand, some consumer organisations argued that

9 The Commission Working Document, summary of responses and individual stakeholders contributions are

published on the following website: http://ec.europa.eu/consumers/rights/travel_en.htm.

10 The Summary of the Workshop is published on the following website:

http://ec.europa.eu/consumers/rights/docs/sum_report_27102009_en.pdf.

11 The ECCG opinion on the revision of the PTD is published on the following website:

http://ec.europa.eu/consumers/empowerment/eccg_en.htm.

12 Due to the ash cloud, only 50 stakeholders participated physically in the workshop. The rest could follow the

workshop via web-streaming. The recordings of the workshop are published on the following website http://ec.europa.eu/consumers/rights/travel_en.htm

13 Web-streaming of the stakeholder's conference is available at:

http://scic.ec.europa.eu/streaming/index.php?es=2&sessionno=6a4d5952d4c018a1c1af9fa590a10dda

more labels might confuse consumers. After seeing the results of the study (see

assessment of policy option 3), most stakeholders have shown scepticism.

Furthermore, the vast majority 14 stated that it is important to further harmonise EU rules on

the scope, definitions, information requirements, liabilities of the professional parties and contract changes. Furthermore, the revision has also been requested from or been supported

by the co-legislators and the EESC. 15

1.4. Consultation of the Impact Assessment Board

The IA report was examined by the Commission's Impact Assessment Board (IAB) on 21 st November 2012. The IAB evaluated the IA report positively and considered the assessment to be thorough. The IAB recommended several aspects to be improved, in particular by providing a more complete overview of Member States' legal framework, simplifying presentation of options, improving coherence of options and specific objectives as well as including more stakeholders' views. All these recommendations have been addressed. For instance, the existing legal framework was presented in more detail in this report and Annex 2, presentation of options was simplified and only the assessment of retained sub-options was kept in the main report, specific objectives were reformulated to make them more measurable, more stakeholders views were added to the main report and the annexes.

1.5. Specific characteristics of the package travel and the legal framework in place

Travel services are to some extent regulated at EU level in sector-specific legislation e.g. in

the transport sector, where different regulations safeguard passengers rights 16 depending on

the mode of transport (e.g. travel by ship, bus, rail or air). Travel services are also covered by

horizontal EU consumer protection legislation such as the Unfair Contract Terms Directive 17 , the Unfair Commercial Practices Directive 18 and the Consumer Rights Directive 19 , as well as the contract law of the Member States. 20 Travel services also fall within the scope of the

Services Directive 21 22 and, when provided online, of the E-Commerce Directive .

14 Based on the results of the 2009 public consultation, 89% of MS' authorities, 74% of industry associations and

79% of companies were in favour of harmonising the rules concerning scope and definitions, 82% of MS' authorities and 88% of companies were in favour of harmonising the rules concerning information requirements, 89% of MS' authorities and 88% of companies were in favour of harmonising the rules concerning the liabilities.

15 E.g. Council conclusions on consumer Affairs on the 2255th Council meeting, European Parliament resolution

of 16 January 2002 (2001/2136(INI)), ECCG opinion of 21 April 2010, Opinion of the European Economic and Social Committee of 11.05.2011 (Official Journal C 132)

16 Regulation (EC) No 261/2004 i (air passenger rights), OJ L 46/1 of 17.02.04; Regulation (EC) No 1371/2007 i on

rail passengers’ rights and obligations, OJ L 315/14 of 03.12.07; Regulation (EU) No 181/2011 i concerning the rights of passengers in bus and coach transport, OJ L 55/1 of 28.02.11, to be applied from 1 March 2013; Regulation (EU) No 1177/2010 i concerning the rights of passengers when travelling by sea and inland waterway, OJ L 334/1 of 17.12.2010, to be applied from 18 December 2012.

17 Directive 93/13/EEC i of 5 April 1993 on unfair terms in consumer contracts.

18 Directive 2005/29/EC i of the European Parliament and of the Council of 11 May 2005 concerning unfair

business-to-consumer commercial practices in the Internal market.

19 Directive 2011/83 i/EU of 25 October 201, whose rules shall be applied from June 2014.

20 The table in Annex 2 gives an overview on traders' obligations and how different categories of travellers are

protected by existing legislation and on how they will be protected under the proposal for a new package travel directive.

21 Directive 2006/123/EC i on services in the internal market.

When purchasing travel products (e.g. accommodation, transport and car rental), consumers are protected against unfair, i.e. misleading or aggressive marketing practices. Traders must always display the full price of the product including any unavoidable charges such as local fees, taxes and handling fees. The advertising of travel products may not be misleading and may not, in particular, contain false information or omit important information to entice consumers to purchase a travel product they would not have bought otherwise.

For online purchases of travel products, sellers must give detailed information, including their contact details and a description of the main characteristics of the product. They cannot use

pre-ticked boxes to induce consumers to buy additional services 23 . Furthermore, contracts for

travel products must not contain unfair terms. For example, the seller may not impose terms which the consumer had no real opportunity to read before signing the contract.

The passenger rights regulations lay down specific rights for travellers in relation to carriers with regard to transport services, but not in relation to the actual combination of different tourist services.

Although as summarised above, some horizontal consumer protection rules apply to package travel contracts as well, they do not regulate specific aspects associated with them, thus leaving important gaps for consumers. These gaps include specific information obligations, such as on the travel itinerary, the definition of liability in the event of problems in the performance of the included services and mandatory insolvency protection requirements.. A detailed overview of legislation and rights applicable to different travel services and a table showing legal gaps in the area of packages are included in Annex 2.

Package travel contracts normally represent a rather complex and atypical contractual relationship:

• the customer expects to be able to rely on one single interlocutor who guarantees the

overall quality of the package;

• a package normally involves several service providers (separate sub-contractors

providing different travel services, e.g. hotel accommodation, charter flights, car rental and excursions);

• the customer does not have a contract with the individual service providers and is

often not even aware of the identity of all the involved service providers, who may be often based abroad and not share his/her language;

• a problem with one travel service has often consequences for other services included

in the package;

• pre-payments are very common, thus exposing the customer to a financial risk;

• the packages often involve travelling considerable distances and travellers can be at

risk of being stranded far away from their place of residence if the organiser goes bankrupt;

22 Directive 2000/31/EC i of the European Parliament and of the Council of 8 June 2000 on certain legal aspects

of information society services, in particular electronic commerce, in the Internal Market ('Directive on electronic commerce')

23 As from June 2014 when Directive 2011/83 i/EU becomes applicable (see above).

• there is a commercial link between different service providers and the organiser of the

package.

2. P ROBLEM DEFINITION

The Package Travel Directive has worked well throughout the years creating its own market. However, with the increasing trend towards on-line travel purchases, its scope has become unclear and outdated. As a consequence, businesses across the Internal Market are no longer competing on an equal footing and are facing obstacles to expand their operation crossborder. Its outdated scope is a source of significant detriment for consumers who often purchase unprotected travels under the impression that they are protected. Other outdated and unclear provisions of the current Directive generate unnecessary costs for businesses and consumers.

2.1. Context of the problem definition- changes in the travel market

2.1.1. The EU travel market

The EU travel market comprises approximately 90,000 tour operators and travel agencies. 24 It is estimated that 80% of them sell packages (72,000 businesses). 25 SMEs constitute 99% of

these businesses, of which micro enterprises represent 92%. In the EU there are also 200,000

hotels 26 (99% SMEs, 73% of which are micro enterprises), 13,000 car rentals 27 (99% SMEs,

out of which 94% are micro enterprises), 300 airlines (50% large and 50% medium sized businesses) and 58,000 businesses operating in the transport sector other than airlines and car

rentals (99% SMEs, about 90% micro enterprises). 28

2.1.2. Development of Internet distribution

Almost 70% of EU citizens use the Internet at least once a week. More than half of the Internet users are "regular users" surfing the Internet every day or almost every day. 73% of EU households had access to the internet in 2011, with the Netherlands posting the highest

access rate (94%) and Bulgaria the lowest (45%) 29 . Together with the growing number of

Internet users, the travel market has significantly shifted on-line. Gross online travel bookings across Europe account for 35% of the total bookings in 2011, now measuring €83.6 billion compared to €238 billion for the entire (on- and off-line) market, having increased by 21%

since 2006. 30 Travel services are the most popular category purchased on-line. Stand-alone air

tickets account for more than 50% of the total online sales value of travel services, followed

by stand-alone hotel bookings (19%) and packages (14%) 31 .

24 Eurostat structural business statistics, see also Annex 7.

25 According to ABTA estimates there are 45% retailers, 35% tour operators/retailers, 20% tour operators.

26 Hotels, apartment hotels, motels, roadside inns, beach hotels, residential clubs, rooming and boarding houses,

tourist residences and similar accommodation.

27 See also Annex 5.

28 Eurostat structural business statistics, last available data 2009. See also Annex 5 Section 6 and Annex 7 for

extra details.

29 Eurostat, Data in focus, 66/2011.

30 http://www.newmediatrendwatch.com/regional-overview/103-europe?start=2 , See also Annex 2

31 http://www.crt.dk/uk/staff/chm/trends.htm.

2.1.3. Different categories of trips

Estimates based on the Consumer Detriment Study and Eurostat (tourism database) 32 indicate

that, out of a total number of trips of about 580 million every year in the EU (excluding short domestic trips which are s generally not purchased as a package), there are 500 million holidays and 80 million business trips. For holidays, pre-arranged packages currently account for about 23% of the total market volume (i.e. about 118 million trips), combined travel arrangements for another 23% (i.e. also about 118 million trips, of which 87 million are “one trader” packages and 31 million are "multi trader" travel arrangements (50% of which are "multi-trader" packages and 50% are "multi-trader" travel arrangements) and independent

travel arrangements for 54% of the travel market volume (i.e. roughly 277 million trips). 33 Combined travel arrangements are on the rise 34 : data shows that 23% of EU citizens buy them

every year but the figures are substantially above average for Ireland (46%), Sweden (44%),

Italy (36%) and Slovenia (42%) 35 (see also Annex 2 Figure 5).

Figure 2 Holiday travel market- different categories of holiday trips

Concerning business trips, 80%-85% (64-68 million) of trips are arranged by travel

management companies (TMCs) 36 . Taking into account the specificities of such trips, it is

32 http://epp.eurostat.ec.europa.eu/portal/page/portal/tourism/data/database.

33 Estimates based on Eurostat tourism database, Study on Consumer Detriment in the area of Dynamic

Packages, Flash Eurobarometer 258. These data have been recently confirmed by 2011 figures provided by European Travel Agents and Tour Operators Association (ECTAA); see Annex 2 for a detailed methodology of estimates.

34 The Study on Consumer Detriment in the area of Dynamic Packages confirms that there is a positive

correlation between the incidence of use of combined travel arrangements and the internet penetration. Together with the growing number of Internet users, the market is expected to shift towards combined travel arrangements. The data provided by business stakeholders (see figure 6, annex 2) show that the share of "protected" pre-arranged packages has been decreasing steadily.

35 Study on Consumer Detriment in the area of Dynamic Packages, DG SANCO, London Economics, 2009.

36 Based on information provided by the Guild of European Business Travel Agent (GEBTA)

considered that most business travellers do not use pre-arranged packages, but rather prefer

more customised solutions, better tailor-made to the needs of their work-related journey 37 .

Therefore, out of the 80 million business trips carried out annually in the EU, it is assumed that around 24 million trips are combined travel arrangements (out of which 16 million are "one trader" packages organised by TMCs), while independent travel arrangements have been

estimated at around 56 million trips (out of which 50 million trips are booked by TMCs). 38

Table 2 Market of Business- different categories of business trips

Business trips % share Number of business Number of business Number of Market segment trips (millions) trips arranged by business trips TMCs (millions) NOT arranged by TMCs

(millions

"One-trader" 22% 18 16 2 packages

"Multi-trader" 8% 6 0 6 travel arrangements

Independent travel 70% 56 50 6 arrangements

TOTAL 100% 80 66

2.2. The travel market has outgrown the existing legislation – an introduction to the problems in the existing package travel market

The main underlying drivers of the problems related to the Package Travel Directive are its outdated scope and the presence of outdated and unclear provisions.

2.2.1. The outdated and unclear scope of the Directive

The current Directive refers to "pre-arranged" combinations of travel services and does, therefore, not explicitly cover packages which are combined at the consumer's request. Still,

in the Club Tour-Case 39 , the Court of Justice of the European Union clarified that the

combination of tourist services by a "bricks and mortar" travel agency at the specific request of the consumer falls within the scope of the Directive if the consumer pays an inclusive price and there is a contract between the consumer and a travel agent,. However, the practical impact of this ruling has led to litigation at national level, and failed to provide full clarity on

37 The assumption taken forward is that business trips arranged by TMCs tend to fall in the category of "onetrader"

packages or "multi-trader" linked travel arrangements or independent travel arrangements.

38 It is reasonable to assume maintaining the same ratio as for holidays' trips among "one-trader" packages and

"multi-trader" travel arrangements and independent travel arrangements. See estimates based on Eurostat in Annex 2.

39 Case C-400/00

the applicability of the package travel legislation. See Annex 3 for details how the term package is interpreted in different Member States.

In particular, it remains unclear whether, in the light of that ruling, the current Directive also applies to "one-trader" packages sold on-line, whereas "multi-trader" packages and "multitrader" assisted travel arrangements are clearly outside of its scope. This is the case even though at least "one-trader" packages and "multi-trader" packages have similar characteristics and are competing for the same customers.

The figure below illustrates the scope of the Directive in relation to different travel arrangements.

Figure 3 Scope of the Directive

COMBINED TRAVEL ARRANGEMENTS

ONE-TRADER TRAVEL ARRANGEMENTS MULTI-TRADER TRAVEL ARRANGEMENTS

MULTI-TRADER INDEPENDENT

PRE-ARRANGED PACKAGE ONE-TRADER PACKAGES MULTI-TRADER ASSISTED TRAVEL TRAVEL

PACKAGES ARRANGEMENTS ARRANGEMENTS

23% 17% 3% 3% 54%

LEGAL GREY

COVERED BY THE PTD ZONES NOT COVERED BY THE PTD

2.2.2. Outdated and unclear provisions of the Directive

Several provisions of the Directive lack clarity (for instance, provisions on the liability, contract changes) and some provisions are outdated (for example, the rules regarding information requirements or lack of termination rights for consumers). See annex 3 for further details.

In a nutshell, most of the problems with the current legislation can be categorised into two main groups:

Business problem, i.e. absence of a level playing field, unjustified compliance costs and obstacles to cross-border trade within the Internal Market (see Chapter 2.3), as well as

Consumer problems, i.e. detriment suffered by consumers (see Chapter 2.4).

2.3. Key problems faced by businesses

2.3.1. Absence of a level playing field

The described changes in the market have led to a situation where the market players covered by the PTD are at a competitive disadvantage compared with those which are not covered or, at least, do not consider themselves to be covered, although both are competing for the same customers and although the combinations they sell can include exactly the same components.

Consumers are often unaware that different protection applies to such competing products (i.e. pre-arranged as opposed to "one trader" or "multi traders" packages). However, businesses selling such competing products are subject to different obligations and thus bear different costs. In particular, the average cost of businesses for complying with the PTD requirements has been estimated at €10.5-€12.5 per package. When considering 160 million

holiday packages currently covered by the Directive 40 , aggregate annual compliance costs

amount to about 1.7 – 2 € billion.

The breakdown of costs for complying with the PTD is provided in Annex 5, section 1.1.1.

Such average cost accounts for about 1.4%-1.6% of the average price of a pre-arranged

package (777€ 41 ). Even if it is small, this percentage contributes to the difference in the average price as compared with combined travel arrangements (741€ 42 ). It can be argued that

this difference in price, to a large extent, reflects an unjustified difference in regulatory treatment among traders selling competing products in the same market segments.

Box 1 Example of differences in the market playing field

Happy Flight, an airline, sells online a ticket to Malaga to a consumer in Finland. In the booking process Happy Flight offers hotel accommodation through the website of a business partner which has a similar website layout. After selecting the flight and the hotel, the consumer is charged for the two services at one inclusive price. In parallel, Happy Holidays, a Finnish tour operator, sells a pre-arranged package consisting of exactly the same flight and accommodation in the same hotel. To sell this package, Happy Holidays has to provide insolvency protection and comply with the information requirements of the PTD. Additionally, he will be liable for the proper performance of all the services included in the package. This costs him on average €10.5-€12.5 per package. Happy Flight, which in fact offers the same travel services but presents them differently, does not incur such costs.

2.3.2. Unnecessary/unjustified compliance costs

With the development of the Internet and other changes in the market, some of the above mentioned compliance costs do not seem justified:

• Outdated information requirements

According to the current rules, if an organiser provides consumers with a public brochure, it must contain prices and other information, for instance about the itinerary, the meal plan, the destination and the means, characteristics and categories of transport. The particulars in the brochure are, as a general rule, binding on the organiser/retailer, including prices. These rules have led to businesses complaining that, in order to minimise litigation risks, they do reprint the brochures in case of changes in prices, accommodation, etc., which costs them around

€400 million annually. 43 This gives an amount of approximately 2.5€ per package, when divided by the number of packages covered by the Directive. 44 In today's Internet world, the

continued need for specific printed information seems less justified than 23 years ago.

• Unjustified costs for package travel organisers in case of delays, cancellations,

force majeure events and accidents related to transport due to insufficient redress mechanisms

40 See Annex 2: 118 million pre-arranged packages +an estimated 50% of the 87 million "one-trader" packages=

160 million trips are already covered by the PTD

41 Consumer Detriment Study, ibidem.

42 Consumer Detriment Study, ibidem.

43 For this reason, the administrative burden estimated in this Impact Assessment as results of re-printing

brochures should be considered as a high estimate. See Annex 6.

44 160 million of packages when 50% of "one-trader" packages are assumed to be covered, see Annex 6.

Where transport is included in the package, in most cases, both the package organiser and transport carriers are obliged to provide compensation and assistance in case of delays, cancellations or accidents to passengers under EU rules on passenger rights. Thus, consumers may in many situations choose whom to turn to: the carrier or the organiser. This situation where several parties (i.e. transport provider and a package travel organiser) are obliged to provide assistance and possibly pay compensation for the same situation (e.g. cancellation or delays), might lead to unjustified cost for certain organisers (double compensation paid to travellers).

• Lack of coherence with EU passenger rights rules - unlimited liability in case of

force-majeure events

Currently there are no limitations to the organiser's liability to provide alternative arrangements for the continuation of the package in case of events which prevent the consumer from returning home according to the planned schedule. This is clearly a burdensome rule for businesses and, due to its unlimited character, difficult to insure against. For example, ECTAA estimated that, during the 2010 volcanic ash crisis, tour operators had to provide care and assistance to the stranded passengers, including their repatriation, for an

overall cost of € 380 million. 45 The EU rules on passenger rights provide for a limitation of

the carrier's duty to provide accommodation for cancelled/delayed trips in the case of bus and maritime transport and a similar limitation is foreseen, also for force majeure events, in the

review of APR 46 .

The PTD rules lack a similar limitation to the organisers' liability to provide alternative arrangements for the continuation of the package, which would seem particularly appropriate in long lasting force majeure events.

• Duplication of protection for business trips

The current PTD protects "consumers" purchasing packages. However, the definition of "consumer" encompasses anyone taking the package, thereby including business trips and granting full protection also to business travellers purchasing a package (B2B contracts).

It is considered burdensome and unnecessary that the protection applies also to travellers

going on business trips organised by specialised Travel Management Companies (TMCs) 47 . This cost amounts to € 10.5 – € 12.5 per package leading to a total of € 30-114 million 48

annually for the industry. Business travellers have specific demands, they know exactly when and where they have to go and give specific instructions to their travel agencies. Also, the contracts are usually rather long-term ones, concluded between the agency and the travellers' employer, are usually very detailed and address the handling of possible disputes or problems. For these reasons, business travellers are far less exposed to problems which might occur during their journey and have no personal financial risk or damage. In practice, business

45 Vice-President Kallas' information note to the Commission, The impact of the volcanic ash cloud crisis on the

air transport industry, 2010. SEC(2010) 533

46 The Commission's proposal for a Regulation amending Regulation (EC) 216/2004 i, COM (2013) 130 i limits the

liability to 3 days and €100 per night.

47 The Guild of European Business Travel Agents (GEBTA), the European Travel Agents and Tour Operators

Association (ECTAA) are in favour of excluding B2B trips from the scope of the PTD.

48 Depending on the assumption (25% or 75%) of "one-trader" business trips organised by TMC are currently

covered by the PTD.

trips organised by TMCs, even if not covered by the directive, provide a similar level of protection as under the PTD.

Business trips arranged by TMCs account for 80%-85% of all business trips in the EU However, especially micro and small enterprises often do not have specific contractual agreements with specialised TMCs and hence procure their travel arrangements in a similar way as an average consumer would do.

2.3.3. Legal discrepancies between the Member States leading to additional costs and obstacles to cross-border trade

The current Directive is based on minimum harmonisation, and this has resulted in legal discrepancies between Member States. This fragmentation generates additional compliance costs for businesses wishing to trade cross-border as recently signalled in the performance

checks of the internal market in the tourism sector carried out in 2012 49 . Businesses that trade

across borders have to pay about € 375 to research information about the Member State in which they want to get active. They also have to bear recurring costs of adapting their information materials to the requirements of different Member States. Taking into account the average number of EU companies which make cross-border sales, this translates into about

additional €2 per package out of which €1.7 is a one-off cost 50 . The overall baseline

administrative burden associated with cross-border trade has been estimated at € 26 million (out of which €21m are one-off costs for researching Member States' differing national legal requirements and legal advice; €5.1m are recurring annual administrative costs).

Administrative costs associated with cross-border trade €2 per package

Total costs for export-oriented businesses €12.5-€14.5

The Eurobarometer study has shown that more than 70% of EU retailers, including (but not limited to) the travel industry, would be interested in making cross-border sales if laws regulating consumer transactions were the same across the EU and half of retailers that made cross-border sales would be interested in selling their products in more than

ten Member States. 51 One third of businesses stated in the public consultation that their level

of cross-border trade would increase if the rules regarding package travel were to be harmonised across the EU. This could be one of the reasons explaining the current low amount of cross-border sales by travel agents and tour operators (less than 10% according to 2009 data).

The following examples of legal discrepancies in the package travel sector are particularly likely to cause barriers to cross-border trade:

49 The Commission staff working document on the result of the performance checks of the internal market for

services (construction, business services and tourism) (SWD(2012) 147 final).

50 The calculations underlying these figures are provided in the SCM spread-sheets (see Annex 6) and section

1.1.1.2 of Annex 5.

51 Flash EB 300, Retailer's attitudes towards cross-border trade and consumer protection, 2011. The sample

excludes micro-retailers.

• Divergent insolvency protection schemes and lack of mutual recognition

Under the Directive, the organiser/retailer must provide sufficient evidence of security for the refund of all money paid over and the repatriation of the consumer in the event of

insolvency 52 . The Directive does not set out any explicit requirement for the actual method of

insolvency protection as long as it is effective 53 . As a result, there are diverging methods of

insolvency protection in the Member States, e.g. insurance policies, bank guarantees, national insolvency funds or a combination of these methods. This, combined with the lack of explicit rules on mutual recognition, have resulted in a situation where some retailers or organisers who are trading cross-border had to pay several times for insolvency protection which they

had already secured in their Member State of establishment 54 .

More than 58% of enterprises consider the variety of insolvency schemes as an important obstacle to cross-border trade and ask for increased harmonisation. Even though the performance checks of the internal market for the tourism sector carried out in 2012 showed that a number of Member States recognise the protection awarded by funds established in

other Member States 55 , a systematic mutual recognition in the sector-specific legislation is

sometimes missing.

Some Member States also appear to impose national insurance and guarantee obligations on cross-border service providers legally established in other Member States in order for them to

access and exercise their activity occasionally in their territory 56 .

This situation is detrimental to the Internal Market and can block competition among these insolvency protection providers. It can also cause that businesses have to insure themselves locally while they may obtain a better price somewhere else.

Data provided by a large EU tour operator show that among Member States (even belonging to the same geographical area) differences in the average insolvency protection cost per

package can be very significant 57 .

• Divergent information requirements 58

52 Article 7.

53 See joined cases C-178/94, C-179/94, C-189/94 and C-190/94 and later followed up in C-410/96 and C-

140/97.

54 The case-law of the Court of Justice on the Package Travel Directive established that the Treaty freedoms

allow a service provider that has furnished the security required by one Member State’s legislation to make use of that security for its establishment in another Member State. This case-law was also explicitly reflected in Article 14, paragraph 7, of the Services Directive, which explicitly prohibits that a Member State requires a service provider to provide or participate in a financial guarantee or to take out insurance from a provider or body established in their territory. Furthermore, Article 23, paragraph 2 of the Services Directive also clarifies that in cases of secondary establishment, a Member States may not require professional liability insurance or a guarantee from the provider where he is already covered by a guarantee which is equivalent, or essentially comparable as regards its purpose and the cover it provides in another Member State in which the provider is already established. Where equivalence is only partial, Member States may require a supplementary guarantee to cover those aspects not already covered.

55 See the Commission Staff Working document on the result of the performance checks of the internal market

for services (construction, business services and tourism) (SWD(2012) 147 final), Tourism Background Paper, Section 2.2.

56 Ibidem; Section 2.4

57 The differences in costs also reflects lack of effectiveness of insolvency schemes in some MS. The

Commission has launched several infringement procedures against Member States where the national insolvency protection tuned out to be insufficient to provide adequate protection for consumers.

Some Member States introduced additional information requirements to be included in the brochure or contract. There are also stricter formal requirements in some Member States with regard to the method of providing information, e.g. the requirement that information must be in writing.

As a result, traders who want to produce common brochures for several Member States have to check the specific information requirements applicable in the different Member States concerned. A majority of stakeholders (82% of MS' authorities, 67% of businesses and 59% of consumer organisations) stated in the public consultation that differences in information

requirements across the EU are a problem. 59

Box 2 Example of cross-border obstacles related to information requirements

Sunny summer, a package travel organiser based in Luxembourg, wants to expand his business into the French speaking part of Belgium. He wants to send out brochures to consumers in Belgium. However, he learns that he cannot use the same brochures, as in Belgium the brochure must also provide information concerning financial security in the event of insolvency. Therefore, in order to avoid any risk of litigation, he reprints the brochures especially for the Belgian market.

• Different scope of the protection rules 60

Member States have different rules and practices in relation to the scope of protection under the PTD (e.g. trips of less than 24 hours, occasionally organised trips or certain types of

combined travel arrangements 61 ). Businesses wishing to sell cross-border hence have to carry

out careful legal checks to verify which rules apply on every national market.

79% of enterprises consider the different scope of the protection rules as an important obstacle to cross-border trade. Moreover, almost 80% of business stakeholders and MS

authorities asked for harmonisation of the PTD scope and definitions. 62

• Different national rules concerning liability and obligations of the contractual

parties 63

The current Directive uses the wording "organizer and/ or retailer" and thereby does not

designate one particular party as being responsible 64 . This wording was apparently chosen to

leave the choice to the Member States. At present, France is the only Member States where the liability rests with the retailer and different sorts of joint liability exists in Belgium, Bulgaria, Cyprus, Denmark, Greece, Hungary, Luxembourg, Lithuania, Malta, Portugal,

Romania, Slovakia and Sweden. 65

This has led to diverging national rules in relation to who is liable towards the consumer: the retailer, the organiser or both. More than 80% of enterprises consider the different national

58 Consumer law compendium, page 257-285.

59 Results of the public consultations 2009.

60 Consumer law compendium, page 238-244.

61 For instance, Germany and Sweden apply package travel protection to products that consumer perceive as

packages.

62 Ibidem.

63 Consumer law compendium, page 333-339.

64 E.g. Article 4, 5, 6 and 7.

65 Consumer Law Compedium,

rules concerning liabilities as an important obstacle to cross border trade and 70% is of

opinion that this aspect requires harmonisation across the EU. 66

Box 3 Example of cross-border obstacles related to different rules on liability

Voyage, a travel agency based in Strasbourg, France, sells package holidays organised by ZX travels. Under French law, it is Voyage who is liable for the proper performance of the package. On the German side of the border, the travel agency Reisen is selling the same types of packages organised by ZX travels. However, under German law, Reisen is not liable for the proper performance of the package, as this liability lies with ZX travels. Such discrepancies in liability rules discourage both travel agencies to sell cross border, as this would cause additional costs and would require changes to their business models.

2.4. Key problems faced by consumers

2.4.1. Consumer detriment suffered by users of combined travel arrangements

An increasing number of holidays booked by consumers are not protected as they fall outside

the scope of the PTD 67 .

The Consumer Detriment Study confirmed that problems concerning combined travel arrangements happen more often and are on average more detrimental than problems concerning pre-arranged packages. The main conclusions are:

• Problems are more likely to arise if the package was purchased using the Internet;

• The likelihood of receiving assistance is much lower (40%) when the consumer is

redirected between websites (e.g. purchasing "multi-trader" travel arrangements) rather than when making a purchase on a single website (60%);

• The incidence of problems for combined travel arrangements (8.2%) is much higher

than for pre-arranged packages (3.1%) and independent travel arrangements (1.6%) and;

• Combined travel arrangements cause more detriment than any other type of travel

arrangements. On average, the gross detriment per problem for pre-arranged packages was estimated at €191 (i.e. 25% of the average costs of the package) compared to €593 for combined travel arrangements (i.e. 80% of the average cost of such travel arrangements).

The highest level of detriment was experienced in the UK, DE and FR (see Figures 7 and 8 in Annex 2).

66 Results of the public consultations 2009.

67 According to data provided by business stakeholders, taking the UK market as an example, in 1998 more than

98% of leisure travel bookings were made subject to regulatory protection , while by 2007, the proportion had dropped to 57%. Today it is estimated to be less than 50%. In Denmark and the Netherlands, the share of prearranged packages (under the scope of the PTD or national provisions) was estimated in 2008 at 43% and 38% respectively. In Finland and Sweden the percentage of holidays protected by the PTD and additional MS' provisions in 2007 dropped to around 30%. See also figure 6 in annex 2.

The most common problems and the main source of detriment for consumers as identified in the study are provisions of incorrect or incomplete information, problems with transport delays or cancellations, as well as problems with services not being provided or being of a lower standard than expected.

The insolvency of an organiser or a service provider can be particularly detrimental to consumers. It is often difficult for consumers to understand whether combined travel arrangements which they bought with the assistance of a trader are protected or not. Indeed, 67% of consumers who bought combined travel arrangements through an intermediary with billings by different companies wrongly believed that they would receive a refund in case of bankruptcy of one of them. This confusion could lead to significant detriment, particularly when consumers only realise that they are not protected once their travel company has failed and are left stranded abroad or unable to get their money back. For example, an estimated 1.4- 2.2 million air passengers were impacted by an airline insolvency between 2000 and 2010, of

these, 12% were stranded away from home incurring the average costs of over €796 68 .

As a whole, the Consumer Detriment Study estimated a yearly personal consumer detriment for users of combined travel arrangements in the EU27 at more than € 1 billion net (i.e. after

compensation) 69 compared to only € 159 million for pre-arranged packages. This comprises

both financial and non-financial detriment, including loss of time and moral damages (see

example in Box 3 below) 70 .

Box 3 Examples of consumer detriment

Margus, an Estonian, booked a holiday in Rome (flight and four night accommodation) from an Internet website enabling him to tailor his holidays by combining different travel services. When he arrived at the hotel, he found out that the bathroom had no water. He complained at the reception desk, but he was told that the water problem could not be solved and no further rooms were available. Margus then phoned the call centre of the on-line operator where he made the booking, and was told that he had to solve this problem with the hotel himself. He eventually had to leave and find another hotel. He hence lost 3 hours in trying to solve the problem, €3 for phone calls and paid an additional €200 for a room in another hotel. Had his holiday been a package travel covered by the EU Directive, the organiser would have been liable to offer Margus assistance, e.g. by providing him with an alternative room or hotel.

Thomas, a UK citizen, booked a flight to Thailand directly from the website of the XX airline. After choosing the preferred flight, he was offered an attractive hotel at a discount price, which he decided to purchase (assisted travel arrangements). His friend James had in the meantime bought accommodation at that same hotel and flight with that same airline via a pre-arranged package offered by the XY Leisure Group. While being in Thailand, the XX airline went bankrupt and therefore their return flight was cancelled. However, James told Thomas not to worry, as the XY Leisure Group holds an ATOL licence and would have therefore taken care of repatriating them at no additional costs. However, soon afterwards Thomas learnt that, as he had bought separate travel components directly from the XX airline, he did not, contrary to James, enjoy bankruptcy protection. As a consequence, he had to make his own travel arrangements to get home, which cost him €700 on top of the cost for his original ticket.

2.4.2. Specific problems of consumers detriment stemming from unclear and outdated rules

68 Communication on Passenger protection in case of airline insolvency, COM(2013) 129 final i

69 Consumers purchasing unprotected combined travel arrangement can indeed claim and receive compensation

in case of non-conformity of the services with the contract based on national contract law. In the study, the difference among gross and net detriment is however very small, i.e. € 60 million.

70 For more detailed data and explanation of the consumer detriment methodology see also Annex 2 (Figures 9-

13).

As noted above, and although to a lesser extent than the "unprotected" combined travel arrangements, also those buying the "protected" pre-arranged packages suffer detriment.

This is due to the fact that some provisions of the Directive lack clarity, some are outdated or do not meet the reasonable expectations of today's consumers, whilst failing to take due account of legislative developments at EU level in terms of increased consumer protection, for example thanks to passenger rights rules now covering all transport modes.

• Uncertainties in relation to prices

Under the current PTD, businesses are allowed to revise the price of the package due to certain increased costs, including increased fuel prices or changes in the currency exchange rates, although it is possible for businesses to hedge at least against the risk of currency fluctuations. There is no cap for the possible price increase and as a consequence consumers lack certainty in relation to the final price of their package. Consumers may cancel the contract if the price change is significant. However the term "significant change" is open to interpretation. Some Member States have introduced more specific rules. For instance, Italy has introduced a 10% cap, whereas Germany specifies that travellers may cancel the contract if the price increase exceeds 5%. Moreover, while extra costs are practically always passed on to consumers, the PTD does not specify that consumers are entitled to a discount in the event of cost savings.

• Uncertain liability

Divergences in national rules concerning who is the responsible party (organiser, retailer or both) can be detrimental to the consumer as it can be unclear which party is liable for the

performance of the contract 71 and has to procure insolvency protection, especially if the

package holiday is purchased cross-border or where the retailer and the organiser are established in different Member States or where the organiser is based outside the EU (enforcement against a trader based outside the EU might be difficult). It can lead to situations where the organiser and the retailer refer the consumer to the other party neither of them taking responsibility.

• Lack of a right to termination

Consumers sometimes have a legitimate need to cancel the contract before departure, which is not reflected in the current PTD. For example, today, unless the organizer decided to cancel the trip, consumers cannot unilaterally terminate the contract if they do not wish to embark on a holiday in the event of a serious situation at the place of destination such as a violent conflict, an ecological disaster or a dangerous and contagious disease. Several Member States have introduced a general termination right against compensation (for example BE, CZ, DE, DK, EE, EL, FI, HU, LT, LV, PT, NO), whilst others allow for termination even without

71 See also section 2.2.3 where the differences in MS are presented compensation in force majeure events (for example in DK, FI) 72 . Therefore, the current rules

are unclear, vary considerably across the EU and are not always satisfactory for consumers.

• Uncertainty as to the right to compensation for non-material damages

The Directive does not explicitly state that the consumer has a right to compensation for nonmaterial damage and, in particular, that such compensation can arise from the loss of enjoyment which the consumer has suffered because of improper performance of the travel

contract. However, this right was confirmed by the Court in the Simone Leitner-case 73 .

• Cumbersome access to justice

European consumer associations have reported that a large number of the complaints received are within the area of travel services. For instance, data provided by the European Consumer Centres (ECCs) show that the most frequent type of consumer complaint, out of the 552 cross-border complaints related to the PTD in 2011, concerns packages not performed at all or not in conformity with the booking.

The current PTD does not set up any contact points for complaints, minimum prescription periods or mechanisms for out of court dispute resolutions, which have been criticized by and called for by various consumer organisations/bodies, e.g. the ECCG opinion of 21 April

2010 74 75 . It should be noted that following the adoption of the ADR/ODR proposal , the PTD

would benefit of an extension of ADR procedures in case of conflicts between consumers and businesses.

2.5. Baseline scenario

Without additional public intervention, the problems identified (unfair competition, unnecessary compliance costs, obstacles to cross-border trade, consumer detriment) would remain.

Member States might also take action at local level to protect their citizens by extending their national legislation to cover more types of travel arrangements. For example, the UK extended the bankruptcy protection for "flight plus" travel arrangements in April 2012. This will result in an increased regulatory fragmentation and additional obstacles to cross-border trade.

As consumers get more Internet savvy, they are expected to self-package or purchase combined travel arrangements falling outside the protection of the PTD. As the result, unfair competition between different market players would continue or even increase.

The compliance costs for the industry might decrease along with a lower number of travel arrangements subject to the PTD requirements. However, the consumer detriment would increase as more consumers would be travelling unprotected and buying travel arrangements under the wrong perception that they are protected.

72 Member States' replies to questionnaires as a preparation to Member States' Workshop 5 June 2012

73 CJEU 168/00.

74 ECCG opinion of 21 April 2010 on the review of the package travel directive (PTD),

http://ec.europa.eu/consumers/empowerment/docs/20100421eccg_opinion.pdf

75 COM(2011) 793 final i and COM(2011) 794 final i

Consumers and businesses would also continue to bear unjustified costs related to outdated and unclear provisions of the Directive.

2.6. Does the Union have the right to act?

The legal basis for EU action is Article 114 of the Treaty, which provides that "the European Parliament and the Council shall […] adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the Internal Market." Furthermore, Article 114 (3) specifies that "the Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts."

The proposal shall therefore eliminate internal market fragmentation causing obstacles to cross-border trader and distortions of competition, as well as enhance the protection of consumers, taking into account new market developments. This objective cannot be sufficiently achieved by the Member States, given the disparities between national legislations that are the reason for internal market barriers and distortions of competition. If the Member States addressed new market developments as well as regulatory gaps and inconsistencies in EU law in an uncoordinated manner, this would create even more fragmentation in the Internal Market and exacerbate the problem. Moreover, there is currently no EU legislation that can replace the detailed regulations of the existing Package Travel Directive.

3. P OLICY OBJECTIVES In accordance with Article 114 of the Treaty, the overall general objective is to contribute to the better functioning of the Internal Market and achieve a high level of consumer protection .

General objective 1 General objective 2

Improve the functioning of the Internal Market in the Achieve a high level of consumer protection in the package package travel sector. travel market

Related specific objectives Related specific objectives

• Ensure a more competitive and fairer level playing • Reduce consumer detriment and increase

field for the businesses operating in the travel transparency for travellers who buy combinations market; of travel services currently not covered by the PTD by addressing new market developments;

• Increase the cross-border offer of package travel

services by reducing costs and obstacles to cross•

border trade in the package travel market; Reduce consumer detriment stemming from unclear and outdated provisions.

• Reduce unjustified compliance costs for businesses in the package travel market. Operational objectives

Operational objectives Increase transparency of information provided to consumers to ensure that they receive correct and

Reduce unnecessary cost related to the application of the complete information when purchasing packages Directive in the B2B segment

• Clarify rules on liability of the involved • Reduce cost related to outdated information professional parties, so that consumers know who

requirements is the liable party if something goes wrong when

going on a package holiday

• Lower the costs for companies by clarifying rules on liability between the involved professional • Increase certainty in relation to the price of the

parties package by providing a limitation of price

• increases, Reducing cost for organisers related to double

compensation under the PTD and passenger rights

• Introduce a possibility for consumers to terminate • Streamlining the interplay with passenger rights the contract in certain situations

regulations and reduce costs for businesses by

including limiting the liability of the organiser in •

force majeure events. Codify that consumers can be entitled to nonmaterial damages

• Decrease costs for businesses in connection with insolvency protection • Introduce a minimum prescription period for

claims for damages and price reduction

4. P OLICY OPTIONS

4.1. Identified policy options

Eight policy options have been identified. These options reflect the suggestions made by various stakeholders throughout the consultation process. They include legislative and nonlegislative measures, which can be combined to maximise their effectiveness.

• Option 1 – Maintaining the status quo – baseline scenario (PO1)PO1 entails

maintaining the PTD in its present form. It is the ‘do-nothing’ baseline against which

any potential changes under other policy options and their impacts will be assessed.

• Option 2 – Guidelines (PO2)

Option 2 entails maintaining the PTD in its form and preparing guidelines. These would include CJEU rulings and some clarifications on the scope and on the liabilities, addressing the lack of clarity issues notably outlined in Annex 3, for:

• - 

  providing information (pre-contractual, before departure, last minute bookings);

• - 

  performing the contract properly;

• - 

  providing prompt assistance if the consumer is in difficulty, and

• - 

  sufficient evidence for security in the case of insolvency.

Option 2 recognises that certain aspects of the Directive require clarification and may deliver some improvements for stakeholders by providing guidance.

• Option 3 – Introduction of a "Package Travel Label" and/ or requirement for

traders to state that the services in question do not constitute a package- so called "This is not a package" disclaimer (add-on option to other policy options)

(PO3)

This option covers two sub-options:

Sub-option A entails the introduction of a "Package Travel Label" – an obligatory logotype to be presented to consumers when purchasing a package. Such Package Travel Label would be:

• - 

  a mandatory pan-European logotype ;

• - 

  aimed at clarifying whether a package is covered or not and which are the key rights of it;

• - 

  available in both off-line and on-line transactions;

• - 

  backed up by verification and surveillance by national enforcement authorities, and

• - 

  introduced as add-on to other policy options and not as a stand-alone measure.

Sub-option B entails the introduction of an obligation for traders, when they are offering combined travel arrangements which are not packages as defined in the PTD, to inform travellers that individual service providers are solely responsible for their contractual performance.

• Option 4 – Repeal of the Directive and self-regulation (PO4)

This option entails a repeal of the current PTD and the adoption of self-regulation by the industry. Self-regulation would include specific information requirements and clarification on the liability for proper performance of the travel contract. This option takes account of

the fact that there are several pieces of legislation 76 which, to some extent, apply also to

package travel, as well as industry codes of conduct.

• Option 5 – Modernisation of the Directive and coverage of "one trader" packages

(PO5)

Option 5 involves a revision of the current PTD in which the main legal structure of the existing Directive is kept, but which includes addressing the problems outlined in section 2 and in Annex 3 (while Annex 4 provides a detailed description and justification for the legislative measures proposed). The table below provides a summary of the proposed policy measures and their correspondence with the identified problems.

DRIVERS OF THE SPECIFIC PROBLEMS PROPOSED POLICY MEASURES

PROBLEM

Measures clarifying existing legal framework are highlighted in black whereas those introducing new

measures are highlighted in red

OUTDATED AND Consumer detriment for users Modernising the scope to cover "one trader" UNCLEAR SCOPE of combined travel packages (the Directive would be modernised to OF THE DIRECTIVE arrangements cover "one-trader" packages sold online and would

clarify that "one-trader" packages sold at high street Absence of a level playing are legally subject to all PTD requirements). field

Uncertainties in relation to -Sub-option 0: status quo i.e. package travel prices contracts can allow for price increases due to certain increased transportation costs, including increased fuel prices or changes in the taxes or currency

OUTDATED AND exchange rates;

UNCLEAR -Sub-option 1: introducing a cap of a maximum price PROVISIONS increase of 10%; resulting in consumer -Sub-option 2 : clarifying that consumers have a right detriment to terminate the contract if the price increases more

than 5%, while requiring that possible cost decreases have to be passed on to the consumer as well; -Sub-option 3: making prices in the contract binding, except for price increases caused by unforeseeable increase in taxes or fees imposed by third parties for the performance of the services (e.g. tourist taxes or landing/embarking fees).

Uncertain liability - Sub-option 0: status quo i.e. liability of retailer

and/or organiser -Sub-option 1: contractual liability of the seller/retailer; -Sub-option 2: contractual liability of the organiser and joint liability in case the organiser is based outside the EEA; and -Sub-option 3: joint contractual liability of the seller/retailer and the organiser (consumer can seek redress from either of them);

76 E.g. Directive 2005/29/EC i of the European Parliament and of the Council of 11 May 2005 concerning unfair

business-to-consumer commercial practices in the Internal market, as well as EU rules on passenger rights.

Lack of right to termination Introduction of termination rights for travellers against compensation and in force majeure cases without compensation

Uncertainty as to the right to Clarification of right to compensation for noncompensation for nonmaterial damages. material damages.

Cumbersome access to justice Introduction of a minimum one-year prescription period for claims for damages or price reduction

UTDATED AND Outdated information Pre-contractual information requirements replacing UNCLEAR requirements the current mandatory requirements for the content PROVISIONS of brochures; resulting in unjustified/ Unjustified costs for package Clarified rules on the possibilities to seek redress unnecessary costs travel organisers in case of from the transport carrier in case of costs related to

delays, cancellations, force delays, cancellations, assistance or accidents majeure events and accidents regulated by the EU Passenger Rights. Consumers related to transport would continue to be able to choose whom to seek compensation and assistance from (transport carrier

or the organiser of the package). Clarified rules that travellers do not have a right to double compensation for the same event from a carrier and a package organiser.

Unlimited liability for the Setting a time limit for the organiser's obligation to travellers' continued stay if ensure accommodation for the continued stay (e.g.

the return journey cannot be for maximum 3-4 days). provided in force-majeure situation

Duplication of protection for Exclusion from the scope of business trips organised business trips by TMCs.

Legal discrepancies leading Increased harmonisation of rules concerning the scope to costs and obstacles to cross of the Directive, information requirements, liabilities

border trade (different scope, and obligations of the contractual parties different information requirements, different rules concerning liabilities)

Divergent insolvency Flexibility of Member States as to the method of protection schemes and lack providing insolvency protection, whilst adding explicit of mutual recognition rules on the effectiveness of the national insolvency protection scheme and, the mutual recognition of security provided under the law of the Member State

of establishment .

• Option 6 – Graduated approach- modernisation of the Directive and coverage of

both "one trader" and "multi trader" packages while applying a lighter regime

to "multi-trader" assisted travel arrangements (PO6)

This option includes Option 5 (all proposed policy measures) supplemented with an extension of the scope of the PTD with a graduated approach:

• - 

  "multi-trader" packages would be subject to the same regime as pre-arranged packages (including full liability for the performance of the package and the obligation

  to procure insolvency protection),

-"multi-trader" assisted travel arrangements do not display typical features of a package and are hence less likely to mislead consumers. They would be subject to a lighter regime, limited to insolvency protection and an obligation to state in a clear and prominent manner that each service provider will be solely contractually

responsible for the performance of its service(s) (policy option 3B).

As mentioned above, in case of "multi-trader" travel arrangements, the different components of the trip are purchased from different traders, often under legally distinct contracts and as a consequence the distinction between seller and organiser is often blurred. Therefore the following sub-options concerning the liabilities are considered:

Sub-option 1: the liability is placed on a single provider (a trader selling the first component who links to facilitate the purchase of the other components) who would

be considered as an "organiser";

Sub-option 2: liability is placed on each involved provider for the service segment

they offer;

Sub-option 3: joint liability of all traders unless the parties designate only one trader to

be liable.

• Option 7 – Modernisation of the Directive and coverage of both "one trader"

packages and all "multi-trader" travel arrangements (PO7)

This option includes PO 5 and 6 whilst subjecting also all "multi-trader" assisted travel arrangements to all PTD requirements. This means that all obligations and liabilities also would apply to "multi-trader" assisted travel arrangements. Annex 4 provides a detailed description and justification for the legislative measures proposed in Options 5 and 6, based on the results of the public consultation.

• Option 8 – “Travel Directive” (PO8)

This option includes Option 7 supplemented with an extension of the scope also to all independent travel arrangements (stand-alone individual travel services, e.g. car rental, accommodation or flight tickets). The market of independent travel arrangements accounts for 54% of all trips (about 277 Million trips annually). This option would in principle apply the same set of rules to all travel services irrespective of whether the product is offered/purchased as part of a package or as a stand-alone product.

The proposed legislative policy options (PO5-PO8) are based on strengthened targeted harmonisation. The aspects which require leaving flexibility to Member States include prescription periods and method of insolvency protection.

For these provisions the minimum harmonisation is proposed while other provisions are based on maximum harmonisation.

4.2. Discarded policy options The Impact Assessment does not consider a regulation since a directive allows the Member

States a margin of manoeuvre when incorporating the contractual rules in their national contract law system. A regulation would not allow for such flexibility and could therefore

badly interplay with national contract laws in the Member States

4.2.1. Option 8 “Travel Directive”

PO8 is discarded because the majority of the most common consumer problems with independent travel arrangements can, provided that appropriate enforcement exists at national level, be successfully dealt with in the framework of existing rules such as national contract law, the Unfair Contract Terms Directive, the Unfair Commercial Practices Directive, the Consumer Rights Directives well as the Regulations in the area of Passenger Rights. In contrast to complex and atypical contractual relationship in case of packages, the contracts for independent travel arrangements do not involve several service providers which identity if often unknown to consumer. Therefore, such contracts can be more easily managed by consumers in case of any problems. Moreover, this option would entail additional costs for the industry, in particular for SMEs. These additional costs would most likely result in unjustifiable higher prices for consumers.

5. A SSESSMENT OF I MPACTS

This section presents the most relevant impacts of each of the policy options on key target audiences, i.e. consumers, businesses and MS authorities, in the form of a cost/benefit analysis. All the impact of each policy options will be assessed against the baseline scenario(BS). The estimate of the BS compliance and administrative costs, provided in section 2, will therefore be used to assess the impact of the policy options redefining the scope of the PTD (PO5, PO6 and PO7). The detailed analyses of all the impacts are presented in Annex 5.

5.1. Assessment of Option 2 - Guidelines and Better Enforcement of Existing Legislation (PO2)

Meeting the objectives: this option would only very partially meet the policy objectives. Indeed, unfair competition between different market players is likely to continue. The regulatory fragmentation would remain. By clarifying the current rules, this option may however lead to a certain reduction of detriment as the result of better implementation of the PTD by businesses and Member States. However, as guidelines per definition are not a binding tool, these benefits would depend on their actual use by national authorities.

Economic impacts

Compliance costs for businesses: There should be no overall change in costs incurred by industry as a result of guidelines being issued, as they would relate to clarifications of the existing PTD rules.

Administrative costs for businesses: Similarly to compliance costs, there would be no overall change in administrative costs incurred by businesses as a result of guidelines.

Impact on SMEs: very little change compared to the BS.

Competition in the Internal Market: A clarification of some of the definitions in the PTD could, in theory and to some extent, lead to a clearer segmentation between travel arrangements which are covered or not covered by the PTD and, thereby, lead to somewhat fairer competition. However, confusion might remain in particular in the area of "multitrader" travel arrangements and also for online "one-trader" packages.

Impact on consumers: Consumers may gain some clarity and may also be better protected due to better implementation and enforcement of the PTD. However, some of the loopholes stemming from the content of the PTD provisions would remain (e.g. lack of minimum prescription period to claim damages in cross-border situations).

Impact on EU budget: no change compared to the BS

Impact on competitiveness: no change compared to the BS

Impact on public authorities : no change compared to the BS.

Social impacts: no change compared to the BS

Impact on fundamental rights: no change compared to the BS as the guidelines are not legally binding.

Environmental impacts: no change compared to the BS

Stakeholders' views: Issuing guidance was supported by the minority of stakeholders. Only 28% of companies, 32% of business organisations and 11% of consumer organisations were in favour in issuing the guidance.

Distribution of impacts by Member States: All Member States will be equally impacted by this PO.

5.2. Assessment of Option 3 – Introduction of a "Package Travel Label" (PO3A) and/ or "This is not a package" disclaimer (PO3 B)- add-on option to other policy options

5.2.1. Sub-option A: Package Travel Label

Meeting the objectives: this option would only partially meet the policy objectives.

Indeed, the label could reduce consumer detriment by enabling consumers to take better informed decisions and it could result in fairer competition among the different market players. However, the expected amount of consumer detriment reduction would not off-set costs incurred by businesses for the implementation of the label.

Economic impacts

Compliance costs for businesses: Companies selling packages would need to get familiar with new information requirements and adapt their web-pages and promotional materials to display the Package Travel Label. The average one-off cost for adapting a company's website

and /or printed materials has been estimated at €500 77 . These costs would potentially affect

72,000 companies selling packages at present with the overall one-off costs amounting to €36 million. As this is an add-on option, the final costs would depend on the policy option chosen.

Administrative costs for businesses : Administrative costs coincide with compliance costs, see Annex 6.

Impact on SMEs: SMEs would absorb most of the costs in absolute values. However these costs are one-off and relatively small.

Competition in the Internal Market: Competition may become fairer, as the label would help to distinguish packages which are inside or outside of the scope of the Directive.

Impact on consumers: The impact of a label is expected to be relatively small. Indeed, data coming from the 2012 behavioural study dedicated to the introduction of a "package travel label" show that only 3.1% of consumers would click on the label to find out more about their rights. However, out of those who clicked on the logo, 80% felt knowledgeable about their rights. Also those who noticed the logo but did not click on it felt better informed. It is estimated that detriment would decrease by about € 3 million every year (see details in Annex 5). As the compliance costs related to the introduction of the logo are one-off, no price increases for consumers are expected.

Impact on public authorities : MS would be responsible for the enforcement of the rules.

Impact on EU budget:, the European Commission would have to ensure to have the copyright on the logo and its registration as a trade mark. This would represent a small cost for the institution of the order of a few thousand Euros.

Social impacts: This option is not expected to have specific and significant impacts on employment.

Impact on fundamental rights: This option would result in slightly higher consumer protection in Europe in the area of package travel and, hence, is likely to have a positive impact on the rights protected by the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on the freedom to conduct business would on the contrary be somewhat negatively impacted, as the expected small consumer benefits would most likely not compensate the significantly higher costs this option would create for businesses.

Environmental impacts: No environmental impacts are expected.

Simplification potential: no impact

Stakeholders' views: MS Authorities highly ranked the effectiveness of the label in terms of greater clarity for consumers. However, most of consumer and business organisations were sceptical about the benefits of the label if it is not accompanied by an awareness raising campaign and quality control procedures.

Distribution of impacts by Member States: Member States with the highest share of consumers buying traditional packages (i.e. UK, MT, NL) are likely to be impacted more. As this is an add-on option, the distribution of impacts will depend on the preferred policy option.

77 The Impact Assessment for the Proposal for a Regulation of the European Parliament and of the Council on a

Common European Sales Law estimated the one-off cost for adapting a company's website to display a disclaimer forming a consumer about the application of the European contract law has been estimated at€500.

5.2.2. Sub-option B: "This is not a package" disclaimer

Economic impacts

Compliance costs for businesses: Mainly companies selling on-line "one-trader" packages and "multi-trader" travel arrangements are likely to be affected by this option. Travel service providers (e.g. hotels, car rental companies, airlines, and other transport carriers) marketing their services on the Internet and providing links to other websites would have to adapt their websites to display a clear disclaimer stating that the product is not a package. Similarly as for the Sub-option A, the average one-off cost for adapting a company's website has been

estimated at €500 78 . As this is an add-on option, the total cost could amount to maximum €34.5 million depending on the policy option chosen 79 .

Administrative costs for businesses: Administrative costs coincide here with compliance costs, see Annex 6.

Impact on SMEs: SMEs would absorb most of the costs. The impact would be however limited as these are one-off and small costs.

Competition in the Internal Market: the same impact as Sub-option A

Impact on consumers: As the costs related to the introduction of the disclaimer are one-off, companies would rather quickly absorb them and consumers would hence benefit from more transparency and clearer information at virtually no additional cost.

The reduction of consumer detriment is expected to be higher than under Sub-option A (Package Travel Label) as a negative information would warn consumers who otherwise might purchase unprotected travel under the wrong impression that it is protected (as already indicated this is the currently case for 67% of users of combined travel arrangements).

Impact on public authorities: the same impact as Sub-option A

Impact on EU budget: no impact

Social impacts: the same impact as Sub-option A

Impact on fundamental rights: the same impact as Sub-option A

Environmental impacts: the same impact as Sub-option A

Stakeholders' views: All stakeholders underlined the importance of the transparency on the market i.e. clear information for consumers whether they are buying a "nonprotected" travel.

Simplification potential: no impact

Distribution of impacts by Member States: IR, SE, IT and SL where the share of consumers buying combined travel arrangements is significantly above the EU average (Annex 2, Figure 5) and UK, DE and FR which are the biggest online travel markets (Annex2, Figure 3) are likely to be the most impacted by the additional compliance costs linked with the introduction of the "This is not a package" disclaimer.

78 The Impact Assessment for the Proposal for a Regulation of the European Parliament and of the Council on a

Common European Sales Law estimated the one-off cost for adapting a company's website to display a disclaimer forming a consumer about the application of the European contract law has been estimated at€500.

79 500€* (36,000 companies selling "one-trader" packages with an online presence + 34,000 companies selling

"multi-trader" travel arrangements). For the detailed methodology of estimate see annex 5.

5.3. Assessment of Option 4 – Repeal of the Directive

Meeting the objectives: In theory, this option could ensure a more competitive and fairer level playing field and reduce unjustified costs for businesses.

However, deregulation at EU level would most likely increase legal fragmentation, since MS would be able to maintain and create rules in an uncoordinated manner. This would be harmful to the Internal Market.

In case of the repeal of EU legislation, the number of unprotected consumers and an amount of consumer detriment would increase.

Economic impacts

Compliance costs for businesses: The repeal of the Directive might result in decreased compliance costs for businesses of up to €10.5-€12.5 per package. However, the cost savings for businesses would depend entirely on the willingness of MS to repeal their national legislation protecting consumers. It is likely that many MS would maintain and further develop their legislation in this area.

Administrative costs for businesses: Similarly to compliance costs, this PO might result in lower administrative costs for businesses of up to €409 million depending on the number of MS that decide to repeal their national legislation (the remaining baseline administrative costs are considered business as usual).

Competition in the Internal Market: This option might increase legal fragmentation within the Internal Market since MS would be able to maintain and create rules in an uncoordinated manner.

Impact on SMEs: The repeal of the Directive might in theory lead to fairer competition since nobody ( and hence also no SMEs) would be any longer subject to the EU package travel requirements and the related compliance costs, provided however that all MS would be ready to repeal their own national legislation in this area.

Impact on businesses from third countries: this option could in theory facilitate organisers outside the EU to sell packages in the EU as they would not have to comply with the PTD requirements. However, as it is likely that MS decides to keep their national rules, the organisers outside the EU will have to comply with national rules of each MS they sell packages to.

Impact on consumers: The repeal of the Directive is likely to increase gross consumer detriment (estimated at more than €159 million annually for traditional packages and more than €1 billion for combined travel arrangements every year). In theory, a lower cost burden for industry could lead to lower end-prices to the consumer. The average price per package could go down by about €10.5-€12.5, but only if MS decided to repeal their national legislation.

Impact on public authorities: MS would be free to decide whether to maintain their national legislation unchanged, repeal their national legislation or update their legislation. If legislation is repealed, consumers being stranded when on holiday due to the insolvency of the tour organiser might more often turn to embassies to receive necessary assistance and financial support to be repatriated.

Impact on EU budget: no impact.

Impact on competitiveness: See Annex 7 for detailed analysis. Quantifications are presented in this report under the other economic impacts.

Social impacts: Only small social impacts expected. For instance, consumers being stranded due to the insolvency of the tour organiser would not receive the necessary assistance and financial support to be repatriated, thus possibly causing delays to their professional activities.

Impact on fundamental rights: This option would result in lower consumer protection in Europe in the area of package travel and, would hence have a negative impact on the rights protected by the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on the freedom to conduct business might positively be impacted, depending on the number of MS which would repeal their national legislation.

Environmental impacts: Businesses would not be required to re-print brochures as a result of the PTD and its indirect effect in practice (see section 2)

Simplification potential: Deregulation could result in simplification of the legal framework for businesses. However, the impact will depend on MS actions that might revise their legislation leading to more fragmentation with reverse effect on simplification.

Distribution of impacts by Member States: All MS will be equally impacted by the Repeal of the Directive.

5.4. Assessment of Option 5 – Modernisation of the Directive and coverage of "one trader" packages (PO5)

Meeting the objectives: This option meets well the policy objectives, both improving the Internal Market functioning and achieving a high level of consumer protection. Indeed, it would eliminate legal fragmentation and provide for a more level playing field for operators. As more packages would be brought under the scope of the PTD (this option would cover about 40% of all holiday trips) and certain rules would be clarified, the consumer detriment would decrease.

Economic impacts

Compliance costs for businesses: In some MS, national legislation already covers some online "one-trader" packages (e.g. DE and partly SE) and some large operators based in these countries may be assumed to already comply with package travel requirements across all countries in which they operate. However, it cannot be assumed that even in those MS all traders selling "one-trader" packages online comply, in practice, with all PTD-requirements, including the bankruptcy protection. The results of the Consumer Detriment Study suggest that at least 50% of these travel arrangements are sold at high street travel agents' and thus in most of the cases are already subject to the PTD. It is therefore assumed that 50% of "onetrader" packages that are currently not covered would now be covered. Hence, approximately 44 million “one-trader” holiday packages and 1 million B2B trips would be brought under the scope of the PTD, while 8 million of "one-trader" B2B trips organised by TMCs would be excluded from the scope of the PTD.

The following table presents the impact of Option 5 (PO5) on costs of companies (detailed calculations are provided in Annex 5)

Savings on costs Monetised values

Administrative costs- elimination of the brochure requirement €390 million euro

annually 80

(only big companies, currently under the scope of the PTD can benefit)

(almost €3 euro per package)

Exclusion of business trips organised by TMC - €60-€76 million euro annually

(only companies currently under the scope of the PTD can benefit) -€9.5 – 10.5 per

package 81

Elimination of differences in provisions hampering cross-border trade €5 million annually

(Only companies trading cross-border can benefit)

Clarified rules on possibilities of redress for package travel organisers from transport Not possible to carriers in case of costs related to delays, cancellations, assistance or accidents regulated quantify by the EU Regulations on passenger rights

The introduction of a limitation (in days) to provide alternative arrangements in case of Not possible to long lasting force majeure events quantify

Improved mutual recognition of insolvency funds and improved competition between Not possible to insolvency schemes. Businesses might seek to subscribe to the most efficient scheme. quantify

New costs

Bringing new travel arrangements in the scope €335-€424 million annually

 -€7.5 - €9.5 per package

The overall impact on the industry would be a benefit of €42-€115 million annually (low €7.5 and high €9.5 estimate of compliance costs per package).

Impact on SMEs: Mainly SMEs selling on-line "one-trader" packages brought under the scope of the PTD (and which currently have been treated as to be outside the scope) would incur increased compliance costs. Those costs would amount to a maximum of €7.5 - €9.5 plus €0.15 of administrative costs per package. Most SMEs which are selling "one-trader"

80 €421 of administrative costs under the BS (see section 5.1) - €31.1 million of administrative costs under PO5

(see Annex 5 and Annex 6).

81 TMCs are unlikely to produce brochures and therefore do not incur thereof related administrative costs.

packages at high street (bricks and mortar travel agencies) are already subject to all the PTD requirements, even though these rules are not always properly enforced. The additional costs would therefore affect mostly online sellers of these travel arrangements. SMEs would also benefit from increased harmonisation and clarity of rules across the EU as they would be able to rely on one set of rules across the EU.

Micro-enterprises account for 92% of all travel agencies and tour operators (79,000 companies). The exclusion of micro and small businesses from the scope of the Directive would not be therefore a viable option. Firstly, it would result in unfair competition between businesses selling competing products whilst having different regulatory regimes and hence facing uneven compliance costs. Secondly, it would significantly increase consumer detriment, as consumers would not be able to easily determine the rights they enjoy, as these would depend on the size of the business they are purchasing from. Overall, excluding or applying a lighter regime for small and/or micro enterprises would be contrary to the objectives of the revision process, i.e. achieving a high level of consumer protection and

improving the functioning of the Internal Market 82 .

Competition in the Internal Market : Businesses would benefit from a fairer level playing. Competition is likely to improve as a result of the harmonisation of legislation (and the ensuing reduction in obstacles to trade).

Impact on businesses from third countries: this option would facilitate organisers outside the EU to sell packages in the EU as they would have to comply with the same requirements in all MS. Organisers outside the EU selling packages to consumers in the EU, will face the same obligations as the EU organisers i.e. they would face an increase of costs for packages newly brought under the scope of the Directive.

Impact on consumers: PO5 would reduce the detriment associated with "one-trader" packages, especially in the on-line environment. Indeed, also these package travellers would be entitled to refunds of advance payments and repatriation in the event of insolvency, redress in the event of non-performance of contracts and spend less time and effort in seeking compensation. It could be assumed that the detriment per package and incidence of problems for "one-trader" packages brought under the scope of the Directive would be the same as for pre-arranged packages. The estimated reduction of consumer detriment would

be therefore up to 88% 83 , i.e. the baseline level of detriment associated with combined travel

arrangements would decrease.by €348 million assuming that 50% of one-trader packages

are newly brought under the scope of the PTD. 84 For detailed calculations see Annex 5.

Some consumers may experience an increase in the price of “one-trader” travel arrangements, up to € 9.5, as businesses may pass on to them the increased compliance costs. This impact will depend on supply and demand elasticity, but in any case this is likely to be less than 2% of the total price of the package and broadly comparable with the cost of obtaining commercial travel insurance and, as such, unlikely to be detrimental to consumers. In a

82 see Annex 7, where an assessment of possible specific sub-options aiming to reduce the burden for SMEs is

presented.

83 The consumer detriment for 100 pre-arranged packages amounts to €592 (100*3.1% incidence of problems

*€191 average cost of problem) compared to €4,862 for 100 combined travel arrangements (100*8.2% incidence of problems* €593 average cost of problem).

84 It should be noted that the figures on the incidence of problems and average cost per problem cover all

combined travel arrangements i.e. some "one-trader" packages where some of them are already compliant with the PTD and some "multi-trader" travel arrangements for which the level of incidence of problems and an average cost of problem are likely to be higher.

competitive market, price increases on the end product tend to get minimised to the possible extent.

Impact on public authorities: all MS would be affected, as this option would require some

changes in the domestic legislation. MS would bear the usual cost which accompanies the

implementation of EU legislation.

Impact on EU budget: no impact, the European Commission would bear the usual cost which accompanies the implementation of new EU legislation.

Impact on competitiveness: More competition is expected in the sector, due to the increased level playing field. See Annex 7 for detailed analysis. Quantifications are presented in this report under the other economic impacts.

Social impacts: Businesses selling "one-trader" packages would incur additional costs, however as these costs will be passed on consumers, they are not expected to have any negative effect on employment. In the longer term, as business models would adjust, there would be more transparency and more competition that might lead to job creation.

Impact on fundamental rights: This option would ensure a high level of consumer protection in areas which are currently unregulated by EU legislation. It fully complies with the provisions of the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on freedom to conduct business would not be significantly impacted since, even if there would be higher compliance costs, there would also be a significant reduction in administrative burden.

Environmental impacts: The main effects of this policy options would relate to the printing of brochures as undesirable environmental impacts linked to it would no longer occur.

Stakeholders' views: The inclusion of "one-trader" packages was supported by the overwhelming majority of stakeholders in the public consultation (93% of MS' authorities, 78% of industry associations, 64% of businesses and 96% of consumer organisations).

Simplification potential: For businesses, this option would simplify the regulatory environment, eliminating the need to research of different national laws. Moreover, this option would simplify some of the current unclear provisions of the Directive, in particular rules on liabilities and streamline the information requirements.

Distribution of impacts by MS: FR will be the MS that probably will be the most impacted regarding rules on liability. In several other respects, such as regards the insolvency protection, FR will be less impacted. In this area, for instance, the UK will be significantly impacted, since the UK will have to amend their recently adopted rules which extend their insolvency protection scheme also to cover the so called "Flight-Plus packages".

IR, SE, IT and SL where the share of consumers buying combined travel arrangements is significantly above the EU average (Annex 2, Figure 5) and the UK, DE and FR which are the biggest online travel markets (Annex2, Figure 3).

These countries are therefore likely to be the most impacted by the additional compliance costs stemming from extension of the scope of the Directive.

Assessment of sub-options

• Sub-options concerning the liability for proper performance of the contract

The results of the public consultation about who should be responsible for the proper performance of the contract are widely divided. The largest number of respondents favoured the package organiser as the liable party or joint liability.

Based on the assessment (see annex 5 for details), sub-option placing the liability on the organiser is the preferred solution as it is the least burdensome for businesses while providing for sufficient protection of consumes. Only in one MS (FR) there would be a shift of liability from retailers to organisers.

• Sub-options concerning the revision of prices following the signature of the contract

Industry stakeholders argue that the existing rules on price revisions should be maintained, while consumer organisations say that there is a need for increased foreseeability of expenses and that the current possibilities of price revisions should be abolished.

Sub-option 1 (maximum increase capped at 10%) and sub-option 2 (price increase above 5% giving the right to cancel the contract) are less costly for businesses while safeguarding consumer interests.

The preferred measure could be therefore one of these sub-options or a combination thereof.

See annex 5 for detailed assessment.

Impacts of other substantive provisions

Substantive provision MS impacted Impact of the provision

Introduction of termination rights for All MS would be In serious unavoidable and extraordinary travellers against compensation, as impacted, but less impact situations (force majeure cases), the well as without compensation for force in MS such as CZ, DE, majority of businesses act reasonably and, majeure events BE, DK, EE, EL, FI, in order to maintain their reputation,

HU, LT, LV, PT and ES cancel trips themselves. However, where variations of such organisers and travellers might have termination rights different opinions as to the implications of already exist. extraordinary situations for the trip Consumers would benefit from gaining the right to cancel holiday in the event of a force majeure situation, such as for example the outbreak of violent conflict or an ecological disaster, even if the organiser refuses to do so. This may result in some increase of compliance costs for

businesses.

If a termination right against compensation is introduced, consumers would be able to terminate the contract at any time paying a fee to businesses. If the fee is proportionate, businesses would face a very limited impact as the compensation paid by consumers is supposed to cover

these costs.

Clarification of right to compensation All MS except for AT, The consumer would be entitled to for non-material damages BE and EE that already compensation for both material and nonexplicitly

 provide for material (moral) damages (e.g. loss of

compensation for loss of holiday enjoyment) in cases of nonenjoyment.

performance or improper performance of

the contract. For businesses the

clarification should not bring significant

costs, since this is an existing possibility,

although not often used by consumers.

Flexibility of MS as to the method of Limited effect on No additional compliance costs for

providing insolvency protection whilst Member States. They companies. Businesses would benefit from

adding explicit rules on the will have to establish mutual recognition of schemes across the effectiveness of the national central contact points to EU, as increased competition among funds

insolvency protection schemes, the

mutual recognition of security facilitate the mutual in the internal market is likely to drop the

provided under the law of the MS of recognition. insurance costs. Businesses offering establishment, as requesting the well services cross-border would particularly

as establishment of central contact benefit from reduced costs through mutual

points (minimum harmonisation rule). recognition as they would not need to

provide the insolvency protection in each

MS they operate.

Consumers would get access to more

offers at competitive prices.

Reinforced rules on the possibilities All Member States Package travel organisers could have some to seek redress from the transport savings as it would be easier for them to carrier in case of costs related to recuperate at least part of the delays, cancellations, assistance or compensation paid to travellers in case of accidents regulated by the EU delays, cancellations, assistance or Passenger Rights. Consumers would accidents regulated by the EU Passenger continue to be able to choose whom Rights. The extent of this saving is to seek compensation and assistance however unknown as two of these

from (transport carrier or the Regulations 85 have only recently entered

organiser of the package). into force and the APR is currently under review. At present, the possibility of seeking redress often depends on the specific arrangements between two

business parties 86 .

85 Regulation 181/2011 i concerning the rights of passengers in bus and coach transport has entered into force in

March 2013, whereas Regulation 1177/2010 i concerning the rights of passengers when travelling by sea and inland waterway entered into force in December 2012.

86 Impact Assessments accompanying different proposals for the EU passenger rights provide an estimate of the

maximum costs related to different provisions not excluding package travellers.

The liability of the organiser to This would require Compared to the legal situation today, this

provide alternative arrangements for legislative amendments would mainly result in a cost reduction for

the continuation of the package in case in all Member States. 87 organisers . Consumers would in most of force majeure events would be instances not be significantly affected, but

limited (e. g. to a maximum number of

three or four days). This provision would incur increased detriment in

would reflect the rules set out in EU situations where it is not possible for the Passenger Rights Regulations. traveller to return immediately to the place

of destination within four days after the return. It can also be expected that such a cap on the liability to provide assistance would make it easier for organisers to

insure this risk.

Introduction of minimum one year Member States will not Overall, this provision would bring prescription period for claims for be affected by such a slightly increased legal certainty for damages or price reduction (minimum minimum requirement consumers, but since most Member States harmonisation rule). already have at least one year prescription

periods, no major cost or impacts are

expected.

5.5 Assessment of Option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while

applying a lighter regime to "multi-trader" assisted travel arrangements (PO6)

Meeting the objectives: Compared to PO5, this option would further contribute to the better functioning of the Internal Market in the package travel sector, eliminating legal fragmentation and levelling the playing field for operators. Making "multi-trader" assisted travel arrangements subject exclusively to the obligations to declare that they do not constitute a package and to procure insolvency protection, would increase transparency for consumers and ensure fair competition, while avoiding unnecessary costs associated with all obligations applying to packages.

Compared to PO5, this option would further increase the number of consumers protected by the PTD and would significantly decrease the consumer detriment.

Economic impacts

There are 31 million "multi-trader" holiday travel arrangements and 6 million business "multitrader" travel arrangements sold annually. However, the exact share of "multi-trader" assisted travel arrangements and "multi-trader" packages is not known.

The "lighter regime" provided by PO6 would be particularly beneficial for SMEs currently selling "multi-trader" and "one-trader" packages as it could be difficult for them to cover liability for the performance of all services provided by different traders. These companies would be able to adapt their business activities so as to face only some PTD requirements (insolvency protection and an obligation to display the "This is not a package" disclaimer). It is impossible to quantify precisely how many businesses would do this.

87 The Impact Assessment on the possible review of Air Passenger Rights Regulation estimated that the

assistance costs in case of travel disruption in case of force majeure events would reduce by 40% with a 3-day cap and by about 20% with a 4-day cap.

High-street travel agents selling "one-trader" packages in most cases have to already comply with the current PTD, as interpreted by the CJEU. A change of the business model would imply inconvenience for their customers, i.e. a need to make separate payment transactions. Online traders selling "one-trader" packages (for which it is less clear to what extent they are covered under the current PTD as interpreted by the ECJ, although they covered by national legislation in a number of Member States) would have to ensure that the services they offer are no longer booked within one booking process (i.e. no longer put in a single "shopping basket" by consumers). The additional services would have to be offered after the booking of the first travel service is confirmed, which would imply some redesigning of their websites and, sometimes, a clarification of their commercial agreements with other traders. Sellers of "multi-trader" packages could adapt their websites more easily, but they would have to stop charging an inclusive or total price for packages: this might imply the risk of losing those customers who might find the separate payment transactions less convenient. It is therefore

assumed that only around 25% of "one-trader" packages 88 and roughly 50% of multi-trader

packages would in the future be sold as "multi-trader" assisted travel arrangements.

Compliance costs for businesses : the same savings as in PO5 are expected. Under PO6, traders selling "one-trader" and "multi-trader" packages not covered by the current rules would incur additional compliance costs estimated at €7.5-€9.5 per package. Traders selling "multi-trader" assisted travel arrangements would incur one-off administrative costs (see below) related to displaying the "This is not a package" disclaimer and the cost for the insolvency protection. The current estimated cost of insolvency protection for packages amounts to roughly €3 per package. Based on the available figures and in particular on the experience of the UK "Flight Plus" scheme, which is a very similar model, the assumption is that this cost would remain roughly the same also for "assisted travel arrangements".

Given the above, the total additional compliance cost for the industry of PO6 could be estimated at €528-€654 million annually (low-€7.5 and high-€9.5 estimate of compliance

costs per package). 89

However, using the above assumptions that some traders might adapt their business models and no longer sell packages, the additional yearly compliance costs of PO6 could be estimated at €386-€444 million annually (low- €7.5 and high- €9.5 estimate of compliance costs per

package) 90 .

Administrative costs for businesses: Same savings as in PO5. Some additional administrative

costs for businesses brought under the scope of the PTD: -€2.8million annually 91 . Providers

88 At present, around 50% of "one-trader" packages are sold in brick and mortar shops.

89 50% of "one-trader" packages (PO5) and all "multi-trader" packages, i.e. 63 million holiday and business

trips*€ 7.5-€9.5 (low and high estimate of compliance cost per package excluding administrative costs) + all assisted travel arrangements i.e. 18,4 million holiday and business trips* €3 (cost of insolvency protection).

90 Compliance costs of PO6 calculated above minus reduced costs by €4.5-€6.5 for 25% of "one-trader"

packages and 50% of "multi-trader" packages i.e.29.5 million trips that might in the future be sold as multitrader assisted travel arrangements thus incurring average costs of €3 per packages instead of €7.5-€9.5 per package.

91 18.5 million packages brought under the PTD x € 0.15 = € 2,775,000 (see Annex 5 for more details). The cost

per package estimate (based on option 5) has been used to estimate recurring administrative costs for providing information as it is impossible to determine the exact number of companies which would be responsible for providing particular pieces of information. Under sub-option 1 (contractual liability only on the initial service provider), even though the legal responsibility lies with the initial web page, in practice the detailed information about a specific travel component is likely to be provided by the service provider. Similarly, under sub-option 2 (each service provider responsible for the service they offer), each of the service provider will be responsible for

of "multi-trader" linked travel arrangements, subject only to the lighter information regime, would incur one-off administrative costs of €500 per company (€17 million for the whole

industry 92 ) to state in a clear and prominent manner that each service provider will be solely

responsible for the performance of its services ("This is not a package" disclaimer).

Impact on SMEs: Similarly to PO5, this option would increase compliance costs for businesses including SMEs selling "multi-trader" packages. However, PO6 provides for a lighter regime which would be particularly beneficial for SMEs currently selling "one-trader" and "multi-trader" packages which might find it difficult to assume liability for the performance of different services included in the travel combination. These companies would be able to adapt their business model and face only some PTD requirements (insolvency protection and the obligation to display the "This is not a package disclaimer") thus incurring lower compliance costs (on average €3 per package) compared to sellers of packages (on average €7.5-€9.5 per package).

PO6 would impact hotels, car rentals, airlines and businesses operating in the transport sector other than airlines and car rentals. Most of these businesses, excluding airlines, are SMEs/micro businesses (99%/73% for hotels, 99%/94% car rentals, 99%/90% other transport

services) 93 . For this reason, the goals which option 6 aims to reach would be hampered if such

businesses were to be excluded from the scope.

Competition in the Internal Market: Businesses would also benefit from a more level playing field compared to PO5. "This .is not a package" disclaimer would bring transparency on the market and travel arrangements which have similar characteristics would be subject to the same requirements. Consequently, competition is also likely to improve correspondingly better than in PO5.

Impact on businesses from third countries: similar effects as PO5.

Impact on consumers: Compared to PO5, this option would bring additionally around 31 million "multi-trader" travel arrangements within the scope of the Directive, bringing additional protection for consumers purchasing combined travel arrangements.

As estimated under PO5, the baseline detriment for 15.5 million "multi-trader" packages is expected to be reduced by 88%. For "multi-trader assisted travel arrangements", gven that the most prevalent problems causing detriment concern provisions of information (22% of EU-17 problems with combined travel arrangements) and services not provided at all or of lower standard (17% of problems), it is assumed that the reduction of detriment would be 30% lower compared to the decrease of detriment for packages.

The yearly consumer detriment could be reasonably estimated to decrease by €508 million.

However, using the same assumptions as above, i.e. that some traders might adapt their business models and no longer sell packages, the total reduction of yearly consumer detriment

could be estimated at €430 million 94 .

their respective part of the package (e.g. an airline will be responsible for providing information on the time of departure, but not on the classification of accommodation included in the linked travel arrangements).

92 This option is likely to impact hotels, car rental and transport providers with on-line presence and linking to

other websites. Based on Eurostat data and number of assumptions (for details see annex 5), it has been estimated that there are 34,000 companies like this.

93 Eurostat Structural Business Statistics, 2009.

94 The same approach is applied as in PO5. Therefore, the same methodological constraints apply to these

estimations. For detailed calculations see annex 5.

Moreover, the "This is not a package"- disclaimer would enable consumers to make informed choices. On the other hand, some consumers may experience an increase in the prices of "multi-trader" and "one-trader" packages of around €7.5-9.5 per packages and of around €3 for "multi-trader" assisted travel arrangements if businesses pass on their increased compliance costs. But, similarly to PO5, such possible price increase case would be less than 2% of the total price of the package.

It is interesting to note, in this context, that 68% of surveyed consumers were willing to pay

additionally €3 for insolvency protection for standalone airline tickets 95 , which shows that

consumers would be similarly likely to accept the potential increased prices for "multi-trader" assisted travel arrangements offering them protection against insolvency.

Impact on public authorities : similar effects as PO5.

Impact on EU budget: similar effects as PO5.

Impact on competitiveness: See Annex 7 for detailed analysis.

Social impacts: similar effects as PO5.No negative impacts on employment are expected. In the longer term, the transparency and increased competition might have some positive impacts on employment.

Impact on fundamental rights: similar effects as PO5.

Environmental impacts: similar effects as PO5.

Simplification potential: similar effects as PO5.

Stakeholders' views: The inclusion of "multi-trader" travel arrangements was supported by the majority of stakeholders in the public consultation (67% of MS' authorities, 57% of industry associations, 64% of businesses and 96% of consumer organisations).

Assessment of sub-options

Sub-option 3 (joint liability unless the parties designate one liable trader) is the preferred solution as it provides for the highest benefits to consumers while imposing liabilities on a reasonable number of companies (dependant on B2B arrangements).

For the detailed assessment see annex 5.

Distribution of impacts by Member States: the same distribution of impacts as under PO5.

5.6. Assessment of Option 7 - Modernisation of the Directive and coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7)

Meeting the objectives: Similarly to PO6, this option would contribute to the better functioning of the Internal Market in the package travel sector by eliminating legal fragmentation. However, by extending the scope to "multi-trader" assisted travel arrangements, it would generate disproportionate and unfair costs for these companies. Compared to PO6, this option would further increase the number of consumers protected by the PTD (covering 46% of all holiday trips) and would significantly decrease the consumer detriment.

95 YouGov survey of 2500 consumers carried for the Impact Assessment Study on the Review of the Package

Travel Directive, Risk&Policy Analysts, 2010

Economic impacts

Compliance costs for businesses: Same savings as in PO5. However, by extending the scope to all "multi-trader" travel arrangements and by making them subject to all PTD obligations, this option would generate disproportionate and unfair costs for companies acting merely as intermediaries, since they might not be able to guarantee the performance of all services included in the travel combination.. The additional compliance costs could be estimated at

€610-€773 million annually 96 (low-€7.5 and high-€9.5 estimate of compliance costs per

package).

Administrative costs for businesses: Same savings as in PO5. Some additional administrative

costs for businesses brought under the scope of the PTD: €5.6million annually 97 .

Impact on SMEs: Similarly to PO5 and PO6, mostly SMEs would be impacted by increased compliance costs. Compared to PO6, this option does not provide for any lighter regime. All travel companies with online presence and linking to other travel providers would be subject to all PTD requirements which could be considered as dispropo rtionate burden.

Competition in the Internal Market: Businesses selling packages (pre-arranged, "one-trader" and "multi-trader" packages) would benefit from a more level playing field similarly to PO6. However, as this option would also impose all the PTD obligations on "multi-trader" assisted travel arrangements, it would put traders selling these products in an unjustified competitive disadvantage compared to traders selling independent travel arrangements.

Impact on businesses from third countries: similar effects as PO5 and PO6.

Impact on consumers: This PO would further increase the number of consumers protected by the PTD and would significantly decrease the yearly consumer detriment by €593 million. For combined travel arrangements brought under the scope of the PTD, consumers could face price increases of up to 2%.

Impact on public authorities: similar effects as PO5 and PO6.

Impact on EU budget: similar effects as PO5 and PO6.

Impact on competitiveness: See Annex 7 for detailed analysis.

Social impacts: This PO might have some negative impacts on employment compared to PO5 and PO6 as this option places additional compliance costs on micro enterprises linking to other service providers for purely informative purposes. The impact is not expected to be significant as these companies can cease linking and avoid the compliance costs.

Impact on fundamental rights: similar effects as PO5 and PO6.

96 31 million "multi-trader" travel arrangements and 43.6 million "one-trader" packages *€ 7.5-€9.5 (low and

high estimate of compliance cost per package excluding administrative costs). See Annex 5.

97 37 million "multi-trader" travel arrangements brought under the PTD x € 0.15 = € 4,650,000 (see Annex 5 for

more details). The cost per package estimate (based on option 5) has been used to estimate recurring administrative costs for providing information as it is impossible to determine the exact number of companies which would be responsible for providing particular pieces of information. Under sub-option 1 (contractual liability only on the initial service provider), even though the legal responsibility lies with the initial web page, in practice the detailed information about a specific travel component is likely to be provided by each concerned service provider. Similarly, under sub-option 2 (each service provider responsible for the service they offer), each of the service provider will be responsible for their respective part of the package (e.g. an airline will be responsible for providing information on the time of departure, but not on the classification of accommodation included in the linked travel arrangements).

Environmental impacts: similar effects as PO5 and PO6.

Simplification potential: similar effects as PO5 and PO6.

Stakeholders' views: The industry stakeholders have questioned the feasibility of this option and argued that the inclusion of all "multi-trader" travel arrangements in disproportionately burdensome.

Distribution of impacts by Member States: the same distribution of impacts as under PO5&PO6

6. C OMPARATIVE ASSESSMENT OF POLICY OPTIONS

Comparison of rating vs. objectives

Option 1 (Status Option 2 (Guidelines) Option 3 A (Package Option 3 B- Option 4 (Repeal) Option 5 Modernisation of Option 6 Graduated Option 7 covering all quo) Travel Label)- add "This is not a the Directive and coverage approach "multi-trader" travel

98

on option package" of "one trader" packages arrangements

disclaimer(PO5) add-on

99

option

Objective 1: Without EU action, Unfair competition As consumers Similarly to Whilst not fully This option would This option would Similarly to PO6, this Improve the the regulatory between different increasingly recognise PO3 A (label), eliminating obstacles to contribute to the better further contribute to the option would contribute functioning of the fragmentation would market players is likely that the same label businesses cross-border trade, the functioning of the Internal better functioning of the to the better functioning Internal Market in remain and so would to continue. The applies across the EU, would be able PTD has reduced legal Market in the package travel Internal Market in the of the Internal Market in the package travel the excessive regulatory this option is likely to to compete on fragmentation. sector, eliminating legal package travel sector the package travel sector, sector administrative costs fragmentation will result in fairer fairer grounds Deregulation at EU fragmentation and levelling compared to PO5, eliminating legal

for businesses. With remain. The guidelines competition between as the nonlevel would most likely the playing field for eliminating legal fragmentation. However, the growing might however clarify different market protected again increase legal operators. Some unjustified fragmentation. This by extending the scope to

popularity of the current rules. players and could products fragmentation since MS compliance costs, e.g. option would provide "multi-trader" travel customised travel therefore strengthen without would be able to eliminating special rules for for a more level playing arrangements it would

arrangements, unfair the functioning of the protection maintain and create brochures, will be removed. field for operators than generate disproportionate competition is likely Internal Market. would be rules in an There would be however an PO5. Some unjustified and unfair costs for these

to continue and clearly uncoordinated manner. increase of compliance costs compliance costs would companies, possibly increase. labelled. This would be harmful for new customised travel also be removed. to the Internal Market, arrangements brought under as well as to businesses the scope of the PTD. and consumers.

Reduce costs and 0 0 0/+ 0/+ -- ++ ++ ++ obstacles to crossborder trade in the package travel market

Ensure a more 0 0/+ 0/+ 0/+ - + ++/+++ ++ competitive and fairer level playing field for the businesses operating in the travel market

Reduce unjustified 0 0 -- - (increased + ++ ++ ++ compliance costs administrative

for businesses in costs) (- for compliance costs for (- for compliance costs (-- for compliance costs the package travel new packages brought under for new packages for new customised

market the scope) brought under the travel arrangements brought under the scope

98 The effectiveness of this option would be higher if combined with policy options 5 or 6.

99 Similarly to PO3 A, the effectiveness of this option would be higher if combined with policy options 5 or 6.

Option 1 (Status Option 2 (Guidelines) Option 3 A (Package Option 3 B- Option 4 (Repeal) Option 5 Modernisation of Option 6 Graduated Option 7 covering all quo) Travel Label)- add "This is not a the Directive and coverage approach "multi-trader" travel

98

on option package" of "one trader" packages arrangements

disclaimer(PO5) add-on

99

option

scope) of the PTD.)

Objective 2: Consumers are likely This option may lead The label could reduce "This is not a In the absence of EU As more packages will be Further decrease of Compared to POA, this Achieve a high to purchase more to a reduction of consumer detriment as package" legislation, there is brought under the scope of consumer detriment option would further level of consumer customised travel detriment as the result consumers would be disclaimer is likely to be a significant the PTD, the consumer than in PO5 as more increase the number of protection in the arrangements falling of better able to take informed expected to be decrease in the number detriment will decrease. travel arrangements consumer protected by package travel outside the scope of implementation of the decisions. However, more effective of protected consumers Consumers would also would be brought under the PTD and would market, the PTD in future. PTD by businesses and the amount of this in reducing the and an increase in benefit from clarification of the scope. Moreover, significantly decrease the

This might further MS. However, as reduction would not consumer consumer detriment. certain rules. consumers would consumer detriment. deteriorate the guidelines per off-set costs incurred detriment than benefit from clarity and consumer definition are not a by businesses for the PO3A as a transparency avoiding understanding of the binding tool, these implementation. negative confusion as to whether applicable protection benefits will depend on information a customised travel rules and result in an the actual use by might warn arrangement is increase of consumer national authorities. consumer who protected or not. detriment. otherwise might purchase unprotected travel under the wrong impression that they are protected

Reduce consumer 0 0 0/+ + -- +/++ ++/+++ +++ detriment and increase transparency for travellers who buy combinations of travel services currently not covered by the PTD by addressing new market developments;

Option 1 (Status Option 2 (Guidelines) Option 3 A (Package Option 3 B- Option 4 (Repeal) Option 5 Modernisation of Option 6 Graduated Option 7 covering all quo) Travel Label)- add "This is not a the Directive and coverage approach "multi-trader" travel

98

on option package" of "one trader" packages arrangements

disclaimer(PO5) add-on

99

option

Reduce consumer 0 0 0/+ 0/+ -- ++ ++ ++ detriment

stemming from unclear and

outdated provisions.

Comparison of cost and benefits for businesses and consumers

Option 1 Option 2 Option 3 A Option 3 B- "This is Option 4 (Repeal) Option 5 (covering "one Option 6 Graduated approach Option 7 (cover all (Status quo) (Guidelines) (Package Travel not a package" trader" packages) "multi-trader" travel

Label)- add-on disclaimeradd-on arrangements) option option

Compliance Additional compliance cost for the

costs for industry of €528-€654million annually 102

businesses See administrative costs. if the market structure remains

€1.6-€2.4 See administrative Additional compliance costs of unchanged.

billion 100 ) No change costs. In theory, no costs €335-€424 million annually 101 Additional yearly estimated compliance

costs of at €386-€444 million annually if

businesses adapt their business models. 103

Administrative Additional The administrative burden Some additional administrative costs for Some additional

costs Additional costs of €409 million administrative costs of In theory, no costs; decrease by €390 million € 75/16 million businesses brought under the scope of the administrative costs for

105

+ €26 €500 per company potentially annually (due to the removal one-off and €58/26 PTD -€2.8millionannually businesses brought million for No change (with maximum total significant increase of the brochure requirement). under the scope of the million recurring

cross-border cost of €35million in administrative Elimination of administrative

Additional one-off administrative costs PTD compared to PO5:

costs.

trade depending on the policy costs for crosscosts for cross-border trade € of €17 million (€500 per company) 106 to €5,6 million 107

option. 104 border trade 26million (€ 5 million display "This is not a package annually). disclaimer"

100 €10.5-€12.5 per package x 162 million packages (i.e. 118 million pre-arranged packages+ an assumed 50% of the "one-trader" packages being already covered by the PTD).

101

 Low-€7.5 and high-€9.5 estimate of compliance costs per package, assuming that 50% of one-trader packages are already covered by the current PTD. See also assessment of PO5.

102

Low and high estimate of compliance cost *€ 7.5-€9.5 per package and cost of insolvency protection €3 for "multi-trader" assisted travel arrangements. See also assessment of PO6.

103

 Compliance costs of PO6 calculated above minus reduced costs by €4.5-€6.5 for 25% of "one-trader" packages and 50% of "multi-trader" packages See also assessment of PO6.

104 36,000 companies selling "one-trader" packages and 34,000 companies selling "multi-trader" travel arrangements See assessment of option 3.

105

  "multi-trader" packages * €0,15 administrative cost.

106

 See assessment of option 6.

107

 All "multi-trader" travel arrangements x €0,15 administrative cost.

Option 1 Option 2 Option 3 A Option 3 B- "This is Option 4 (Repeal) Option 5 (covering "one Option 6 Graduated approach Option 7 (cover all (Status quo) (Guidelines) (Package Travel not a package" trader" packages) "multi-trader" travel

Label)- add-on disclaimeradd-on arrangements) option option

Consumer Reduction of detriment The yearly consumer detriment could be .The yearly reduction of (traveller) expected to be higher The level of detriment would estimated to decrease by €508 million. consumer detriment

detriment Small reduction of than in sub-option 3A.

€1 billion No change consumer detriment Increase in consumer

decrease by €348 million if However if some traders adapt their estimated at €593

(€ 3 million per detriment 50% of one-trader packages business models not to sell packages the million.

111 .

year) 108 . are newly brought under the total reduction of yearly consumer 109 scope of the PTD. . detriment could be estimated at €430

110.

million.

108

 Based on data from a behavioural study. See assessment of option 3.

109 See assessment of option 5 for details.

110

 See assessment of option 6 for details.

111

 See assessment of option 7 for details.

6.1 Preferred Policy option

Option 6 "graduated approach", including sub-option 3B, has a number of advantages over other POs. Indeed, it meets the stated policy objectives as it would level the playing field whilst ensuring that compliance costs will be reasonable for the new players falling under its revised scope. This option also provides for a lighter regime that would be particularly beneficial for SMEs and micro-enterprises, which might find it difficult to assume liability for the performance of different services included in the travel combination. For consumers, PO6 would bring a significant reduction of consumer detriment due to the widening of its scope, ensuring insolvency protection for all types of combined travel arrangements, clarification of certain outdated and unclear rules of the current Directive and increased transparency of the information provided to consumers. It achieves a fair balance between business and consumer interests by tackling only those situations where there are concrete elements indicating to the consumer that he/she is purchasing a package, while applying a "lighter regime" with only some PTD requirements (insolvency protection and information obligations) to situations where the link between the offered services is less prominent.

7. M ONITORING AND EVALUATION

The monitoring and evaluation process should focus on the three specific objectives determined by the problem definition. Concerning the reduction of obstacles to cross-border trade in the package travel market, the focus should be on:

Increase in cross-border trade in the package travel market;

Concerning the establishment of a level playing field for the businesses operating in the travel market, the focus should be on: costs for businesses and competitiveness of the package travel market, including an active debate with business stakeholders, e.g., a panel of traders established to review the costs and competitiveness of the package travel market. Concerning costs for businesses and detriment for consumers stemming from unclear and outdated rules:

Costs for businesses, including an active debate with business stakeholders, Number of consumer complaints concerning the identified problems as submitted to the national consumer organisations and ECC-net. Concerning the reduction of consumer detriment and making consumers aware of the applicable rules, focus should be on: increase in the number of consumers protected when going on holidays; increased consumer awareness of the applicable protection rules when purchasing package holidays; decrease in the number of consumers experiencing problems for different types of travel arrangements;

The following tools could be used to gather the necessary evidence and evaluate the proposal:

• Monitoring the proper transposition of the Directive by Member States;

• Consultation of stakeholders to review the costs and competitiveness of the package

travel market;

• Preparation of a Eurobarometer study on tourism and consumer protection; • Monitoring consumer complaints submitted through ECC-Net and national consumer

organisations. A report on the application of the Directive should be submitted to the European Parliament and the Council no later than five years after the transposition deadline.

ANNEX 1

T HE MAIN REQUIREMENTS OF THE P ACKAGE T RAVEL D IRECTIVE

The Directive protects the interests of consumers buying a package holiday by defining a range of the organiser’s and retailer’s duties and obligations and some specific consumer rights. Below is the summary of the key provisions. They all represent minimum consumer rights, and EU countries have been free to add more stringent rules to protect consumers in their national laws.

1. Information requirements

The organiser/retailer is obliged to provide the consumer with information at the following steps of the contractual relationship: before the contract is concluded, in the contract itself and before departure.

The Directive also contains special requirements for brochures.

If a brochure is made available to the consumer, it must not be misleading and must contain clear, comprehensible and accurate information on:

(a) price;

(b) destination;

(c) transport: means of transport, type, and category;

(d) accommodation: its type, location, category, degree of comfort; its main features, its approval and tourist classification;

(e) meal plan;

(d) itinerary;

(e) passport and visa requirements as well as health formalities;

(f) details of the payment schedule;

(g) whether a minimum number of people is required for the package to take place and, if so, the deadline for informing the consumer in the event of cancellation.

The details contained in the brochure are binding on the organizer (or retailer, as the case may be), unless the consumer was clearly informed of any changes before signing the contract (this must then be clearly stated in the brochure) or if the changes were agreed between the two parties later.

In addition, the consumer must be informed about the following in good time before the start of the journey:

(h) the times and places of intermediate stops and transport connections, and details of the place to be occupied by the traveller, e.g. cabin or berth on a ship, a sleeper compartment on a train;

(i) contact details of the local representative or a local agency which can provide assistance; when these do not exist, at least an emergency phone number or other means to contact the organiser or retailer when in difficulty;

(j) information on optional insurance to cover the cost of cancellation by the consumer or the cost of assistance, including repatriation, in the event of accident or illness.

Furthermore, the contract must contain at least the following as long as relevant for the particular package:

 (a) the travel destination(s) and, where periods of stay are involved, the relevant periods, with dates;

(b) the means, characteristics and categories of transport to be used, the dates, times and points of departure and return;

(c) where the package includes accommodation, its location, its tourist category or degree of comfort, its main features, its compliance with the rules of the host Member State concerned and the meal plan;

(d) whether a minimum number of persons is required for the package to take place and, if so,

the deadline for informing 112 the consumer in the event of cancellation;

(e) the itinerary;

(f) visits, excursions or other services which are included in the total price agreed for the package;

(g) the name and address of the organiser, the retailer and, where appropriate, the insurer;

(h) the price of the package, an indication of the possibility of price revisions under Article 4(4) and an indication of any dues, taxes or fees chargeable for certain services (landing, embarkation or disembarkation fees at ports and airports, tourist taxes) where such costs are not included in the package;

(i) the payment schedule and method of payment;

(j) special requirements which the consumer has communicated to the organiser or retailer when making the booking, and which both have accepted;

 (k) periods within which the consumer must make any complaint concerning failure to perform or improper performance of the contract

The terms of the contract must be communicated to the consumer before the conclusion of the contract. The consumer must also receive a copy of the contract.

112 Limitation to deadline.

2. Binding prices

The price of the package agreed in the contract is binding, with some limited exceptions 113 .

Price increase is only possible if the contract expressly provides for it and states precisely how the revised price is to be calculated, and is only allowed for the revision in limited situations due to variations in: (a) transportation costs (including fuel costs), (b) taxes and fees, such as airport taxes, and (c) currency exchange rates on which the price of the package is based.

No price increase is allowed during the last 20 days before departure.

3. Right to transfer the package

Where the consumer is prevented from proceeding with the package, s/he may transfer his/her booking. The transferor of the package and the transferee will be jointly and severally liable to the organiser or retailer party to the contract for payment of the balance due and for any additional costs arising from such transfer.

4. Cancellation or change of contract terms

If any of the essential elements of the package (such as the price) agreed in the contract is significantly changed or if the organiser cancels the package, the consumer has the right to withdraw from the contract and get a full refund. Alternatively, s/he may accept a substitute package. If the substitute is of lower quality than the original one, s/he is entitled to receive the price difference. If the package is cancelled by the organiser, the consumer may also have the right for compensation in addition to the full refund (with some exceptions, e.g. if the package was cancelled due to a force majeure situation).

5. The organiser's responsibility and complaint handling

The organiser and/or retailer is liable for damages if the contract is not properly performed (with some exceptions, e.g. if the reason for the improper performance is caused by a force majeure situation). They are also required to provide prompt assistance if the consumer is in difficulty, even though it is a force majeure situation or the problem is caused by a third party not connected to the package.

Consumers are entitled to compensation for damages if the contract is not performed properly (though the amount of the compensation can be limited by international conventions and to some extent by national laws). The rule on liability, Article 5, is to be interpreted as

conferring, in principle, a right also for compensation for non material damages 114 . A

consumer is not entitled to compensation for damages in certain situations, e.g. if the reason for the improper performance is caused by himself or a force majeure situation. If the service

113 See Article 4 (4).

114 C168/00 (Simone Leitner).

offered on the spot does not correspond to what was agreed in the contract, the consumer must make a complaint as soon as possible. The organiser (or their local representative) must try promptly to find a satisfactory solution. Where, after departure, a significant proportion of the services is not or will not be provided, the organiser must make suitable alternative arrangements to the consumer, at no extra cost, for the continuation of the package. If there is a difference between the services contracted for and those supplied, the consumer is entitled to compensation. In cases where it is impossible to make such alternative arrangements (or these are not accepted by the consumer for good reasons) the organiser shall, where appropriate, provide the consumer, at no extra cost, with equivalent transport back to the place of departure (or to another return-point to which the consumer has agreed) and shall, where appropriate, compensate the consumer.

6. Insolvency protection

The organiser and/or retailer must provide sufficient evidence of security for the refund of the money paid and for the repatriation of the consumers in the event of insolvency of the organiser. This means that the consumer must be fully protected against loss of money and in the event the insolvency occurs while on holiday that he is repatriated.

ANNEX 2

1. Problem definition-data tables and graphs

Figure 1 Travel and tourism economic impact

2011 Key Facts

GDP: Direct Contribution

The direct contribution of Travel & Tourism to EU GDP is expected to be €356 bn (2.9% of total GDP) in 2011, rising by 2.9% per year to €474 bn (3.1%) in 2021 (in constant 2011 prices).

GDP: Total Contribution

The total contribution of Travel & Tourism to EU GDP, including its wider economic impacts, is forecast to rise by 2.4% per year from €960 bn (7.8% of GDP) in 2011 to €1215bn (8.1%) by 2021.

Employment: Direct Contribution

Travel & Tourism is expected to support directly 7,062,000 jobs (3.2% of total employment) in 2011, rising by 1.5% per year to 8,218,000 jobs (3.7%) by 2021.

Employment: Total Contribution

The total contribution of Travel & Tourism to employment, including jobs indirectly supported by the industry, is forecast to rise by 0.9% per year from 18,382,000 jobs (8.4% of total employment) in 2011 to 20,066,000 jobs (8.9%) by 2021.

Source: World Travel & Tourism Council, Travel and tourism economic impact, 2011

Figure 2 Trends in overall online travel market size - Europe 1998-2008 with projections to 2009

Year Market (€ billion) Internet sales (€ billion) Internet sales (% of the market)

1998 200 0.2 0.10%

1999 212 0.8 0.40%

2000 227 2.5 1.10% 2001 223 5 2.30%

2002 221 8.9 4.00%

2003 215 14 6.50%

2004 220 21.2 9.60%

2005 235 30.4 12.90%

2006 247 40.3 16.30%

2007 254 49.8 19.60%

2008 260 58.4 22.50%

2009 254 65.2 25.70%

Source: Carl H. Marcussen, Trends in European Internet distribution of travel and tourism services, Centre for Regional and Tourism Research, Denmark, updated 23 March 2009 Figure 3 Geographic status for the European online travel market 2008

UK 30%

Germany 18%

France 14%

Nordic 11%

Middle 10%

Southern 14%

Eastern Europe12 new Member States 3%

0% 5% 10% 15% 20% 25% 30% 35%

Source: Source: Carl H. Marcussen, Trends in European Internet distribution of travel and tourism services, Centre for Regional and Tourism Research, Denmark, updated 23 March 2009. Nordic: Denmark, Finland, Iceland, Sweden, Norway; Middle: Belgium, Netherlands, Luxembourg, Switzerland, Austria, and Ireland; Southern: Italy, Spain, Portugal, and Greece.

Figure 4 Evolution of Low Cost Carriers capacity on intra European routes

Source: OAG FACTS Executive Summary June 2011, http://www.oagaviation.com/OAG- FACTS-June-2011-Executive-Summary

Figure 5 Incidence of use of combined travel arrangements in the population within the last 2 years

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

United Kingdom 20% Greece 20% Ireland 46% Finland 20% Sweden 44%

Denmark 26% Germany 24%

Austria 25% Netherlands 26%

France 22% Spain 19%

Italy 36% Czech Republic 12%

Poland 19% Slovenia 42% Bulgaria 8%

Hungary 19% EU-17 24% EU-27 23%

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009

Figure 6 Percentage of holidays protected by PTD and additional MS provisions

80%

70%

60%

50% UK

40% FI

SE

30% DK

20% NL

10%

0%

2003 2004 2005 2006 2007 2008

Source: TUI, estimates provided on the request of the Commission

Figure 7 Estimated gross personal detriment for combined travel arrangements Figure 8 Estimated net personal detriment for combined travel arrangements (i.e. gross detriment minus compensation)

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009

Figure 9 Methodology for the estimation of personal detriment

Gross personal detriment in sample =

Gross personal detriment per problem x Total number of problems in sample

where

Gross personal detriment per problem =

     Average cost of problem + average time spent complaining x value of time

Total number of problems in sample =

     Number of respondents in sample with problems x

                     Average number of problems experienced by individuals with problems

Net personal detriment in sample =

Gross personal detriment in sample – Compensation in sample

where

Compensation in sample = Total number of problems in sample x

      Share of respondents with problems who received compensation x

      Average value of compensation received

Annual personal detriment in population =

Personal detriment in sample/ share of households surveyed/ 2 years

where

Share of household surveys=

Number of participating interviewees above 15 years/

(Population/ average household size)

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009 Figure 10 Incidence of problems with combined travel arrangements in the last 2 years by number of problems

0 2 4 6 8 Percentage

1 time 2 times 3 times 4 times >4 times Don't know

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009

Figure 11 Availability of assistance by type of presentation – weighted average for EU-17

Redirected 40.7 59.3

One Website 59.8 40.2

Not at same time 38.7 61.3

0 20 40 60 80 100 Percentage

Assistance No assistance

Source: Study on Consumer Detriment in the area of Dynamic Packages, The European Commission Health and Consumers DG, prepared by London Economics, November 2009

Figure 12 Gross detriment per problem by type of travel arrangements

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009

Figure 13 Incidence of problems by type of travel arrangements (number of trips with problems per 100 trips)

Source: Study on Consumer detriment in the area of dynamic packages, The European Commission, Health and Consumers DG, prepared by London Economics, November 2009

2. Estimation of the travel market segments

Estimation of the pre-arranged packages segment

This estimation relies on data from Eurobarometer 328 (Q10) which provides data on how EU citizens organised their main holiday trips in 2010 distinguishing four categories of trips.

Figure 14

How respondents organised their main holiday trip in 2010

7% 10%

13%

57%

14%

travel organised individually travel booked through a travel agency

package tour booked via Internet package tour booked trhough a travel agency

other

Source: Flash Eurobarometer 328, 2011

We assume that the purchase habits of consumers remain unchanged and even if citizens take 2-3 holidays per year, they purchase it the same way as they do for their "main" holidays. These statistics do not correspond directly with the market segments of interest for the present study. However, some analysis can be made in relation to whether certain arrangements fall under the scope of the PTD and to which market segments certain categories could be assigned.

PTD protected/ PTD not Study category protected

Travel or accommodation organised individually Unprotected - independent travel arrangements

• - 

  "multi-trader" travel

arrangements

• - 

  "one-trader" travel

arrangements

Travel or accommodation booked through a travel Protected or unprotected - independent travel agency arrangements

-"one-trader" travel package

Package tour or all inclusive holiday booked via Protected - pre-arranged packages

Internet

Package tour or all inclusive holiday booked Protected - pre-arranged packages through a travel agency

Other and no answer Unprotected - independent travel arrangements

• - 

  "multi-trader" travel arrangements

Based on the chart above, it can be assumed that on an EU average pre-arranged packages account for 23% of the holiday trips (package tour/ all inclusive holiday booked via Internet (13%) + package tour/ all inclusive holiday booked through a travel agency (10%)).

Estimation of the combined travel arrangements segment

According to the Consumer Detriment Study 115 , 23% of EU citizens purchased combined

travel arrangements in the last two years. Given the lack of other sources of data concerning these travel arrangements, we assume that this figure can be an approximation of the shares of combined travel arrangements. Based on this study it can be also estimated that "multi-trader" travel arrangements account for 25% of the total number of combined travel arrangements and therefore for 6% of the holiday trips (25% x 23% = 5,75%) sold annually. Furthermore, based on empirical data observations, it is assumed that, at present around 50% of "multi-trader" travel arrangements are sold in a similar manner as package travel and fall under the category of "multi-trader" packages.

Estimation of the market segments

Based on the above estimation of shares of combined travel arrangements and pre-arranged packages, the market structure would be as follows:

Figure 15: Travel Market Structure

Source: Own estimates based on Flash Eurobarometer 328 and Study on Consumer Detriment in the area of dynamic packages.

115 http://ec.europa.eu/consumers/rights/docs/study_consumer_detriment_dyna_packages_en.pdf.

Estimation of the total volume of the market

In 2010, EU27 residents (excluding Malta) made 1.0 billion holiday trips, of which more than three-quarters were domestic trips, within the country of residence, and around one quarter were outbound trips outside the country of residence. Considering the duration of these trips, as would be expected domestic holiday trips are mainly of short duration, lasting 1 to 3 nights,

and outbound trips are more often long trips of 4 nights and more. 116

We can assume that short domestic trips are not a substitute to packages and exclude them from the total market estimate. We would get the estimate of the total market of 513 million trips.

Market segment % share Number of trips (millions)

Pre-arranged packages 23% 118

"One-trader" packages 17% 87

"Multi-trader" travel 6% 31 arrangements

Independent travel 54% 277 arrangements

ECTAA 117 estimated that 170 Millions packages are covered by the PTD (covering prearranged

 packages and some of "one-trader" packages). As it has been estimated, between 25%-75% of "one-trader" packages comply with the PTD. This would mean that, according to the estimates presented in the table above, between 140 and 183 million packages are compliant with the PTD which is in line (concerning the highest estimates) with the estimates of ECTAA.

Business trips

In 2010, business trips were 172 million. 118 This data relates to the EU-27 without Belgium,

Estonia, Cyprus, Malta, the Netherlands and Slovenia. We can assume henceforth that, in the EU-27, business trips are about 200 million. They split as in the following table:

116 http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-27092011-AP/EN/4-27092011-AP-EN.PDF.

117 European Travel Agents and Tour Operators Association, estimates provided on the request of the

Commission.

118 Eurostat business trips by duration, 2010.

Number of business trips (in thousands) Share by type of trip (%)

Domestic Outbound Domestic Outbound business trips business trips

All Short Long Short Long business trips

EU27 200 000 152 400 47 600 60 17 14 9

60% of these trips are domestic and with short duration. The remaining 40%, i.e. 80 million of trips, could be eligible to be purchased as a travel package.

It is nonetheless very unlikely that business trips can be booked as a pre-arranged package travel, as businessmen have a very precise schedule to respect and solutions need to be tailormade. Guild of European Business Travel Agents estimates that 80%-85% of business trips

(64-68 million trips) 119 are arranged by travel management companies (TMCs) 120 .As there is a

direct and bilateral relationship between TMC and its business customers, it is assumed that the business trips arranged by TMCs most likely fall in the category of "one-trader" packages or independent travel arrangements.

Concerning the typology of trips, it is reasonable to assume maintaining the same ratio as for holiday's trips among "one-trader" packages, "multi-trader" travel arrangements and independent travel arrangements (i.e. 17 – 6 – 54), in a way they add to 100% (i.e. 22 – 8 - 70). As indicated above, TMCs are unlikely to sell "multi-trader" travel arrangements. In order to estimate number of business trips arranged by TMCs the same ratio of independent travel arrangements and "one-trader" packages is applied. The results of this assumption are shown in the following table.

Market segment % share Number of business Number of business trips (millions) trips arranged by TMCs (millions)

"One-trader" 22% 18 16 packages

"Multi-trader" 8% 6 0 travel arrangements

119 In the assessment of options, an estimate of 66 million business trips annually is taken forward

120 Travel agencies which are specialised in providing services for corporate clients

Independent travel 70% 56 50 arrangements

TOTAL 100% 80 66

3. Overview of applicable legislation and rights

Product Single services Packages

Accommodati Car Transport Other PTD Revised

on rental tourists PTD

Air Rail Bus, Waterbor services coaches ne (e.g.

transport excursion s, events)

Specific/sector No, only if part No, Regulatio Regulatio 181/2011 Regulation No, only Directiv n/a al EU of a package only if n n 1177/2010 if part of a e

legislation part of 261/2004 1371/2007 (into force (into force package 90/314

applies? a

packag in March

in

e 2013)

December 2012)

Information requirements:

-In horizontal EU Yes (UCPD; Yes Yes Yes Yes Yes (UCPD, Yes Yes, Yes,

legislation 121 CRD for online (UCPD, (UCPD, (UCPD, (UCPD, Art. 8 (2) (UCPD, UCPD, UCPD,

sales) CRD for Art. Art. 8 (2) Art. 8 (2) CRD on CRD for online 8(2)CRD CRD on CRD on internet cost online

sales) on internet internet cost internet cost traps for sales) cost traps traps for traps for online sales)

for online online online sales) sales) sales)

-In No No Yes Yes Yes Yes No Yes, Possible sectoral/specific (including PTD

EU legislation ASR 122

Article 23)

Contractual liability:

• - 

  for non No, only national No, only Yes, via Standardise Standardise Standardised No, only Yes Possible

performance 123 contract law national the d d compensatio national

contract Montreal compensati compensati n scheme contract law convention on scheme on scheme law

121 The CRD will be applicable as of 13 June 2014 for single services (and not for package travels falling under

the PTD). Up to this date, the following directives apply: the Distance Selling Directive 97/7/EC i with general information requirements; the Doorstep Selling Directive 85/577/EEC i with information requirements on the particulars of the contract and the right of withdrawal

122 Air Services Regulation 1008/2008 i

123 Until 13 June 2014, Art. 7 (2) of the Distance Selling Directive continues to apply. It requests that the trader

informs the consumer if the service is unavailable and provides for a right to reimbursement as soon as possible and the latest within thirty days.

• - 

  denied boarding n/a n/a yes No, (only Yes No, n/a yes Possible national

  contract law)

-cancellations No, only national No, only yes Yes Yes Yes No, only yes Possible contract law national national

contract contract law law

-delays n/a n/a yes Yes Yes Yes n/a yes Possible

• - 

  lost luggage No, only national No, only yes yes Yes No No, only yes Possible contract law national national

  contract contract law law

• - 

  personal injury No, only national No, only yes yes yes yes No, only yes Possible contract law/tort national national

  law tort law tort law

Insolvency No No No No No No No yes Possible protection

Unfair contract Yes (UCTD; Art. Yes Yes Yes Yes Yes (UCTD; Yes Yes Yes terms 19,21,22 CRD) (UCTD, (UCTD, (UCTD; (UCTD, Art. 19,21 (UCTD; (UCTD) (UCTD)

Art. Art. 19,21 Art. 19, 21 Art. 19, 21 CRD) Art. 19, 21 19,21,22 CRD) CRD) CRD) CRD) CRD)

Misleading/ Yes (UCPD) Yes Yes Yes Yes Yes (UCPD) Yes Yes Yes unfair (UCPD) (UCPD) (UCPD) (UCPD) (UCPD) (UCPD) (UCPD) commercial practises

Withdrawal No No No No No No No No Possible

right 124 with a

limited withdrawal right, e.g. for breach of informatio n requiremen ts

Apply to B2B None of the EU None of Yes Yes Yes Yes None of the Yes Possible contracts legislation apply, the EU EU

only national legislatio legislation contract law n apply, apply, only only national national contract contract law law

4. Gaps in the current legal framework for packages

Legal CRD UCPD PASSENGER SERVICES Comment requirements RIGHTS DIRECTIVE

REGULATION

124 For single services under the conditions set out in Art. 16 (1) of the CRD. Until 13 June 2014, the Doorstep

Selling Directive continues to apply; it provides for a right of withdrawal.

Pre-contractual Does not Applies, but is Some information Applies, but is GAP 125

information apply not targeted requirements, but not targeted towards travel limited to the towards travel relevant transport element relevant

information information

Rules on Does not Applies Some limited rules Only very No gap marketing of apply relating to the limited general packages transport element, rules

e.g. Air services Directive article 23

Rules on Does not No Some limited rules Only very GAP 126

content of apply requirements relating to the limited general

contract transport element, rules, e.g. non Unfair clauses is e.g. Air services discrimination governed by the Directive article 23 etc. Directive on Unfair

Contract Terms

Rules on Does not No rules Rules relating to No rules GAP cancellations apply the transport before element departure

Rules on Does not No rules No rules No rules GAP transfer of apply bookings

Rules on Does not No rules Rules only relating No rules GAP remedies if apply to the transport something goes element wrong

Rules on Does not No Rules only relating No GAP liability for apply requirements to the transport requirements damages element

Rules relating Does not No Rules only relating No GAP to force apply requirements to the transport requirements majeure element situations

Rules on Does not No No direct No GAP insolvency apply requirements requirements requirements protection protecting

consumers in the event of insolvency

125 E.g no rules on: itinerary, intermediate stops, rating under hotel classification system, if a minimum number

of persons are required for the package to take place, health and visa requirements, meal plans, etc.

126 E.g. no rules on cancellation or termination rights, special requirements of the traveller which the organiser

has accepted, name of the entity providing the insolvency protection and its contact details, the minimum number of persons are required for the package to take place, etc.

ANNEX 3

S PECIFIC PROBLEMS WITH THE PACKAGE TRAVEL DIRECTIVE

S COPE AND DEFINITIONS

The scope of the Directive is closely related to the definitions in the Directive, especially the definitions of "package", "organiser" and "consumer" in Article 2(1), (2), and (4).

The overwhelming majority of stakeholders in the public consultation considered the clarification/ updating of definitions as well as a clarification/extension of the scope as important.

1.1. Definition of "package"

The definition of the term "package" is of particular importance for the Directive’s scope.

The current description of what falls within the definition does not fully take the reality of today's travel market into account.

This includes, in particular, the growing popularity of the so-called "combined travel arrangements" ("tailor-made"), where different travel services are combined at the demand of the consumer and are sold to a large extent over the Internet.

In the Club Tour-case 127 the CJEU clarified that the combination of tourist services carried

out by a travel agency to the specific requests of the consumer up to the moment of conclusion of the contract is covered by the Directive. In this respect the term "pre-arranged", which is currently included in the definition, seems superfluous and can create unnecessary confusion.

The main problem in practice has been to adapt the current definition of a "package" to new purchasing methods, notably to the "combined travel arrangements", especially in the on-line environment.

Whether the product is under the scope will depend on a rather complex case-by-case

assessment 128 .

Furthermore, it is often unclear to the consumer that different levels of protection apply for more or less equivalent travel arrangements, depending on how they are sold. In addition, the transposition of the Directive and the corresponding interpretation varies in the Member States.

127 C-400/00.

128 See also the related point in 1.3 concerning the definition of the "organiser".

This leads to a different scope of protection granted within the Internal Market and affects competition and consumer protection.

The public consultation confirmed that both business and consumer stakeholders have problems in distinguishing which travel arrangements fall under the definition of a "package".

Table 1: Interpretation of the term "package" in different Member States

Cover one shop

MEMBER travel package Covers one-shop

STATE sold in the high travel packages

Covers multi-shop Covers B2B

street sold on-line*

travel arrangements* contracts

AUSTRIA x x x

BELGIUM x x x

BULGARIA x x x

CYPRUS x

CZECH x x x REPUBLIC

GERMANY x x If the product is x perceived as a package

DENMARK x x x

ESTONIA x x Partly, as "legal persons" are

outside the scope

FINLAND Only in cases where Only in cases where x services are not services are not

available separately available separately

FRANCE x x x

GREECE x x

HUNGARY x X x

ITALY Unclear reply In theory, but no x

case-law yet

LITHUANIA x x X

LUXEMBOURG x x x

LATVIA x x In theory, but no case x law yet

POLAND x x x

MALTA x x

PORTUGAL Unclear reply Unclear reply

SWEDEN x x x

SLOVENIA

SLOVAKIA Unclear reply

UNITED x Only in some cases, Only some (Flight x KINGDOM following the results plus – insolvency

of court decisions. protection)

THE x x x NETHERLANDS

SPAIN x

ROMANIA

(no reply)

IRELAND

(no reply) Source: Member States' replies to questionnaires as a preparation to Member States' Workshop 5 June 2012, according to which the coverage appears to depend on a case by case assessment.

In the Member States, there are currently significant differences in the definitions and interpretation of the Directive's term "package". Some Member States have, for instance, broadened the definition of a "package" and covered, e.g., travel products containing only one element, trips of less than 24 hours or without overnight accommodation. A few Member States have not included the requirement of other tourist services to account for "a significant

proportion" of the package 129 . Other EEA states, such as Sweden and Norway, have also

incorporated travel products that significantly resemble travel packages. Germany found another solution whereby the consumer's perception of what he is offered (whether it is a package) plays a role when determining if a product is within the scope of the national package travel law.

Another expression used in the definition of a 'package' that has created confusion is "other tourist services not ancillary to transport and accommodation and accounting for a significant proportion of the package".

Some stakeholders have asked for a clarification of "significant proportion", possibly by expressing the concept explicitly, e.g. in a percentage of the value of the package. Additionally, it is neither indicated nor explained what kind of services could be regarded as

"other tourist services", which might also cause confusion or litigation 130 .

Cruises are a special case of a package holiday, since the maritime transport service coincide with the accommodation. Thus, it would be useful to remove any remaining doubt and clarify

that cruises are within the scope of the Directive 131 .

Similarly, we find that transportation which includes accommodation, e.g. overnight ship/train trips which include accommodation, causes difficulties in determining whether it falls under

the definition of a "package" 132 . In this “grey zone” area; it can be unclear if it should be

considered to be a combination of transport and accommodation services, creating problems for both consumers and traders as to whether products are falling within the scope, including whether such products should have protection against bankruptcy.

1.2. Definition of "consumer"

The Directive defines the consumer as "the person who takes or agrees to take the package (”the principal contractor”), or any person on whose behalf the principal contractor agrees to purchase the package (”the other beneficiaries”) or any person to whom the principal contractor or any of the other beneficiaries transfers the package (“the transferee”)". Consequently, the definition of "consumer" in the Directive is significantly broader than the definition of consumer in the rest of the Consumer Acquis, since there is not a requirement

129 The Consumer Law Compendium, page 243.

130 E.g. see reference for a preliminary ruling, pending Case C-32/10 (Semerdzhiev) and judgement in C-237/97

AFS Intercultural Programs Finland.

131 See also Case C-585/08 Pammer.

132 Case C-585/08 Pammer.

that the consumer is acting for purposes which are outside his trade, business, craft or profession. However, this solution is in line with other EU transport legislation where the

"passenger" 133 is the protected party, irrespective of the purpose of the travels. The problem in

defining the consumer in this way is that the term "consumer" does not fit with what the definition actually includes.

1.3. Definitions of "retailer" and "organiser"

The notion of "retailer" and "organiser" is not in line with the definition of a "trader" or a "seller" and similar terms describing professional parties in the Consumer Acquis. While it is required elsewhere that a trader/seller is acting for purposes relating to his trade, business, craft or profession, such a requirement is absent in the Directive. The existing definitions of "retailer" and "organiser" therefore also include private persons. This means that, under certain circumstances, consumer-to-consumer contracts (C2C) come under the scope of the Directive. Thus, the rules which are created on the basis that there is an imbalance between the contractual strength of the two parties (consumer and trader) do not fit in C2C cases.

In the increasing trend of offering customised/combined travel arrangements, suppliers do not necessarily offer contracts for different travel services in their own name. This has created legal grey zones, where both businesses and consumers are often uncertain as to whether such packages are covered by the PTD and whom is liable for the performance of the contracts. The coverage has, as indicated above, to be determined on a case-by-case basis and will often lead to complex judicial decisions and court proceedings, both in determining if the components qualify as a package and whether the seller qualifies as an "organiser" of the

package. In several recent national court cases 134 , the courts have not considered sellers of

combined travel arrangements as "organisers" when they have been offering several travel components in a combination, but not in their own name ("one-shop" travel packages). This has led to an increasing number of customised combined travel arrangements not being considered as under the scope of the Directive, resulting in fewer consumers going on holiday being protected and creating an un-level playing field for the traders selling packages.

I NFORMATION REQUIREMENTS

The Directive contains several obligations to provide information for the professional party(ies) to the contract. Article 3 and 4 prescribe the minimum information that must be given to the consumer at different stages in the conclusion of a contract, including mandatory rules on what should be included in a brochure that is made available to consumers. The general feedback from stakeholders is that the current information requirements work rather well. However, some problematic issues are explained below.

133 E.g. Regulation 2004/261(air passenger's rights) and Regulation (EC) No 1371/2007 i of the European

Parliament and of the Council of 23 October 2007 on rail passengers’ rights and obligations.

134 E.g., CAA vs Travel Republic (UK), BGH Judgement of 30. September 2010 – Xa ZR 130/08 (DE),

Judgement of 11 June 2010 Erste Kammer, 08/04611, SGR vs ANVR (NL).

Requirements for the brochure

According to the current rules, if a brochure is made available for the consumer, it must contain prices and other information, such as about the itinerary, the meal plan, the destination and the means, characteristics and categories of transport used. The particulars in the brochure are, as a general rule, binding on the organiser/retailer, including the mentioned prices. These rules have led to businesses complaining that they may be forced to reprint the brochures in cases of changes in prices, accommodation, etc., which they consider to be very costly and unnecessary, since the consumer always would be able to get the updated price before he concludes a contract.

Furthermore, they have complained that this rule indirectly makes prices for packages less dynamic and flexible, which they see as a competitive disadvantage compared to companies selling travel products falling outside the scope of the Directive.

How to provide the required information

The formal requirements for the pre-contractual information in Article 4(1) a) are unclear, as the Directive uses the wording "in writing or any other appropriate form" and thereby leaves it open to interpretation what should be considered as "appropriate". The same problem occurs if the information has to be provided before the start of the journey as described in Article 4(1) b). Even the formal requirements for the information to be provided in the contract (see Article 4(2)) are unclear as the requirement is: “in writing or such other form as is comprehensible and accessible to the consumer”. However, according to the same provision, the consumer is entitled to receive a “copy of these terms”, which normally in practice implies that the consumer receives a paper copy of the contract. As a result, the way in which information has to be provided is transposed or interpreted differently across the Member

States 135 creating a legal framework with national difference that can make it more difficult

and cumbersome for traders to provide services in several Member States.

Furthermore, instead of communicating in writing by post, consumers and professionals may nowadays prefer other means of communication, such as e-mails, and in the Member states it can be unclear whether this should be considered to be in "an appropriate form". There is no reference to "durable medium" in the Directive, something which is common in the more recent consumer legislation.

Last minute bookings

The current Directive is considered to be unclear when describing the information and

contractual requirements for last minute bookings. It has been questioned 136 whether the

exemptions from the information requirements in the case of last minute bookings are applicable only with regard to the requirement of having a written contract whose terms are

communicated to the consumer before the conclusion of the contract 137 or also with regard to

other information duties, in particular the requirements of Article 4(1), i.e. the general

135 Consumer law compendium, page 257-285.

136 Consumer law compendium page 265.

137 Article 4(2)(b).

information on passport and visa requirements, etc. The Directive does not give any directions as to what is a "last minute" booking.

Lack of sanctions for non-compliance with the information requirements

The current Directive does not provide for sanctions for traders who do not comply with the

information rules. This has been criticized as a shortcoming by several stakeholders 138 , since

rules without sanctions can be difficult to enforce.

C ONTRACT CHANGES BEFORE THE DEPARTURE

The package travel market has traditionally been characterized by consumers booking packages a long time before the departure and making pre-payments. While it has become easier to purchase last minute tickets, especially via the Internet, the amount of holidays being booked months in advance is still significant. Since the contracts are often concluded a long time before the departure, certain circumstances, including costs incurred by organisers, may change. The existing rules on contract changes vary depending on the gravity of and the reason for the contract change. The main problems related to these rules are explained below.

Price revisions

Article 4(4) (a) regulates price revisions: The prices laid down in the contract shall not be subject to revision unless the contract expressly provides for the possibility of upward or downward revision and states precisely how the revised price is to be calculated. Such revision is only possible until 20 days prior to departure and on the grounds of actual variations in:

• - 

  transportation costs, including the cost of fuel,

• - 

  dues, taxes or fees chargeable for certain services, such as landing taxes or embarkation or disembarkation fees at ports and airports,

• - 

  the exchange rates applied to the particular package.

Stakeholders, especially from the consumer side and from Member States, have argued that there is a need to further restrict the possibilities of price revisions since the financial risk for fluctuation is put on the consumer after the conclusion of the contract, even if the price has been agreed in the contract. Furthermore it is argued that traders normally would be able to hedge against such fluctuations and also that the nature of fluctuations would involve that in the longer run the traders do not bear a big financial risk. The limitations suggested by stakeholders include a complete prohibition on price revisions, specified percentage caps or an increase of the existing 20-day cut-off period. The rules relating to price revisions vary significantly in the Member States (see below under point 3.3), again creating a legal

138 See Summary of responses to the public consultation in 2007

http://ec.europa.eu/consumers/rights/summary_responses_publication_final_30012007.pdf and in 2010 http://ec.europa.eu/consumers/rights/docs/20100430_summary_responses.pdf.

framework with national difference that can make it more difficult and cumbersome for traders to provide services in several Member States. Furthermore, the interplay between this Article and Article 4(5) on significant alteration of essential terms is unclear (see point 3.3) which is creating an ambiguity whether and when the consumer should have a withdrawal right in cases of price increases.

While the Directive contains provisions on additional charges, which may be imposed on the consumer in precise circumstances, it does not spell out whether the contract may stipulate that the organiser's administrative costs connected to price increases, e.g. due to altering fuel prices, may be passed on to consumers, creating a legal ambiguity which can lead to unnecessary disputes and/or litigation.

Significant alterations of essential terms before departure

If before the departure, the organiser finds that he is constrained to alter significantly any of the essential terms, such as the price, the consumer has, according to Article 4(5), the choice either to withdraw from the contract without penalty or to accept a rider to the contract specifying the alterations made and their impact on the price.

The Article is, however, unclear as to what changes in the contract qualify as a "significant alteration", or what should be considered as an "essential term" (except for the price). This can create uncertainties both for consumers and businesses and therefore also be a source of unnecessary litigation costs. A majority of both Member States and consumer stakeholders

asked for a clarification of "essential terms" in the 2007 consultation 139 .

Furthermore, Article 4(5) uses the term "withdraw", which in other pieces of legislation is related to the "cooling-off period". Therefore, on grounds of consistency, the term "terminate" should be used instead.

Finally, the Directive is silent when it comes to how changes to the essential contract terms which are not considered as significant should be treated. This creates legal ambiguities which can lead to unnecessary disputes and/or litigation.

Significant price alterations

While Article 4(4) a) regulates price revisions, Article 4(5) sets out the organiser's obligations and the corresponding rights for the consumer in case the organiser is forced to make significant alterations to the essential terms of the contract before departure, including changes in prices.

The wording of the Directive is criticized for being too vague as the meaning of "significant" alterations of the price is not specified. This can be a problem both for consumers and businesses, as it is unclear when the consumer should have a withdrawal right in case of price increases which, again, can result in unnecessary disputes and litigation costs. Some Member States, e.g. Slovenia and Romania, specify in the laws transposing the Directive that the consumer may withdraw from the contract in case the agreed price increases more than 10%.

139 See Summary of responses (2007).

Other Member States have used the minimum harmonisation approach to grant consumers more protection by putting a cap on the possibilities for price increases, such as Italy, where the price increase can never exceed 10 %.

It is, furthermore, unclear whether Art. 4(4) ("upward" or "downward revision") deals with both possibilities, hence the word "or" instead of "and" should be used in order to make it clear that it should apply to both possibilities. Finally, the internal relationship between Article 4(4) and 4(5) is open for interpretation, in the sense that it is unclear whether Article 4(5) also applies to price revisions, or if Article 4(4) in such cases should be regarded as lex specialis.

Cancellations of the contract before departure

According to Article 4(6), in the event of cancellation of the package, the right to compensation is limited if:

"(i) cancellation is on the grounds that the number of persons enrolled for the package is less than the minimum number required and the consumer is informed of the cancellation, in writing, within the period indicated in the package description; or

(ii) cancellation, excluding overbooking, is for reasons of force majeure, i.e. unusual and unforeseeable circumstances beyond the control of the party by whom it is pleaded, the consequences of which could not have been avoided even if all due care had been exercised."

Cancellation of the package caused by other reasons than the fault of the consumer or the above mentioned reasons entitles the consumer to compensation "if appropriate". However, it is not specified in the Directive when compensation could be appropriate (or inappropriate). Thus, there is most likely not a homogenous interpretation of this term in the Member States. Several Member States have introduced a general termination rights against compensation (for example BE, CZ, DE, DK, EE, EL, FI, HU LT, LV, PT), whilst others allow for

termination even without compensation in force majeure events (for example DK, FI) 140 .

Consequently, it can also be unclear for both businesses and consumers when compensation is appropriate or not.

Cancellations before departure on the ground that there are too few participants

At present the organiser is entitled to cancel the package if the number of participants is less than the minimum number required and the consumer has been informed about the possibility of cancellation on this ground in the contract.

The deadline for such cancellations is determined by the organiser and has to be specified in the contract. In both public consultations, consumer stakeholders and some Member States argued that there should be a time limitation to the possibilities of cancelling the package on the grounds that there are too few participants. This is supposed to prevent circumstances

140 Member States' replies to questionnaires as a preparation to Member States' Workshop 5 June 2012 where the consumer receives such information only a few days before the scheduled departure at a time when it can be difficult or at least very expensive to find other alternative offers or otherwise reschedule the holiday.

Cancellations before departure due to force majeure

On the one hand, the organiser is entitled to cancel the package contract without any obligation to pay damages for non-performance of the contract if the cancellation is for reasons of force majeure, solely depending on his assessment of the security situation.

On the other hand, the consumer does not have a similar right to cancel in the event of force majeure, something that has been criticised by consumer advocates and there are examples of organisers refusing to cancel the package even though national travel advices advised against travelling to the destination.

They are arguing that the consumer can have a legitimate need for an option to cancel the

contract 141 if there is a force majeure situation in the area of the destination, e.g. warfare or

natural disasters, which is likely to have a negative impact on the enjoyment or the safety during the holiday and where the organiser does not take initiative to cancel the package. Such events would often not be covered by travel insurances the traveller might purchase. Similarly, some consumer advocates have argued that there also should be a possibility to terminate the contract if there is a force majeure situation in relation to the traveller, e.g. serious illness or death in close family, which prevents the traveller from leaving for the holiday. Such events are, however, often covered by travel insurances the traveller might purchase.

Transfer of the package before departure

Where the consumer is prevented from proceeding with the package, he may transfer his booking to a person who satisfies all the conditions applicable to the package, having given reasonable notice of his intention before departure to the organiser or to the retailer. From the wording of the Directive it is unclear if the Member States are free to regulate whether the organiser or the retailer should receive the notice from the consumer or if the consumer is entitled to choose which of them to notify. Furthermore, the Directive does not specify the content of "reasonable notice" in the Directive, which has resulted in several different

solutions in the various Member States 142 . In some Member States the consumer's notice has

to be in writing or even by a recorded delivery. The term "reasonable notice" should also be clarified, at least in order to point out that it is the timing of the notice that should be reasonable and not the notice itself.

A LTERATIONS OF THE CONTRACT AFTER DEPARTURE

Also after the departure circumstances might occur which can make it difficult, or even impossible, to provide the services as foreseen in the contract. Article 4(7) regulates the situation where a significant proportion of the services are not being provided or the organiser

141 Given that the organiser does not cancel the contract despite this situation.

142 Consumer law compendium page 292.

perceives that he will be unable to procure a significant amount of the services. Normally, the consumer will have a right to get compensation for damages in such situations. The main regulatory problems related to these situations are set out below.

Cancellations after departure due to force majeure

Article 4(7) provides that, where, after departure, a significant proportion of the services contracted is not provided, the organiser has to make suitable alternative arrangements, at no extra cost to the consumer, for the continuation of the package. If it is impossible to make such arrangements, the organiser shall provide the consumer with equivalent transport back to the place of departure, alternatively to another return point to which the consumer has agreed.

Furthermore, under Article 5(2) the organiser is obliged to provide prompt assistance to consumers in difficulty, e.g. in cases of force majeure. The Directive does not specify what kind of assistance the organiser is obliged to provide and for how long, but it states clearly that the organiser is not responsible for damages. However, as long as the content of the obligation to provide assistance is not specified, it can be difficult to decide what should be provided as assistance and what costs should be covered by the organiser. The rules relating to Article 4(7) and 5(2) are transposed differently in the Member States.

The incident starting 15 April 2010 with the closure of air space and airports in Europe due to volcanic activities in Iceland had huge impacts on the travel market. A significant number of European consumers, airlines and package tour organisers were heavily affected. Estimations from ECTAA (the European association of travel agents and tour operators) showed that more than 1.2 million travellers were stranded at the same time and that tour operators spent more than € 388 million on care and assistance to the stranded passengers as well as their repatriation. This situation revealed several problems with the interpretation of the Directive, namely Articles 4(7) and 5(2) and also to some extent its interplay with the Air Passengers'

Rights Regulation 143 (APR Regulation), see section 4.2 below. Furthermore, it is unclear if

Article 4(7) second paragraph applies in situations where the package does not contain any transport services. There is obviously a need for clearer rules in order to remove any remaining doubts that the obligation to provide suitable alternative arrangements, at no extra cost to the consumer, for the continuation of the package (Article 4(7)) also applies in force majeure situations. Legal ambiguities can lead to unnecessary and costly disputes and/or litigation which also were reported in the event of the ash cloud in 2010.

However, in order to have proportional and balanced rules, and to prevent too heavy responsibilities on the organiser, it might also be necessary to introduce certain limitations for the liability of the organiser in situations where the force majeure situation is preventing consumers to return to their home for a long time period, e.g. introducing a cap to the liability, for instance 3 or 4 days (which is the case in several of the Passenger rights regulations). However, the most important aspect will be to remove any doubt that organisers are obliged to take care of travellers/consumers and make arrangements for the continuation of the package.

Interplay with the APR Regulation

Even though the APR Regulation states that it shall not affect the rights of passengers under the PTD, the relationship between the APR Regulation and the Directive is not fully

143 (EC) No 261/2004, see especially Article 3(6) and Articles 6, 8, 9.

streamlined. As long as the package contains air transport, there is an overlap between the two different legislations as both pieces of legislation apply and give rights to the passenger towards both the airline (APR regulation) and the organiser (PTD). In practice this overlap has created confusing situations for the consumer, e.g. where the air carrier has been telling him to contact the tour operator in order to escape the burden to provide assistance and vice versa.

Article 8 (2) of the APR Regulation states that (contrary to the right to reimbursements) the right for a return flight to the first point of departure, at the earliest opportunity, also applies to passengers whose flights form part of a package. In many circumstances, e.g. if the flight is cancelled, the passenger is entitled to choose either to direct his claim (e.g. for continuation of the package and assistance) towards the organiser (through the PTD) or he can directly claim his rights under the APR Regulation towards the airline.

However, neither of the two pieces of legislations explicitly mentions that passengers are not entitled to "double assistance" or "double compensation" for the same incident (both from the air carrier and the tour operator). This should be clarified in order to prevent potential abuse in the future as well as simplifying the organiser's right to seek redress from the service providers, the latter which the industry today claim not to work well enough. It should, at the same time, be underlined that both the PTD and the Passenger Rigths regulations apply where such transport is included in the package.

P ROBLEMS RELATED TO PERFORMANCE , LIABILITY AND OBLIGATION OF THE

PROFESSIONAL PARTIES

The current rules regarding the retailer's and organiser's liabilities and obligations relate mainly to the obligation to provide information (Article 4), to proper performance/liability for improper performance (Article 5), and to provide evidence of security for refund of money/repatriation (Article 7).

Who is the responsible party?

A common feature of the rules regulating performance, liability and obligation of the professional parties is that the Directive uses the wording "organizer and/or retailer" and

thereby does not designate one particular party as being responsible 144 .

This wording was chosen to leave the choice to the Member States to decide who should be the responsible/liable party when transposing the Directive into national law. Consequently, this solution has led to diverging national rules on who is liable towards the consumer: the retailer, the organiser or both. These divergences can be detrimental to the consumer as it can be unclear which party is responsible, especially if the package holiday is purchased crossborder. It can also lead to situations where the organiser and the retailer are blaming each other without anyone of them taking the responsibility. Furthermore, differences between Member States' legislation and the possibility for the consumer to claim his rights may be problematic in particular in cases where the retailer and the organizer are established in

144 E.g. Article 4, 5, 6 and 7.

different Member States. The situation can also be an obstacle to cross-border trade since legal fragmentation can deter traders from selling travel packages cross-border.

Compensation for damages

Article 5 covers the liability for damage suffered by the consumer due to non-performance or improper performance of the services contracted for. The consumer can be entitled to compensation for both material and non-material (moral) damages (e.g. loss of holiday enjoyment) in cases of non-performance or improper performance of the contract.

The rule does not explicitly state that the consumer has a right to compensation for nonmaterial damage and, in particular, that such compensation can arise from the loss of enjoyment which the consumer has suffered because of improper performance of the travel

contract. However, this right was confirmed by the CJEU in the Simone Leitner-case 145 . It is

highly questionable whether this right is known to the average consumer as this right is not explicitly mentioned in the Directive or most national laws transposing the Directive.

In parallel with the general rule on compensation for damages in Article 5(2), Article 4(7) refers to a right to compensation for consumers "where appropriate". It is unclear if the rule in Article 4(7) thereby is an independent liability rule or if it merely refers to the rule in Article 5(2). Moreover, it is not indicated in what situations compensation could be "appropriate". In Czech Republic and France this is specified to situations where the substitute service is of lower quality. Such legal ambiguities can lead to unnecessary and costly disputes and/or litigation.

Moreover, as a result of substantial differences in national laws concerning the possibility to limit compensation in the case of damages resulting from non-performance or improper performance of services included in the package, organisers and retailers who want to directly market package tours in several Member States have to engage in thorough legal checks on the possibility to limit compensation in other Member States or they are compelled, in practice, to refrain from agreeing any limitation on compensation if they want to act lawfully. This can be a barrier to cross border trade.

As an example, a trader established in Belgium would like to direct sales of packages also to consumers in Germany. However, since he does not know if he can impose the same limitation to his liability as he can lawfully do in Belgium, i.e. two times the costs of the travel package, he might refrain from directing sales cross border. If he would engage in legal checks regarding this issue, he would find out that he will not be able to use the same contract terms, since in Germany you cannot limit the liability to less than three times the costs of the travel package.

Type of liability

It is not totally clear from the wording of Article 5 what type of liability it imposes. Most Member States seem to have interpreted Article 5 as imposing a "strict liability"- like rule,

145 ECJ 168/00.

though including certain exceptions to the liability, such as force majeure or where the damage is caused by the consumer himself or a third party not connected to the contract.

However, in at least two Member States (Ireland and the UK) the courts seem to interpret Article 5 as imposing only a fault-based liability as regards personal injury claims. In several Member States the organiser is not liable if he can prove that he did not act intentionally or

negligently 146 . Legal ambiguities can lead to unnecessary and costly disputes and/or litigation

and the difference of the interpretation of the rules can constitute an obstacle to cross border trade and also represent a barrier for the consumer to buy cross border if he is uncertain whether he would have less legal protection if buying from a foreign trader.

Conditions for liability

The Directive does not set up clear conditions for the liability, for instance the burden of proof and the need for a causal link are not touched upon, leaving it to Member States to interpret this. The consequence is that the practice and conditions relating to the liability for proper performance in Member States deviates.

N OTIFICATIONS

There are currently no requirements to the form to which the parties must stick for notifying each other, e.g. in Article 4(3) the only requirement is to give "reasonable notice" and in Article 4(5) the notice must be given "as soon as possible". Similarly, according to Article 4(6) the consumer must inform the organiser about his decision to either withdraw or accept a rider to the contract "as quickly as possible". The lack of clarity regarding deadlines can lead to unnecessary and costly disputes and/or litigation. However, some Member States have transposed this rule by specifying certain time limits (from two working days to eight calendar days).

According to Article 5(4), the consumer must communicate any failure in the performance of a contract which he perceives on the spot to the supplier of the services concerned and to the organiser and/or retailer in writing or any other appropriate form at the earliest opportunity. There are several ambiguities or unclear aspects related to this duty; notably who should receive the notification (the organiser and/or the retailer?), the form of the notification ("in writing or any other appropriate form") and the timing of the notification ("at the earliest opportunity"). Legal ambiguities can lead to unnecessary and costly disputes and/or litigation.

In general, the vague regulation of the parties' notifications has created different rules in the Member States. It can also give rise to disputes between the parties to the contract, e.g. related to the timing of the notification, the proof of having sent the notification and whether the notification was sent in an acceptable form.

146 Consumer law compendium page 321.

T IMING OF REPAYMENT

The retailer/organizer is obliged to repay the consumer in certain circumstances, e.g. if the consumer uses his right to terminate the contract if the tour organiser has made significant

changes to essential terms 147 . However, these rules lack a deadline for when the

reimbursement/refund must be executed at the latest.

I NSOLVENCY PROTECTION

Under the Directive the organiser/retailer must provide sufficient evidence of security for the refund of all the money paid and the repatriation of the consumer in the event of

insolvency 148 . The Directive itself does set out any explicit requirement for the actual method of insolvency protection. Nevertheless, the CJEU has outlined in numerous rulings 149 that the

insolvency protection must be effective, i.e. it must guarantee the consumers' repatriation and the refund of money that they have paid. As a result, there are numerous diverging methods for providing insolvency protection in the Member States, e.g. insurances, bank guarantees, national insolvency funds or a combination of these methods. Some Member States have a wider scope of protection than merely insolvency protection for services included in the package. Consequently, there seems to be significant differences in the level of consumer

protection in the Member States 150 . Furthermore, the vague wording of Article 7 has led to several court cases, with subsequent referrals to the ECJ 151 .

The performance checks exercise in 2012 showed that different national rules regarding the obligation to provide insolvency protection have also resulted in a situation where some retailers or organisers who are trading cross-border had to pay several times for insolvency

protection which already had been secured in another Member State. 152

The Commission has also understood that there have been problems with the sharing of information between the different protections schemes in the Member States as there is not established any forum for such exchanges, e.g. information concerning fraudulent traders who are operating in several Member States, possibly causing unnecessary economic losses. The administrative cooperation system foreseen by the Services Directive, the Internal Market Information system, can and is, however, used by some authorities for this purpose though.

147 Article 4(6).

148 Article 7.

149 See joined cases C-178/94, C-179/94, C-189/94 and C-190/94 and later followed up in C-410/96 and C-

140/97.

150 E.g. according to Belgian law, travel services, including stand-alone products, sold by travel agents should be

covered. Since 1 January 2010, a new Danish law is requiring that consumers are offered the possibility to purchase insolvency protection also for stand-alone air tickets and car rental outside Denmark.

151 E.g. C-178/94, C-179/94, C-189/94, C-190/94, C- 410/96 and C-140/97.

152 The Commission staff working document on the result of the performance checks of the internal market for

services (construction, business services and tourism) (SWD(2012) 147 final)

P RESCRIPTION PERIODS

The PTD does not regulate prescription periods, leaving this to Member States. Consumer organisations report that this can cause consumer detriment especially in cross border situations where consumers are rarely aware of prescription periods in other Member States. With the expected increase in cross border trade due to harmonisation of rules, at least the minimum length of the prescription periods should be regulated in a new Directive.

ANNEX 4

L EGISLATIVE M EASURES PROPOSED IN OPTIONS 5, 6 AND 7

1. Introduction

A legislative approach is widely supported; the majority of stakeholders in the public consultation indicated a more up-to-date directive as the preferred option. Furthermore, the revision has also been requested from or supported by the co-legislators and international

bodies. 153

Table 1: Preferred way of ensuring consumer protection in the field of package travel

MS Industry Consumer

Authorities Associations Companies Organisations

A more up-to-date EU Directive 89% 70% 64% 96%

Repeal of the Directive and use of

other existing legislation 7% 9% 20% 0%

Industry self-regulation 19% 37% 36% 4%

Issuing of detailed guidance for

businesses 37% 30% 32% 11%

Undertaking awareness campaigns 44% 28% 32% 19%

None of the above 0% 2% 4% 0%

Other 19% 7% 8% 0%

Source: Public consultations on the revision of the Package Travel Directive, 2010

2. Proposed legislative measures in option 5 - Modernisation of the Directive and coverage of "one trader" packages (PO5)

2.1. Update of definitions

2.1.1. 'Package'

The definition in the existing PTD would be clarified to include "one-trader" packages.

This reflects not only the principles of the CJEU ruling in the Club Tour case 154 , but also the

views from stakeholders, who in the majority favour the need to clearly include more

153 E.g. Council conclusions on consumer Affairs on the 2255 th Council meeting, European Parliament resolution

of 16 January 2002 (2001/2136(INI)), ECCG opinion of 21 April 2010, Opinion of the European Economic and Social Committee of 11.05.2011 (Official Journal C 132)

154 C-400/00 Club Tour.

combined travel arrangements and cruises within the scope of the Directive. However, the "multi trader" travel arrangements would not be covered by policy option 5.

The majority of respondents indicated that a combination of travel services should not necessarily have to be sold or offered for sale "at an inclusive price" to qualify as a ' package'. It is planned to define as a " package" those combinations of not fewer than two different types of travel services for the purpose of the same trip or holiday fulfilling at least one of several criteria which are "typical" for the sale of packages, e.g. where such services are (a) put together by one trader, including at the request of the traveller before one contract on all services is concluded, (b) sold, offered or charged at an inclusive or total price, (c) sold within the same booking process from a single point of sale or one single trader, (d) combined after the conclusion of a contract by which a trader entitles the traveller to choose among a selection of different types of travel services (travel package gift box), (e) advertised or sold under the term "package" or under a similar term, or (f) o purchased from separate traders through linked online booking processes where the traveller's name or particulars needed to conclude a booking transaction are transferred between the traders at the latest when the booking of the first service is confirmed;

Option 5 would also clarify that car rental would be considered as a travel service which, if sold together with another travel service, can create a package.

Furthermore, in relation to tourist services other than accommodation, transport and car rental, the current requirement, according to which it needs to represent a "significant proportion of the package", would be maintained, in line with the views of many stakeholders, while specifying in a recital that such additional tourist services should account for more than 20% of the total price or otherwise represent an essential feature of the trip.

2.1.2. Consumer

The current definition of a "consumer" in the PTD deviates from the rest of the consumer acquis since it does not require that the consumer is acting for purposes which are outside his trade, business, craft or profession.

Some stakeholders argue that the original definition in the existing PTD should be updated to fall in line with the definition of 'consumer' in other consumer legislation. This change would, however, have an impact on the scope of protection, by excluding all business travel packages and package travels bought for mixed business- and leisure purposes.

Table 2 Travel arrangements that should be covered by the PTD

Travel-related Products or MS Industry Companies Consumer Arrangements Authorities Associations Organisations

Packages purchased for solely

business purposes 41% 28% 32% 59%

Packages purchased for solely

leisure purposes 89% 74% 48% 81%

Packages purchased for mixed

purposes (private& business) 63% 46% 60% 74%

Source: Public Consultations on the Revision of the Package Travel Directive, 2010

The potential inclusion in the scope of packages that are solely for business purposes received a relatively low level of support from most stakeholder groups. This is confirmed by the fact that, across stakeholder groups, respondents commented that business-to-business trade does not require the same level of protection as business-to-consumer trade and that, in general, there is little evidence of detriment in B2B contracts. However, it was noted by key industry association respondents that there may be difficulties in determining the precise purpose of every trip, particularly in relation to trips involving both business and leisure elements. Industry stakeholders representing SMEs also argued that SMEs should continue to be protected under the scope of the PTD, since SMEs in many instances are as vulnerable as consumers.

Under option 5, the protected party would be the "traveller". This concept corresponds largely to the current definition of the "consumer" in the PTD. However, packages purchased on the basis of a framework contract between the traveller's employer and a trader specialising in the arrangement of business travel (so-called "managed business travel") would be excluded from the Directive.

2.1.3. Organiser

Option 5 would introduce some changes to the definition of an organiser, in the sense that only traders can be organisers (and never consumers) and that all traders who combine, including at the request of a traveller, travel services into a travel package and sell or offer them for sale, either directly or through another trader or together with another trader, would be considered to be an organiser.

An essential feature of option 5 is that at least one trader should always be responsible as an organiser for the package as a whole. Therefore, only in cases where another trader is acting as the organiser of a package, should a trader, typically a high-street or on-line travel agent, be able to act as a mere retailer or intermediary and not be liable as an organiser.

2.1.4. Occasional organiser

Stakeholders have been divided regarding the question of whether to keep the current exemption for occasional organisers.

Many stakeholders have pointed to the need to clarify this concept.To increase consumer protection and create fairer competition, Option 5 would narrow the existing exemption for occasional organiser by limiting it to traders who do not have the sale of travel packages as one of their main business activities and who do not organise travel packages more than twice a year.

Table 3 Whether certain travel arrangements put together by occasional organisers should be covered by the PTD

Travel-related Products or MS Industry Companies Consumer

Arrangements Authorities Associations Organisations

Packages occasionally organised by a company which normally does not organise packages (e.g.

package travel to Oktoberfest in 52% 54% 68% 63%

Germany organised and sold by a bank for best clients once a year)

Packages occasionally organised by a non-business organisation (or not-for-profit organisation) which normally does not organise

packages (e.g. package travel to 41% 48% 56% 63%

Vatican for Christmas celebration organised and sold by the local church)

Source: Public Consultations on the Revision of the Package Travel Directive, 2010

2.2. Update of Information Requirements and adaptation to the Consumer Rights Directive (CRD)

The current specific rules on brochures, which have created administrative burden, will be abolished. Traders may still use brochures, but option 5 would contain no mandatory requirements for its actual content.

No major problems have been identified in relation to the content of the existing list of information requirements. However, option 5 would include strengthened requirements for the timing of the information and its clarity, such as "prior to the conclusion of the contract" the pre-contractual information should be provided "in a clear and prominent manner". Furthermore, option 5 would require that the contract shall be "in plain and intelligible language and, in so far in writing, be legible". To improve the readability, the information requirements would be divided into three clear-cut sections:

• - 

  pre-contractual information,

• - 

  information in the contract and,

• - 

  information before departure.

There will be detailed requirements for the pre-contractual information, mainly in line with the information the consumer will have to receive today.

The main change would be that the traveller must also be informed that the product sold or offered for sale is a package and that, as a consequence, the traveller will benefit from legal protection for travel packages under EU law. Furthermore, in line with the Consumer Rights Directive, option 5 would also include a rule stating that, if the information requirements on additional charges, fees or other costs for services included in the package have not been complied with, the traveller shall not bear those costs.

Option 5 would adapt Article 8(2), Article 19, Article 21 and Article 22 of the CRD, so that these rules also apply to packages.

2.2.1. Including other (modern) channels of marketing communication

Many stakeholders complain about current special rules for the brochures and their binding nature. Given that for 40% of Europeans the internet is the most important source of

information when making a decision about holiday 155 , special rules on what must be included

in brochures seem no longer to be crucial. Moreover, the financial and environmental costs of reprinting brochures due to the existing legal requirements are large. Therefore, the existing rules regulating the content of the brochure would be removed. This means that all the sale channels would be treated in the same fashion and would have to adhere to the same requirement to provide the consumer at least with the specified key information about the travel package before conclusion of the contract (pre-contractual information). Furthermore, this would remedy the complaints from the side of industry that still produces brochures, namely that they have a disadvantage compared to the part of the industry which only operates online.

Thus, it would contribute to creating a level playing field and remove a significant administrative burden for industry.

2.2.2. Durable medium

Currently, information is widely available on the internet from a variety of sources, and it may be too prescriptive to impose the form in which information should be provided at the precontractual stage. Therefore, the form in which information and notices primarily should be provided to consumers would be specified only for the contract and the departure stages, namely on a durable medium for both stages. This is consistent with the approach used in other recent legislation.

2.2.3. Last minute bookings

The pre-contractual information requirements would specify what information should be provided by consumers before concluding the contract. Most stakeholders (including those in industry) did not see a need for this aspect to be regulated. Also, with the advantages of electronic transactions - which have been a major driver in the increase in last minute bookings - consumers are able to receive electronic copies of documents on "durable medium" almost immediately upon booking. Therefore there would be no special rules regarding information requirements for last minute bookings.

155 Flash Eurobarometer 334, 2011

2.3. Contract changes and other issues

2.3.1. Price revisions

The industry stakeholders have argued that the existing regime (see PTD article 4(4)), for price revision is appropriate, while consumer organisations mainly argue that there is a need for increased foreseeability of expenses and, thus, that the current possibilities to revise the agreed price should be abolished.

Member State authorities, industry associations and operators coincide in that the highest percentage of respondents opted for the current time limit in the PTD of 20 days. Consumer organisations and consumers predictably were mostly in favour of prices in contracts being binding.

Table 4: Time limit for price changes

MS Industry

Authorities Associations Companies

Consumer Organisations

8 weeks before trip 4% 4% 8% 11%

6 weeks before trip 0% 2% 0% 7%

4 weeks before trip 15% 11% 8% 0%

20 days before trip 56% 48% 52% 11%

Prices should be binding 7% 4% 8% 52%

Other 15% 13% 12% 15%

Source: Public Consultations on the Revision of the Package Travel Directive, 2010

As regards the maximum acceptable level of price changes, Member States, industry associations and companies selected a limit to price revisions of between 5% and 10%. However, unsurprisingly, the highest number of industry respondents selected “It should not be specified". Again, the majority of consumer organisations indicated that prices should be binding.

Table 5: Acceptable level of price revision

MS Industry Consumer

Authorities Associations Companies Organisations

<1% 0% 2% 0% 0%

2-5% 26% 2% 16% 15%

5-10% 33% 26% 20% 11%

15-25% 0% 4% 0% 0%

>25% 0% 2% 4% 0%

It shouldn't be specified 26% 39% 48% 11%

Prices should be binding 15% 11% 4% 67%

Source: Public consultations on the revision of the Package Travel Directive, 2010

Against this background, the following sub-options have been analysed:

– Sub-option 0: status quo i.e. package travel contracts may allow for price increases due to certain increased transportation costs, including increased fuel prices or changes in the taxes or currency exchange rates;

– Sub-option 1: introducing a cap of a maximum price increase of 10%;

– Sub-option 2: clarifying that consumers have a right to terminate the contract if the price increases more than 5%, while requiring that cost decreases have to be passed on to the consumer as well;

– Sub-option 3: making prices in the contract binding, except for price increases caused by unforeseeable increase in taxes or fees imposed by third parties for the performance of the services (e.g. tourist taxes or landing/embarking fees).

2.3.2. Essential terms of the contract

The current PTD does not stipulate which terms of the contracts, other than the price, are considered as essential and which may not be altered significantly without enabling the consumer to accept an amendment to the contract or cancellation of the contract.

The results of the consultation show that, in general, most of the terms indicated are considered to be essential by most of the respondents. The terms that are in general considered to be the least essential are changes to components of additional services and changes in itineraries of those additional services. As might have been expected, consumer organisations and consumers were slightly more in favour of considering them as essential terms (slightly over 50%), companies and industry associations least in favour (slightly under 50%), and Member State authorities in the middle.

Table 6: Essential terms of the contracts

Member States Industry Consumer Associations Companies Organisations

Changes in overall price 96% 89% 100% 100% Change in carrier (air-line, train

service provider etc.) 78% 24% 63% 89%

Changes in travel times and/or

dates 96% 85% 96% 96%

Changes in travel/holiday

destination 96% 96% 100% 96%

Change in accommodation (e.g.

different hotel) 93% 74% 88% 93%

Changes in components of additional services (e.g.

sightseeing tours, entertainment 59% 24% 46% 74%

packages)

Changes in itinerary of

additional services 56% 24% 54% 63%

Change in the payment schedule 74% 76% 79% 85%

Change in special requirements which both parties accepted (e.g. 85% 89% 83% 96% facilities for disabled person)

Other 19% 17% 4% 37%

Source: Public consultations on the revision of the Package Travel Directive, 2010

Based on the above, there would be a list of terms that, if they have to be amended significantly, would give rise to a right for the consumer to terminate the contract without paying compensation (or accept the amendment). The list would include what would be considered to be the main characteristics of the travel package:

(i) the travel destination(s), the itinerary and, where periods of stay are involved, the relevant periods, with dates;

(ii) if transport is included, the means, characteristics and categories of transport, the points, dates and time of departure and return or, where the exact time is not yet determined, the part of the day (morning, afternoon, evening or night) of departure and return, the duration and places of intermediate stops and transport connections;

(iii) if accommodation is included, the location, main features and tourist category including, where available, the rating under a national or international hotel classification system applicable in the host state;

(iv) whether any meals are provided and, if so, the meal plan;

(v) visits, excursion(s) or other services which are included in the total price agreed for the package;

(vi) the language(s) in which the activities will be carried out and (vii) special requirements which were previously agreed by both parties (e.g. special facilities for disabled persons)

2.3.3. Introduction of special rules on termination rights

According to the PTD, the organiser is entitled to cancel the package contract without any obligation to pay damages for non-performance of the contract if the cancellation is for reasons of force majeure, Article 4(6).

On the other hand, the consumer does not have a similar right to cancel in the event of force majeure, something that has been criticised by consumer organisations. There are examples of organisers refusing to cancel the package even though national travel advices warned against travelling to the destination. Thus, consumer representatives have been arguing that the consumer can have a legitimate need to cancel the contract without paying compensation if there is a force majeure situation in the area of destination, e.g. warfare or natural disasters, which is likely to have a negative impact on the enjoyment or the safety during the holiday and where the organiser does not take the initiative to cancel the package. Such events would often not be covered by travel insurances the traveller might purchase.

In addition, in several Member States, consumers currently have a possibility to terminate the contract against paying reasonable compensation. Consumer organisations have requested that this should also be a European rule.

Policy option 5 will introduce rules which will allow travellers to cancel the contract before the departure by paying a reasonable compensation to the organiser.

Furthermore, where there is a force majeure situation (such as natural disasters, warfare, contagious and dangerous diseases or similar circumstances) at the place of destination or its immediate vicinity, travellers would also be able to terminate the contract before the departure without paying any compensation.

Lastly, the existing rules relating to the organisers' possibility to cancel the contract if a minimum number of travellers have not signed up for a certain trip, have been criticized by consumer representatives, e.g. the ECCG opinion of 2010 where it is argued that this rule should be deleted. On the other hand, the industry argues that this rule is very important for their business model. In order to protect the traveller better than today against last minutes cancellations, which can put him in difficult situations in relation to holidays plans and difficulties in finding substitute trips, such cancellations will only be allowed until 20 days before departure if a the minimum number specified in the contract is not met.

2.4. Clarification of obligations and liabilities

The Directive uses the term "the organiser and/or retailer" which has given the Member States the opportunity to choose which of the parties, or both, should be responsible. However, this solution has led to diverging national rules on who is liable towards the consumer: the retailer, the organiser or both.

These divergences can be detrimental to the consumer as it can be unclear which party is responsible and it can also lead to situations where the organiser and the retailer are blaming each other for not fulfilling the responsibilities. It can also be an obstacle to cross-border trade since legal fragmentation can deter traders from selling packages cross-border.

2.4.1. Responsibility for providing information

Under option 5, the responsibility for providing information (pre-contractual, before departure) would lie with the organiser or anyone acting on his behalf. This means that the responsibility rests with the organiser, but where the package is sold through a retailer, the retailer is jointly liable for providing the traveller with the relevant information. In practice, it would normally be the seller/retailer who would provide information to consumers before the contract is signed. Insofar as one of these traders has complied with this obligation, this has effect also for the other party.

2.4.2. Liability for the proper performance of the contract

The results of the public consultation on who should be responsible for the proper performance of the contract are widely divided. The largest number of respondents selected the package organiser as the party responsible for the proper performance of the contract. However, many stakeholders favoured the joint responsibility of the retailer and the organiser.

Table 7: Party responsible for the proper performance of the contract

MS Industry

Authorities Associations Companies

Consumer Organisations

Seller of the package (the party who receives the payment directly 44% 15% 16% 67% e.g. travel agency)

The provider of the service where the difficulty arises (who may receive the payment indirectly, e.g. 33% 57% 80% 56% airline or hotel which is not organising the package )

The organiser of the package

(tour-operator) 89% 89% 72% 89%

Other 11% 2% 4% 7%

Source: Public consultations on the revision of the Package Travel Directive, 2010

To clarify the obligations of the professional parties involved in the performance of the package travel contract, the liable party and its obligations would be specifically defined. This means that the party would be liable to the traveller for the proper performance of the travel services included in the package, irrespective of whether the obligations under the contract are to be performed by the organiser or by other service providers.

In case of improper performance of the package travel contract, the liable party would be obliged to remedy any lack of conformity, provide alternative arrangements, reduce the price and/or grant compensation for damages.

Given the above, the Impact Assessment analyses the following sub-options:

• - 

  Sub-option 1: contractual liability of the seller/retailer;

• - 

  Sub-option 2: contractual liability of the organiser and joint liability in case the organiser is based outside the EEA; and

• - 

  Sub-option 3: joint contractual liability of the seller/retailer and the organiser (consumer can seek redress from either).

  2.4.3. Responsibility for providing prompt assistance if the consumer is in difficulty (for other reasons than the organiser's improper performance)

Discussions with stakeholders confirm that all key actors have an interest in ensuring that travellers do not get into difficulty. The stakeholders' views on who should be liable for assisting the traveller in difficulty are divided.

In the public consultation, the majority of stakeholders in all groups favoured the responsibility of the organiser. The seller of the package was selected by the lowest number in each of the stakeholder groups. Some respondents said that the individual service providers should be responsible in such a case. This presumably reflects the fact that they are usually the closest and most immediately available party when things go wrong.

Table 8: Responsibility for providing prompt assistance if the consumer is in difficulty

MS Authorities Industry Consumer Associations Companies Organisations

Seller of the package (the party who receives the

payment directly e.g. travel 44% 22% 20% 56%

agency)

The provider of the service where the difficulty arises (who may receive the payment

indirectly, e.g. airline or hotel 52% 67% 72% 70%

which is not organising the package )

The organiser of the package

(tour-operator) 93% 85% 72% 74%

Other 4% 9% 4% 7%

Source: Public consultations on the revision of the Package Travel Directive, 2010

Even though service providers are often at the site at which difficulties arise, the traveller has no direct contractual relationship with them and may also face some communication problems, especially if the service provider is based abroad. For this reason, under option 5, the liability for providing prompt assistance to travellers in difficulty would be placed on the organiser. The fact that the organiser may in practice require the assistance of the service provider in providing immediate assistance is a separate issue. Similarly option 5 would also entail that nothing in the revised Directive shall affect the rights travellers have as "passengers" against the air or other carriers or other liable parties as defined in Regulations (EC) No. 2004/261, (EC) No. 1371/2007 i, (EC) No. 1177/2010 i or (EC) No. 181/2011.

2.4.4. Type of liability for proper performance of the contract (strict or fault based liability) and waivers of liability

There is a strong preference of Member State authorities and consumer stakeholders for a strict liability approach. 78% of MS authorities opted for holding the responsible party liable simply for non-performance against what was promised in both contract and marketing materials. Therefore, the option would ensure a model based on a strict liability approach with limitations where the organiser proves that the lack of conformity or the improper performance is attributable to the traveller or to a third party unconnected with the provision of the services contracted for and is unforeseeable or unavoidable, or due to unavoidable and extraordinary circumstances. With the exception of damages caused intentionally or with gross negligence as well as damages for personal injuries, option 5 would allow that the contracts may limit compensation to be paid by the organiser. However, such limitation would not be allowed to be unreasonable and would only be valid if it does not limit damages to an amount less than three times the total price of the travel package. Insofar as international conventions binding the Union limit the extent or the conditions under which compensation is to be paid by a service provider, the same limitations would apply to the organiser.

2.4.5. Obligation to provide alternative arrangements

Where transport is included in the package, in most cases also carriers are obliged to provide compensation and assistance in case of delays, cancellations or accidents to passengers under

EU rules on passenger rights 156 .

These rights of passengers are in parallel to the right consumers have towards organisers if a contract is not performed as agreed. Thus, consumers may in many situations choose whom to turn to: the carrier or the organiser. This situation where several parties (i.e. transport provider and a package organiser) are obliged to provide compensation and assistance, might lead to unjustified cost for certain businesses, in particular in cases where it is difficult for an organiser to obtain redress from the service provider (e.g. a transport provider) who is the party closest to the problem (delay, cancellation, etc.). For consumers, the choice on whom to seek assistance from depends on the situation (e.g. when a flight is cancelled, it is probably easier to contact the tour organiser, who normally has an overview of all the components of the package and who can, for instance, contact the hotel if one or more nights will be missed, than for the consumer to address such problems to the air carrier). The extent of the claim might also differ depending on whether it is directed against the service provider or the

156 E.g. Regulations (EC) No. 2004/261, (EC) No. 1371/2007 i, (EC) No. 1177/2010 i or (EC) No. 181/2011.

organiser. (EU passenger rights provide for a flat rate compensation whereas under the PTD a consumer may also claim other damages).

Currently there is no limitation to the organiser's liability to provide alternative arrangements for the organiser's duty to provide for the continuation of the package in case of force majeure events of long duration which prevents the consumer from returning home according to the planned schedule. This is clearly a burdensome rule for businesses, since such situations are per definition beyond the control of organisers or transport providers. ECTAA estimated that, during the 2010 volcanic ash crisis, tour operators had to provide care and assistance to the stranded passengers, including their repatriation, for an overall cost of €380 million. The EU rules on passenger rights provide for a limitation of such assistance in case of bus, rail or maritime transport. In its proposal for an amendment to the Air Passenger Rights Regulation the Commission proposes to limit the carrier's liability to EUR 100 per night and three nights per traveller. The PTD lacks a similar limitation of the organiser's liability in such situations.

Several industry stakeholders have argued that the current rules (Article 4(7)) put a disproportionate burden on the organiser, since the liability to provide alternative arrangements is not capped or limited. Furthermore, it is argued that the organiser's possibility to seek redress from the service provider, have been obstructed by contractual clauses in the contract between the organiser and the service provider.

To remedy this problem, option 5 would provide that, where it is impossible, for reasons of unavoidable and extraordinary circumstances, to ensure the traveller's transport back to the place of departure within the time set out in the contract, the organiser must provide appropriate arrangements for the traveller's continued stay at the place of destination. However, the obligation would be limited to three days and to EUR 100 per night and traveller.

2.4.6. Insolvency protection

The responsibility for providing evidence of security should lie with the organiser. Information on the insolvency protection obligation as well as the name of the entity providing the insolvency protection and its contact details should be included in the package travel contract.

The different national rules regarding the obligation to provide insolvency protection have also resulted in a situation where some retailers or organisers who are trading cross-border had to pay several times for insolvency protection which already had been secured in another Member State.

Option 5 would entail an introduction of a principle of mutual recognition of insolvency protection schemes among Member States, in order to prevent instances where traders are

required to have "double" insolvency protection 157 if selling packages in more than one

Member State. To reinforce the insolvency protection schemes in the Member States as well as consumer protection, option 5 will also oblige Member States to establish adequate and

157 As reported in the Commission staff working document on the result of the performance checks of the internal market for services (construction, business services and tourism) (SWD(2012) 147 final)

effective means to control that organisers are fulfilling the requirements in paragraph and that national enforcement authorities cooperate in this respect.

2.4.7. Method of insolvency protection

The idea of a pan-European insolvency fund was widely rejected by the overwhelming majority of stakeholders in the public consultation. Moreover, industry and MS are likely to be reluctant to lose control of their national schemes.

There are currently three main types of national schemes i.e. national guarantee funds, bank guarantees and insurance schemes. 60% of the MS authorities indicated that the schemes operating in their MS were effective or very effective. However, the problem of different insolvency schemes was highlighted as one of the obstacles for cross-border trade.

The IA would therefore analyse two sub-options:

• - 

  mandatory national insolvency funds in all MS

• - 

  the current system, giving flexibility as to the method of providing insolvency protection.

Member States would still have to ensure that their national insolvency protection schemes are effective and are able to guarantee the prompt repatriation or the refund of all travellers affected by the organiser's insolvency. In cases where insolvency protection may be provided in the form of a guarantee or an insurance policy, it would be clarified that such security cannot be limited to attestations issued by credit institutions and insurers established in a particular Member State.

To solve the cross-border problems both sub-options would ensure that there is a nondiscriminatory treatment of foreign traders or mutual recognition of foreign based traders which can prove that they have provided efficient and full security for their packages in another Member State.

Thus, in order to facilitate the free movement of services, Member States would be explicitly obliged to mutually recognise an organiser's insolvency protection existing under the law of the Member State of establishment.

To facilitate the supervision of organisers operating cross-border and the mutual recognition mechanism option 5 would also lay down rules on the cooperation between relevant national authorities, including the creation of central contact points.

2.5. Access to justice

European consumer associations have reported that a large number of the complaints received are within the area of travel services. For instance, data provided by the European Consumer Centres (ECCs) show that the most frequent type of consumer complaint, out of 552 cross-border complaints related to the PTD in 2011, is related to package travels not performed at all or which are not in conformity with the booking. The current PTD does not set up any contact points for complaints, minimum prescription periods or mechanisms for out of court dispute resolutions, which have been criticized by and called for by various consumer organisations/bodies, e.g. the ECCG opinion of 21 April 2010 158. See Annex 3 for further details. Against this background, option 5 will entail the introduction of a contact point for the traveller, namely a right for the traveller to address messages, complaints or claims directly to the retailer through which the package was purchased if he chooses not to address the organiser directly as well as a minimum prescription period of one year.

3. Proposed legislative measures in option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6)

This option includes all the legislative measures of Option 5 supplemented with an extension of the scope of the PTD to cover "multi trader" travel arrangements.

3.1. Scope of the Directive

There is a clear indication that stakeholders are in favour of extending the scope of the current Directive to include not just pre-arranged packages, but also most of the so-called tailor made combined travel arrangements, including the "multi-trader" travel arrangements. The inclusion of transport and tourist activities where the service covers a period of less than 24 hours received was supported only by consumer organisations.

Table 7: Travel arrangements that should be covered by the PTD

Travel-related Products or MS Industry Companies Consumer Arrangements Authorities Associations Organisations

Accommodation, transport and/or other tourist services purchased as a package for an inclusive price 89% 93% 100% 96% (i.e. current definition of a package travel under the PTD)

Accommodation, transport and/or other tourist services purchased on the internet from the same site 93% 78% 64% 96% where consumers can assemble the content of the package

Accommodation, transport and/or other tourist services purchased on the internet from different sites 67% 57% 64% 93% which are clearly linked on their web pages

Source: Public consultations on the revision of the Package Travel Directive, 2010

158 http://ec.europa.eu/consumers/empowerment/docs/20100421eccg_opinion.pdf

This inclusion of "multi-trader" travel arrangements has been supported by a high number of

stakeholders in the public consultation 159 , including stakeholders from the travel industry and

Member States. 64% of companies, which might be expected to be the stakeholder group least in support of including combined travel arrangements within the scope of the legislation, indicated that they thought tailor-made combined travel arrangements bought from a single website ("One-trader" packages) as well as combined travel arrangements bought from interlinked websites ("multi-trader" travel arrangements) should be included in the scope of the Directive.

This figure was higher for MS authorities (93% for packages from a single site, or 67% for linked sites) and, as might have been expected, the options gained significant support from consumer organisations, with support for both options ranging from 88% to 96%.

The main arguments from these stakeholders are that the "multi-trader" travel arrangements should be covered in order to create a level playing field, to protect consumers going on holiday and to avoid that consumers are misled (believing that they are purchasing a protected package while they are not).

However, it is clear that the option of covering all "multi-trader" travel arrangements raises several legal and technical issues, given that traders acting solely as intermediaries might not be able to guarantee the performance of all services included in the travel combination.

Based on the above, option 6 includes Option 5 (all proposed policy measures) supplemented with an extension of the scope of the PTD with a graduated approach:

• - 

  "multi-trader" packages would be subject to the same regime as pre-arranged packages (including full liability for the performance of the package and the obligation

  to procure insolvency protection),

-"multi-trader" assisted travel arrangements that do not display typical features of packages, would be subject to a lighter regime, i.e. the obligation to provide a security for their own insolvency and that of service providers combined with policy option 3 B (obligation to state in a clear and prominent manner that each service provider will be solely responsible for the correct contractual performance of its service and that the traveller will not benefit from the rights granted to package travellers except for insolvency protection. In practice, to determine whether "multi-trader" travel arrangements display typical features of a package would have to be based on an assessment of how the travel arrangement was offered for sale. The objective and alternative criteria for this assessment would be that a combination of travel services

is:

(i) purchased from a single point of sale within the same booking process,

(ii) offered or charged at an inclusive or total price,

(iii)advertised or sold under the term 'package' or under a similar term,

159 http://ec.europa.eu/consumers/rights/docs/20100430_summary_responses.pdf

(iv) combined after the conclusion of a contract by which a trader entitles the traveller to choose among a selection of different types of travel services, or

(v) purchased from separate traders through linked online booking processes where the traveller's name or particulars needed to conclude a booking transaction are transferred between the traders at the latest when the booking of the first service is confirmed.

In situations where a website provides no targeted offer for additional travel services for the same trip or holiday or only “editorial links” or pure "advertising links" no particular rules seem to be required.

3.2. Obligations and Liabilities

Under Option 6 three sub-options concerning the obligations of the professional parties involved in "multi-trader" packages are examined with regard to:

• - 

  providing information;

• - 

  proper performance of the contract and

• - 

  providing insolvency protection.

In the case of "multi-trader" packages, the different components of the trip are sold from different traders, often under legally distinct contracts and as a consequence the distinction between seller/retailer and organiser would be blurred. Therefore the following sub-options concerning the above mentioned liabilities/obligations are considered:

Sub-option 1: the liability is placed on a single provider (a trader selling the first component who links to facilitate the purchase of the other components) who would be considered as an "organiser";

Sub-option 2: liability is placed on each involved provider for the service segment they offer;

Sub-option 3: joint liability of all the involved traders unless the parties designate only one trader to be liable.

4. Proposed legislative measures in option 7 – Modernisation of the Directive and full coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7)

This option includes Option 5 and 6 whilst subjecting also all "multi-trader" assisted travel arrangements to the full liability regime under the revised PTD. This means that "multitrader" assisted travel arrangements would be subject to the same regime as pre-arranged packages, "one trader" packages and "multi-trader" packages, including full liability for the performance of the services included in the travel arrangement and the obligation to procure

insolvency protection. ANNEX 5

Detailed assessment of policy options

1. Policy option 1 (Status Quo) - Baseline scenario (BS)

1.1. Baseline compliance costs for industry

Option 1 is effectively the baseline against which any potential changes under the other policy options and their impacts will be assessed. It is therefore important to clearly set the baseline compliance costs for the industry. This estimate will be particularly used to assess the impact of the policy options which change the scope of the PTD (PO4, PO5 and PO6).

There has not been sufficient quantitative information provided by various stakeholders (at the level of detail required) or otherwise available to enable a wholly quantitative baseline to be developed. Furthermore, there are significant differences across Member States concerning the transposition of the PTD and the market structure. Therefore, it was necessary to make a series of assumptions to provide the basis for the analysis. A series of “average” costs per business have thus been developed - most of which have been based on qualitative data provided by various stakeholders.

The uncertainty around these averages means that, for the impact assessment, relatively wide ranges have been provided for most variables and a sensitivity analysis has been undertaken by developing ‘high’, ‘medium’ and ‘low’ estimates, where possible, in order to reflect the possibility of costs varying from the average.

The following compliance costs have been identified and estimated:

• - 

  obtaining insolvency protection

The insolvency protection of customers may take different forms: participation in a guarantee fund (e.g. Belgium, Netherlands, etc.), individual insurance (e.g. Germany) or bank guarantees. The cost of the insolvency protection is based on the credit standing/credit worthiness of the tour operator. Guarantee funds, insurance businesses/banks will carry out a financial/risk evaluation of the balance sheets of the tour operators and determine their level of risk.

For example, in the UK, the basic cost of participation in the insolvency scheme amounts to £2.50 (€2.9) per passenger. In addition to this basic cost, many package organisers are also

required to supplement the security of the scheme by way of bonding. 160 Information provided

by a large tour operator at the European market suggests that the insolvency protection costs

160 UK Department for Transport, Regulating Air Transport: Consultation on Proposal to Update the Regulatory

Framework for Aviation, December 2009.

around €3-€3,50 per package. Therefore this range has been taken forward in the estimates. This figure includes also indirect administrative costs currently associated with obtaining insolvency protection (e.g. providing information to audit inspections).

• - 

  Providing information to consumers (including making changes to brochure)

See section on administrative costs and annex 6 for administrative cost calculations.

• - 

  Proper performance of the contract

In order to cover the liability for the proper performance of the contract, tour operators usually contract specific liability insurances. Their costs vary depending on the country where the tour operator is based, the type of risks to be insured, deductible per loss and limits of

compensation per damage. Based on the information provided by industry stakeholders 161 the

total costs related to the performance of the contract have been estimated at €2.50 (see box 1).

Box 1 Examples of costs relating to the performance of the contract

• 1. 

  Liability Insurance concerning Personal or Material Damages under the Contract

This insurance cover personal or material damages that are incurred during the course of the travel which are the fault of the tour operator or his contractual service providers caused by his or their acts (negligence/intent) or omissions.

Insurance costs for the tour operator (plus any taxes):

• - 

  Average premium per customer: €0.50

• - 

  Minimum premium per contract: €300

Extra costs for insuring special risks such as diving, trekking, skiing etc.

• - 

  Average premium per customer: €1.30 162

• - 

  Minimum premium per contract: €1200

• 2. 

  Liability Insurance concerning Financial Damages under the Contract

This insurance covers financial damages that the customer incurs during the course of travel (e.g. loss of earnings, loss of vacation time or unnecessary expenditures for a travel that was not performed due to overbooking) which are the fault of the tour operator or his contractual service providers caused by his or their acts or omissions.

Insurance costs for the tour operator (plus any taxes):

• - 

  Average premium per customer: €0.50

• - 

  Minimum premium per contract: €300

161 European Travel Agents and Tour Operators Association (ECTAA), German Travel Association (DRV) and

Association of British Travel Agents (ABTA).

• 3. 

  Liability Insurance concerning rescue or extra costs as well as abatement costs

This insurance covers:

• a) 

  costs for rescue measures or alternative services that might become necessary e.g. in case a contractual partner/agent terminates services because of insolvency and the tour operator has to make new arrangements in order to fulfil his contract with the customer

• b) 

  cases where the consumer makes use of his right to claim a compensation for non-performance of the contract (e.g. no warm water in the shower or a construction site near the hotel etc.)

Insurance costs for the tour operator (plus any taxes):

• - 

  Average premium per customer: €0.70

• - 

  Minimum premium per contract: €2,500

In summary, if a tour operator makes use of all of these insurance options he will face the following costs:

• - 

  Average premium per customer: €3.00

• - 

  Minimum premium per contract: €4,000

• - 

  As the insurance covering special risks such as diving, trekking, skiing etc. only applies to some packages, an assumption of the average cost of €2.50 has been taken forward in the IA.

  • - 

    Assisting consumers in difficulty

Assuming costs of €100 to €200 per case and a 1% pay out rate (1 in 100 cases requiring assistance), dividing the costs by 100, give per package costs of €1 - €2.

• - 

  Cross border (due to the differences in national legislations)

See section on administrative costs and the SCM sheet (annex 6) developed for cross-border administrative cost calculations. These costs are not incurred by all businesses and could indeed be higher depending on assumptions made (see table 4).

• - 

  Contract changes - essential terms (and other)

A nominal figure of €1 - €1.5 has been used for aspects where industry will clearly carry out these activities.

Table 1 Baseline compliance costs incurred per package to comply with the PTD

Costs associated with:

Compliance Costs

Obtaining insolvency protection €3 - €3.5 Administrative costs- providing information to consumers (including making

changes to brochure) €3

163

Assisting consumers in difficulty €1- €2

Proper performance of the contract €2.5

Contract changes - essential terms (and other) €1- €1.5

Total €10.5-€12.5

For the impact assessment, an average cost of €10.5 - €12.5 per package will be taken forward, out of which €3 represents administrative costs. It is recognised that businesses trading cross-border would incur the additional administrative costs of €2 associated with cross border trade (out of which €0:50 is recurring cost).

1.1.1. Baseline administrative costs for businesses

The Table below sets out the information requirements under the existing PTD, separating out the “business as usual” costs from the actual burden resulting from the PTD requirements.

Table 2 PTD information requirements

PTD requirements Business Additional as usual burden

Pre When a brochure is made available to the consumer, it shall

contract indicate in a legible, comprehensible and accurate manner both the price and adequate information concerning:

(a) the destination and the means, characteristics and categories of transport used

(b) the type of accommodation, its location, category or degree of comfort and its main features, its approval and tourist classification under the rules of the host Member State concerned

(c) the meal plan

(d) the itinerary

(e) general information on passport and visa requirements for nationals of the Member State or States concerned and health formalities required for the journey and the stay;

(f) either the monetary amount or the percentage of the price which is to be paid on account, and the timetable for payment of the balance

163 See annex 6 for the detailed calculation of administrative costs.

PTD requirements Business Additional as usual burden

(g) whether a minimum number of persons is required for the package to take place and, if so, the deadline for informing the consumer in the event of cancellation.

(h) possibility to revise (prior to concluding contract) any of the particulars set out in brochures must be stated therein if later wish to revise things such as price

(a) the travel destination(s) and, where periods of stay are involved, the relevant periods, with dates;

• b) 

  the means, characteristics and categories of transport to be used, the dates, times and points of departure and return;

(c) where the package includes accommodation, its location, its tourist category or degree of comfort, its main features, its compliance with the rules of the host Member State concerned and the meal plan

(d) whether a minimum number of persons is required for the package to take place and, if so, the deadline for informing the consumer in the event of cancellation;

(e) the itinerary;

(f) visits, excursions or other services which are included in the

In the total price agreed for the package; contract (g) the name and address of the organizer, the retailer and,

where appropriate, the insurer;

• h) 

  the price of the package, an indication of the possibility of price revisions (and how they should be calculated) under Article 4 (4) and an indication of any dues, taxes or fees

chargeable for certain services (landing, embarkation or Partial

disembarkation fees at ports and airports, tourist taxes) where such costs are not included in the package;

(i) the payment schedule and method of payment;

(j) special requirements which the consumer has communicated to the organizer or retailer when making the booking, and which both have accepted;

(k) periods within which the consumer must make any complaint concerning failure to perform or improper performance of the contract.

(a) the times and places of intermediate stops and transport Before connections as well as details of the place to be occupied by the departure traveller, e.g. cabin or berth on ship, sleeper compartment on

train;

PTD requirements Business Additional as usual burden

(b) the name, address and telephone number of the organizer's and/or retailer's local representative or, failing that, of local agencies on whose assistance a consumer in difficulty could call. Where no such representatives or agencies exist, the consumer must in any case be provided with an emergency telephone number or any other information that will enable him to contract the organizer and/or the retailer;

(c) in the case of journeys or stays abroad by minors, information enabling direct contact to be established with the child or the person responsible at the child's place of stay;

(d) information on the optional conclusion of an insurance policy to cover the cost of cancellation by the consumer or the cost of assistance, including repatriation, in the event of accident or illness.

Information requirements identified as representing an additional burden in the right handcolumn involve:

researching the insurance market and providing details to travellers;

researching local agencies and providing telephone numbers of those who might provide assistance in the event a traveller gets into difficulty;

researching information on passport and visa requirements and providing information to travellers;

reprinting of brochures when prices or other (adequate) information changes;

providing details of retailer/organiser and insurer; and

setting out in brochures the possibility for changing any particulars laid out (incl. price).

Table 3 provides the total sum of the administrative costs associated with the existing PTD information requirements. The total baseline administrative costs have been estimated at €421 million of which €409 million are administrative burden (the remaining costs are business as usual costs i.e. the costs that businesses would incur anyhow, even in the absence of legal obligations e.g. information about the destination or price of a package). The detailed calculations are presented in the SCM spread-sheets (see annex 6). See also Box 2 explaining the assumptions of the calculation.

Table 3 Summary of administrative costs associated with information requirements

Total administrative costs ~€421 million

Total administrative burden ~€409 million Total business as usual ~€12 million

Average cost per business ~€4,700

Average cost per package ~€2.63

Box 2 Methodology and assumptions for calculations of administrative costs

• There are approximately 90,000 tour operators/travel agents in the EU and these are split between 45%

retailers, 35% tour operators/retailers, 20% tour operators. The information is provided at the point of sales. It is therefore assumed that 80% of the businesses (retailers and tour operators/retailers) will bear these

costs;

• A wage rate of €15 per hour is used for a “clerk” to adapt information materials for compliance with the

PTD;

• Changes to materials/templates are assumed to take around 10 hours (based on a breakdown of the specific

tasks required);

• The activities are done for every sale but it is assumed that software is adapted to import information from

the booking process into the contract. Therefore the frequency of 3 times a year has been assumed;

• It has been assumed that only large tour operators use brochures (0.5% of all tour operators). Therefore, 250

businesses will bear the costs of preparing and printing the brochures.

• The cost of reprinting brochures is based on estimate calculated from UK figures on reprints (€ 1 per reprint)

and consistent with Dutch business cost estimate of approximately € 1.7million. However, they are very different to German estimate of € 5.63 to 6.25 per brochure for some businesses.

These assumptions were developed by the Consultant and verified by selected industry stakeholders (European Travel Agents and Tour Operators Association (ECTAA), German Travel Association (DRV) and Association of British Travel Agents (ABTA).

1.1.2. Baseline cross-border administrative costs for businesses

An attempt has been made to quantify the costs that may be arising for businesses in order to trade cross border, where these costs are driven primarily by the different information requirements which are applicable in different Member States. Table 4 provides the administrative costs relating to cross border trade. The baseline administrative burden in a cross-border context (due to the minimum harmonisation of the current Directive, the businesses have to get acquainted and comply with various different national rules) have been estimated at of € 26 million (€21 million of one-off costs and €5 million of recurring costs). A detailed explanation of the assumptions is presented in Box 3. The calculations underlying these figures are provided in the SCM spread-sheets (see annex 6).

Table 4 Summary of administrative costs associated with cross border trade

Baseline Cost/€

One off administrative costs for researching MS requirements

and legal advice: 21 million

Recurring administrative costs: 5.1 million

Recurring administrative burden: 0

Recurring business as usual costs 5.1 million

Total administrative cots 26,1 million

Average cost per business involved in cross-border trade 1469

Average cost per package 1.65

Bo Box 3 Methodology and assumptions for calculations of cross-border administrative costs

• The number of businesses trading cross border in different Member States is based on the figures estimated

in Eurobarometer Flash 278 (2009) which carried out a survey into business attitudes towards enforcement and redress in the internal market and collected information on the extent to which businesses engaged in cross border trade. The survey did not focus specifically on the travel sector. Estimates were that 14% of businesses engaged in cross border trade in 4 or more Member States (4 used for estimates), 6% in 2-3 (3 used in estimates) and 5% in one other Member State (suggesting a total of 25% of businesses being

involved in cross border trade);

• There are approximately 90,000 tour operators/travel agents in the EU which sell package travels 164 and

these are split 45% retailers, 35% tour operators/retailers, and 20% tour operators. Not all travel agents and tour operators will be responsible for providing information at the same time as retailers and tour operators work together. We therefore assume 80% of the businesses will be responsible, based on figures for retailers

and tour operator/retailers;

• 10% of businesses’ sales are cross-border sales (based on responses to the public consultation) and this % is

applied to the market for pre-arranged packages);

• Four key tasks are identified with regard to trading cross border:

• Researching requirements in each Member State where a business wishes to sell. This is assumed to

take five hours per Member State at a wage rate of €75 per hour;

• Adapting pre-contractual information to meet requirements in each Member State: This is assumed to

take four hours per Member State at a wage rate of €15 per hour per Member State;

• Adapting contract materials to meet requirements in each Member State: This is assumed to take one

hour per Member State at a wage rate of €15 per hour per Member State;

• Adapting pre-departure material to meet requirements in each Member State: This is assumed to take

one hour per Member State at a wage rate of €15/hour per Member State.

These assumptions were developed by the Consultants and verified by the selected industry stakeholders European Travel Agents and Tour Operators Association (ECTAA), German Travel Association (DRV) and

Association of British Travel Agents (ABTA)

1.1.3. Functioning of the Internal Market and competitions

As consumers get more internet savvy, the sales of combined travel arrangements are likely to increase. This would further negatively impact on the functioning of the internal market and

164 Eurostat structural business statistics: 90,000 businesses, an assumption of 80% selling package travels is

taken into account.

competition where businesses selling similar products have to comply with different rules. The compliance costs have been estimated at €10.5 - €12.5 on the price of a package.

Similarly, businesses wishing to sell cross-border would continue to bear significant costs. They would need to check the relevant national regulations in place in different Member States and ensure compliance of their travel products with the various regulatory requirements in these countries. This results in additional costs per business for selling cross border of €1469. However, it is likely that Member States take action at local levels to protect their citizens (e.g. by extending their national legislation to cover more types of packages/products). This would result in further regulatory fragmentation and further distortion of the Internal Market.

1.1.4. Impact on SMEs

In the absence of action at EU level, micro, small and medium sized businesses would continue to suffer disproportionally from the absence of fair competition on the market and costs stemming from unclear and fragmented rules. The costs of clarifying legal provisions and finding out about the rules applicable to cross-border contract, weigh more heavily, in relative terms, on micro and small businesses.

1.1.5. Impacts on consumers and households

There will be no direct costs to consumers from retaining the status quo. However, consumers would continue to suffer further detriment as combined travel arrangements get more popular.

According to the Consumer Detriment Study in the area of dynamic packages 165 , combined

travel arrangements cause more detriment than any other types of travel arrangements. Not only is the incidence of problems for combined travel arrangements (8.2%) much higher than for pre-arranged packages (3.1%) and independent travel arrangements (1.6%) but also the gross detriment per problem associated with combined travel arrangements is much higher (€593 per package) than that associated with pre-arranged packages (€191 per package). This could be partially remedied if Member States decide to enhance the protection at national level. On the other hand, the increased regulatory fragmentation could lead to higher prices and limited choice for consumers as more businesses would refrain from cross-border operations.

1.1.6. Impact on public authorities

No impact expected.

1.2. Assessment of relevant social impacts

This option is not expected to result in specific impacts in the employment and labour markets (i.e. new job creation, loss of jobs, etc.)

165 http://ec.europa.eu/consumers/rights/docs/study_consumer_detriment_dyna_packages_en.pdf.

1.3. Assessment of relevant environmental impacts

The continued re-printing of brochures, where this is solely the result of the Directive, would continue to impact on the environment.

Limited information provided by industry suggests that around 1.7 million brochures for one large business or 30 million brochures for one country (Netherlands) are re-printed solely to ensure compliance with the Directive. Extrapolating these figures across the numerous businesses across the EU involved in printing brochures would result in a significant amount of brochures being re-printed. The impact on these re-printed brochures on water resources, energy, emissions of VOCs, etc. are some of the undesirable environmental impacts which would continue to occur.

However, it should be borne in mind that the environmental impact of these brochures is likely to be insignificant when compared to the overall environmental impacts of the travel industry.

1.4. Assessment against objective

Policy Objectives Option Comments Rating*

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to With no action at EU level, Member States may take action at cross-border trade; local levels to protect their citizens (e.g. extending their

0 national legislation to cover more types of packages/products). This would result in an increased

regulatory fragmentation and additional costs for businesses.

Ensure a more competitive and Unfair competition between different players in the travel

fairer level playing field for the sector is likely to continue and possibly increase (e.g. with businesses operating in the travel the growing popularity of combined travel arrangements).

market. 0

Reduce unjustified compliance costs for With no EU action, the unjustified costs for businesses

businesses in the package travel market; 0 stemming from different provisions of the PTD would remain

unchanged.

Objective 2: To achieve a high level of consumer protection in the package travel sector, while respecting the freedom to conduct business, by:

Reduce consumer detriment and As consumers get more internet savvy, they may be expected increase transparency for travellers who to self-package or purchase combined travel arrangements buy combinations of travel services falling outside the protection of the PTD. This is likely to

currently not covered by the PTD by 0

addressing new market developments; result in more consumers mistakenly buying unprotected holidays believing that they purchase a protected package

travel.

Reduce consumer detriment 0 With no EU action, consumers will continue to bear costs

stemming from unclear and stemming from some unclear or outdated provisions such as

Policy Objectives Option Comments Rating*

outdated provisions. for example lack of foreseeability in relation to prices or uncertain liabilities of the retailer/organiser.

• * 

  Option Rating from -3 (extremely poor) to +3 (very highly effective)

2. Policy option 2: Guidelines

2.1. Assessment of relevant economic impacts

2.1.1. Functioning of the Internal Market and competition

A clarification of some of the definitions in the PTD could, in theory, result in a clearer segmentation between PTD covered and non-PTD covered packages and thereon lead to fairer competition. However, guidelines are by definition "non-legally binding" and hence it cannot be guaranteed that these clarifications will indeed be taken up by businesses and Member State authorities.

Similar to BS, there is likely to be increased regulatory fragmentation as Member States may take action at local levels to protect their citizens (e.g. extending the protection rules to cover more types of travel arrangements).

Overall, PO 2 is unlikely to significantly enhance the functioning of the internal market; in particular, as it fails to sufficiently address the potential for future regulatory fragmentation which impacts on the functioning of the internal market or provide a fair competitive environment for businesses operating in the travel market.

2.1.2. Compliance costs for businesses

There should be no overall change in costs incurred by industry as a result of the guidelines being issued. This is because the guidelines essentially relate to clarifications of the existing PTD, thus any costs arising are those which should have been incurred already as part of the BS.

The main benefits to businesses of introducing guidelines will arise from increased regulatory clarity. However, the effects of clarification will depend on the actual use that national authorities and courts make of it.

2.1.3. Administrative costs for businesses

The guidelines do not impose additional information requirements on businesses, but clarify the existing PTD. Hence, there is no actual administrative burden associated with PO 2, as the above costs would have been incurred anyway. While some businesses may need to change their current practices in order to adjust to clarifications set out in the guidelines, the extent of these changes is not known and these costs should in theory also have been incurred in the status quo situation.

2.1.4. Impact on SMEs

Very little change compared to the BS.

2.1.5. Impact on consumers and households

Public consultation with stakeholders indicates that most of them show low support for the option of issuing guidelines to businesses (percentage in favour across all stakeholders

ranging from 11% - 37%, where the 11% was from consumer organisations) 166 . This

suggests that the introduction of guidelines is not perceived as resulting in increased consumer protection. Of course, it is possible that consumers may gain some clarity from guidelines and also be better protected due to better implementation (by businesses) and enforcement (by Member State Authorities) of the PTD; however, these are broadly indirect benefits which are not quantifiable and which would not allow to durably tackle the lack of legal clarity at EU level, concerning a number of combined travel arrangements.

2.1.6. Impact on public authorities

No change compared to the BS.

2.2. Social impacts

PO2 is not expected to result in any specific impacts in the employment and labour markets (e.g. new job creation, loss of jobs, etc.)

2.3. Environmental Impacts

The continued re-printing of brochures – as an indirect result of the Directive - would continue to impact on the environment as under status quo.

2.4. Assessment against objective

Policy Objectives Option Comments Rating*

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to cross While it cannot be stated for certain to what extent border trade; Member States would make use of the guidelines, it is

0 reasonable to expect that their introduction might result in fewer Member States taking independent regulatory

actions to protect their citizens compared to the baseline scenario.

166 http://ec.europa.eu/consumers/rights/docs/20100430_summary_responses.pdf.

Policy Objectives Option Comments Rating*

Ensure a more competitive and fairer Unfair competition between different players in the level playing field for the businesses 0/+ travel sector is likely to continue. operating in the travel market.

Reduce unjustified compliance costs for There should be no overall change in costs incurred by businesses in the package travel market; industry as a result of the guidelines being issued.

0 However, some clarification of existing rules might

bring ,some minor savings for the industry,

Objective 2: To achieve a high level of consumer protection in the package travel sector by:

 Reduce consumer detriment and increase Similarly to the baseline scenario, as consumers get transparency for travellers who buy more internet savvy, they may be expected to selfcombinations of travel services currently package or purchase combined travel arrangements not covered by the PTD by addressing 0 falling outside the protection of the PTD. new market developments;

Reduce consumer detriment stemming Guidelines may slightly increase the clarity of the

from unclear and outdated provisions. 0 current rules.

*Option Rating from -3 (extremely poor) to +3 (very highly effective)

3. Policy option 3: Package Travel Label (PO3A) and/or "This is not a package" disclaimer (PO3B), add-on option to other policy options

Two sub-options have been envisaged:

• Sub-option A: Introduction of a Package Travel Label

• Sub-option B: Introduction of a disclaimer "This is not a travel package"

3.1. Assessment of sub-option A - Package Travel Label

3.1.1. Functioning of the Internal Market and competition

The introduction of the PTD label is likely to increase cross border trade as consumers increasingly recognise that the same logo (and legislation) applies across Member States.

It would also contribute to a more even playing field amongst the different businesses in the travel sector. Sellers of pre-arranged packages whose services offer high levels of protection should have reduced trouble competing with sellers of combined travel arrangements that offer little or no protection.

3.1.2. Compliance and administrative costs for businesses

Companies selling packages would need to get familiar with new information requirements and adapt their web-pages and promotional materials to display the Package Travel Label. The average one-off cost for adapting a company's website and /or printed materials has been

estimated at €500 167 . These costs would potentially affect 72,000 companies selling packages

at present with the overall one-off costs amounting to €36 million. As this is an add-on option, the final costs would depend on the policy option chose.

3.1.3. Impact on public authorities

Public authorities will be responsible for proper enforcement of the rules and monitoring the correct use of the label. This does not require setting up a designated certification body. This task could be done by the national bodies enforcing the marketing and other rules in this sector.

The European Commission would have to ensure to have the copyright on the logo and its registration as a trade mark. This would represent a small cost for the institution of the order of few thousands of euros.

3.1.4. Impact on consumers

The study on consumer detriment in the area of dynamic packages shows that 67% of consumers who used a combined travel arrangement that was not covered by the PTD

wrongly believed that they were protected. 168 There is henceforth a large share of

consumers which would substantially benefit from a better understanding of their key rights, as this would help to reduce the consumer detriment estimated as approximately € 1 billion per year. The introduction of the label may help consumers in having a better vision of their rights concerning package travels.

The Commission ran an independent behavioural study with the main purpose to understand the potential effectiveness of such a label, hereunder to which extent consumers would click on the label in an Internet booking process and how the reading of the key rights connected to the label would help consumers to better understand their rights and avoid detriment.

167 The Impact Assessment for the Proposal for a Regulation of the European Parliament and of the Council on a

CommonEuropean Sales Law estimated the one-off cost for adapting a company's website to display a disclaimer forming a consumer about the application of the European contract law has been estimated at€500.

168 Study on Consumer Detriment in the area of Dynamic Packages, The European Commission Health

  and Consumers DG, prepared by London Economics, November 2009.

The main results of the study are not positive in this sense. Consumers 169 went through a

virtual booking process in which they were asked to book a flight and a hotel. Different scenarios were tested, in which consumers at some point were presented with no label or with different sizes and positions of different possible labels. A click on the label brought the consumer to a list of 10 key rights which stem from the provisions of the PTD. The best result was obtained when the label was flashy and dynamic: 3.1% of the respondents clicked on it. Consumers who clicked on the label had a better understanding of each of the 10 key rights compared to consumers who did not click on the label. Asked to select the right answer, consumers who clicked on the label selected the right answer from 4.4% to 19.2% more often than the other consumers. The average for the 10 key rights is 11.4%.

Given these results, and knowing that about 25% of the market is online, the maximum impact (assuming that an improvement in the knowledge of the rights would prevent the share of consumers who wrongly believe they are protected to suffer detriment) that the label can have on reduction of consumer detriment is 25% x 3.1% x 11.4% x € 1 billion = € 883,500 per year.

There is also a difference among consumers who noticed the logo during the booking and consumers who did not.

Asked to declare if they think they are protected by European legislation, consumers who noticed the logo (53.6% of the total) selected the correct answer 7.5% more often than consumers who did not notice the logo. Conservatively assuming that 5% of these consumers will check their actual rights and will avoid possible detriment, and assuming that this result also holds for consumers who will see the label in print when purchasing packages in brick-and-mortar situations, further reduction in detriment is 53.6% x 7.5% x 5% x € 1 billion = € 2,010,000.

Overall, benefits for consumers stemming from the label are of the order of € 3 million every year. It is straightforward to see that it would be impossible to off-set the costs for businesses (€ 75 million one-off and € 58 million every year), even in the case of 100% of consumers

clicking on the label. 170

There may some benefits if an awareness campaign would promote the label and would also improve knowledge of key rights for the consumers clicking on the label (i.e. an increase not only in the 3.1% of those who actually clicked on the logo, but also of those just 11.4% who correctly understood their key rights). It may also be that consumers would progressively become more familiar with the label and that these percentages might hence increase. This would indeed take some time.

3.1.4. Assessment of relevant social impacts

169 From 10 representative MS: Austria, Czech Republic, France, Germany, Ireland, Italy, Poland, Spain, Sweden

and the United Kingdom.

170 25% x 11.4% x € 1 billion + € 2,010,000 = € 30,510,000 per year, which is less than € 58,000,000.

Although, there would be some minor creation of (temporary) jobs (e.g. IT, printing, etc), Option 3 is not expected to result in specific impacts in the employment and labour markets (i.e. new job creation, loss of jobs, etc.).

3.1.5. Assessment of relevant environmental impacts

No environmental impacts are expected.

The re-printing of brochures – as an indirect result of the Directive - would continue to impact on the environment as under Option 1.

3.2. Assessment of sub-option B - "This is not a package" disclaimer

3.2.1. Functioning of the Internal Market and competition

This option would contribute to a more even playing field amongst the different businesses in the travel sector.

Sellers of non-protected packages pre-arranged packages whose services offer high levels of protection should have reduced trouble competing with sellers of combined travel arrangements that offer little or no protection.

3.2.2. Compliance costs for businesses

Travel services providers (hotels, car rentals, airlines, other transport companies) operating on the Internet and linking to booking process at other websites (that offer additional travel services) in a targeted manner in order to facilitate for the procurement of additional travel services before the initial booking process is finalised, would need to adopt their websites to display a disclaimer "This is not Package".

The average one-off cost for familiarising with new requirements and adapting a company's

website has been estimated at €500 171 .

171 The Impact Assessment for the Proposal for a Regulation of the European Parliament and of the Council on a

Common

Companies selling "one-trader" packages and ""multi-trader" travel arrangements" are likely to be affected by this option.

As it has been estimated, there are 72,000 companies selling pre-arranged packages. These companies are likely to sell also "one-trader" packages. It could be assumed that 50% of these companies i.e. 36,000 companies are selling their products online and could be impacted by

this sub-option. 172

In relation to "multi-trader" travel arrangements" this option is likely to capture online booking processes which are linked to facilitate in a targeted manner the procurement of additional travel services before the initial booking process has been completed, in particular:

• websites of airlines or other transport providers (including car rentals) from which a traveller has been redirected to purchase other travel components relating to accommodation and/or car rentals on linked/partner's websites; and

• websites of hotels from which a traveller has been redirected to purchase other components relating to transport (including car rentals) on linked/partner's websites.

Table 5 determining the number of businesses selling ""multi-trader" travel arrangements"

% Number

Assumed of Businesses

HOTELS

Total number of hotels and other accommodation across the EU-27 from which a package

could, in theory, originate 200,000

Number of hotels and other accommodation with an online presence 50% 100,000

Number of hotels and other accommodation with an online presence and linking to other

websites 25% 25,000

CAR RENTALS

Total number of car rentals across the EU-27 13,000

Number of car rentals with an online presence 50% 6,500

Number of car rentals with an online presence and linking to other websites 25% 1,625

AIRLINES

European Sales Law estimated the one-off cost for adapting a company's website to display a disclaimer forming a consumer about the application of the European contract law has been estimated at€500.

172 Eurostat indicates that 41% of businesses with over 10 employees in the accommodation sector (NACE Rev

1.1 H551-H552 and NACE Rev 2 I55) received orders on-line in 2009. No data is provided for other companies in the tourism/travel sector. It has been therefore assumed that 50% of tour operators/ travel agencies are selling packages online.

Total number of airlines across the EU-27 from which a package could, in theory, originate 300

Number of airlines with an online presence 80% 240

Number of airlines with an online presence and linking to other websites 75% 180

ALLOTHER TRANSPORT (EXCEPT AIRLINES AND CAR RENTALS)

Total number of all other transport across the EU-27 from which a package could, in

theory, originate 57,900

Number of other transport with an online presence (assume 50%) 50% 28,950

TOTAL number of companies with an online presence and linking to other websites 34,043

Overall TOTAL of Businesses 271,200

Box 4 Methodology and assumptions for estimating the number of affected businesses

• - 

  Based on Eurostat data, there were 201,802 hotels and similar establishments (this includes hotels, apartment hotels, motels, roadside inns, beach hotels, residential clubs, rooming and boarding houses, tourist residences and similar accommodation). This number does not, however, include “other collective accommodation establishments” which include holiday dwellings, tourist campsites, youth hostels, tourist dormitories, group accommodation, school dormitories and other similar accommodation - numbering around 237,000 across the EU-27.

• - 

  The estimate of the number of car rental businesses (13,000) is based on the basis the data in Eurostat’s

  Structural Business Statistics database 173 .

• - 

  The estimate of 300 airlines is based on Eurostat values; and

• - 

  57,900 transport businesses in addition to airlines and car rentals is based on the number of railway

  businesses (887) plus number of businesses involved in other passenger land transport 174 ( 37,000) plus

  number of businesses involved in water transport (includes freight) 175 (20,000).

Estimates of the number of businesses that would be affected are based on the following assumptions:

• - 

  businesses with an online presence: it has been assumed that 50% of hotels, other accommodation establishments, car rental and transport businesses (with the exception of airlines) sell their products online, while 80% of airlines have an online presence. The assumption on the proportion of hotels that

sell their services via the internet broadly corresponds with Eurostat data 176 , the relevant percentages for

other stakeholders are based on guesstimates as Eurostat does not provide data to sufficient level of

detail 177 ;

• - 

  businesses with an online presence and linking to other websites: it has been assumed that 25% of businesses with online presence link to other websites. However, in the case of airlines, it has been assumed that 75% of airlines with online sales link to other websites; and

173 The most recent data classed under NACE Rev 1.1 are used where available and for the remaining MS (with

the exception of Malta for which no data are available), estimates are derived on the basis of NACE Rev 2 data using an assumption that car rental businesses account for 20% of the total number of businesses renting and leasing all motor vehicles. This assumption is based on the average value for MS for which data are available.

174 Extrapolated on the basis of national GDP from Member State data in the Eurostat Structural Business

Statistics Database. This includes NACE Rev 1.1 codes I6021 and I6023 (other scheduled passenger land transport and other passenger land transport) and, as such, includes land passenger transport excluding railways and taxis.

175 Based on data from the Eurostat Structural Business Statistics Database (NACE Rev 1.1 code I61).

As estimated above, this option is likely to affect 36,000 companies selling "one-trader" packages and about 34,000 companies selling "multi-trader" travel arrangements. The total maximum cost of this policy option would therefore amount to maximum €35 million

depending on the policy option chosen. 178

3.2.3. Administrative costs for businesses

Administrative costs coincide here with compliance costs, see Annex 6.

3.2.4. Impact on SMEs

SMEs would absorb most of the costs, both in absolute values and relatively to their turnover, even though this percentage would be very small (0.2% and 0.01% respectively).

3.2.5. Competition in the Internal Market

The same impact as Sub-option A.

3.2.6. Impact on consumers

176 Eurostat indicates that 41% of businesses with over 10 employees in the accommodation sector (NACE Rev

1.1 H551-H552 and NACE Rev 2 I55) received orders on-line in 2009 (down from 48% in 2007 according to NACE Rev 1.1). 50% therefore seems a reasonable assumption.

177 For the rental sector, Eurostat data on businesses trading online are only available for the broad category of

NACE Rev 1.1 K which relates to ‘Real estate, Renting and Business activities’ (possibly including sub-sectors such as R&D, consultancy, industrial cleaning, etc.) and the proportion of businesses with more than 10 employees trading online was 9% in 2009 (down from 15% in 2007). However, this figure is unlikely to be representative of the car rental sector. The proportion of businesses with over 20 employees in the NACE Rev 2 data for the transport and storage sector (H49-H53) which received on-line orders was 11%. However, these data include irrelevant sub-sectors, such as transport by pipeline, removal services, postal services, warehousing and storage, etc. for which we expect the proportion of businesses trading online to be much smaller than in personal transport.

178 Based on the Eurostat data and certain assumptions it has been estimated that a number of companies

impacted could amount to 34,000. See annex 6.

As the costs related to the introduction of "This is not a travel package" disclaimer are one-off, it is expected that companies will absorb these costs.

Consumers would benefit from clear information.

The reduction of consumer detriment is expected to be much higher than under Suboption

A as a negative information would warn consumers who otherwise might purchase unprotected travel under the wrong impression that it is protected (as indicated before this is the case for 67% of users of combined travel arrangements).

3.2.7. Impact on public authorities

MS would be responsible for the enforcement of the rules. The same impacts as suboption A.

3.3. Social impacts

The same impact as Sub-option A.

3.3.1. Impact on fundamental rights

The same impact as Sub-option A.

3.4. Environmental impacts

The same impact as Sub-option A.

3.5. Assessment against objective

Policy Objectives Option Comments

Rating*

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to The introduction of a PTD label and/or "This is not a package" cross-border trade. disclaimer is likely to slightly strengthen the functioning of

the internal market and increase cross border trade as

0 consumers increasingly recognise that the same

label/disclaimer (and legislation) applies across Member

States.

Policy Objectives Option Comments

Rating*

Ensure a more competitive and The introduction of a PTD label and/or "This is not a l fairer level playing field for the package" disclaimer is likely to result in fairer competition businesses operating in the travel between different players in the travel sector - especially as market. there will be a clear distinction between products which are

covered by the PTD and those which are not.. Sellers of nonprotected packages and traders selling pre-arranged travel

0/+ packages whose services offer higher level of protection,

should be able to compete for the customers which are more enlightened as to the level of protection they will enjoy for the different products.

Reduce unjustified compliance The introduction of a PTD label and/or disclaimer as such

costs for businesses in the package would reduce unjustified compliance costs for businesses

travel market; -- and – stemming from unclear and outdated provisions. Both subfor

 3B options would increase administrative costs for businesses. These would be mostly one-off costs except of the

certification scheme (sub-option A 2) where companies would need to bear verification costs annually.

Objective 2: To achieve a high level of consumer protection in the package travel sector, while respecting the freedom to conduct business, by:

Reduce consumer detriment and As consumers get more internet savvy, more consumers may increase transparency for travellers be expected to self-package or purchase combined travel who buy combinations of travel arrangements. The label itself would not increase the number services currently not covered by 0 and + of consumers protected, however, it could reduce consumer the PTD by addressing new for PO3 detriment. This reduction is not expected to be high. Submarket developments; B option B is likely to be more effective as a negative

information would warn consumers who otherwise might purchase unprotected travel under the wrong impression that it is protected.

Reduce consumer detriment The introduction of the label and/or disclaimer would not as stemming from unclear and such contribute to any reduction of detriment stemming from outdated provisions. unclear/outdated provisions. However, some benefits are

0/+ expected in relation to the current unclear scope of the protection rules and especially the introduction of a disclaimer could prevent travellers from purchasing unproteted travels while wrongly believing that the product is a travel package.

Option Rating from -3 (extremely poor) to +3 (very highly effective). The effectiveness of this option would be higher if combined with policy options 5 or 6.

4. Policy Option 4 – Repeal of the Directive (PO4)

4.1. Functioning of the Internal Market and competition

The repeal of the Directive might in theory eliminate obstacles to cross-border trade and would result in more even market playing field.

Since it is likely that at least some MS maintain their legislation and others take action at national level to strengthen consumer protection, the Internal Market would be more fragmented and there would be more obstacles to cross-border trade.

4.2. Compliance costs businesses

The repeal of the Directive might result in decrease of compliance costs for businesses (up to €10.5-€12.5 per package). However, the cost savings for businesses will depend on the willingness of MS to repeal their national legislation protecting consumers. It is likely that many MS would maintain and further develop their legislation in this area.

4.2.1. Administrative costs for businesses

Similarly to compliance costs, this PO might result in decrease of administrative costs for business up to €409 million depending on the number of MS that decide to repeal their national legislation.

4.3. Impact on SMEs

The repeal of the Directive might in theory lead to fairer competition and decrease of compliance costs which impact, in relative terms, more heavily on micro and small enterprises. The impact will however depend on the willingness of MS to repeal their national legislation.

4.4. Impact on consumers and households

The repeal of the Directive is likely to increase consumer detriment (estimated at more than €159 million annually for pre-arranged packages compared to more than €1 billion for combined travel arrangements). In theory, a lower cost burden to the industry could lead to lower end-prices to the consumer.

4.5. Impact on public authorities

MS would be free to decide whether to maintain their national legislation unchanged, repeal their national legislation or to update their legislation. If legislation is repealed, consumers being stranded when on holiday due to the insolvency of the tour organiser might more often turn to embassies to receive necessary assistance and financial support to be repatriated.

4.6. Assessment of relevant social impacts

Only small social impacts expected. For instance, consumers being stranded due to the insolvency of the tour organiser will not receive necessary assistance and financial support to be repatriated. Thus, consumers may be stranded for longer periods, which in return can have an impact on employers (their employees do not return back in time after their holidays).

4.6.1. Impact on fundamental rights

This option would result in a lowering of consumer protection in Europe in the area of package travel and, hence, is likely to have a negative impact on the rights protected by the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on the freedom to conduct business is positively impacted, but depending on the number of MS repealing their national legislation.

4.7. Assessment of relevant environmental impacts

 Businesses would not be required to re-print brochures solely as the result of the PTD

obligations and its application in practice.

4.8. Assessment against objectives

Policy Objectives Option Comments

Rating*

Objective 1: To improve the functioning of the Internal Market in the package travel sector by:

Reduce costs and obstacles to cross The repeal of the Directive might in theory eliminate border trade; obstacles to cross-border trade. However, it is likely that

-- Member States maintain their legislation and take action at national level to strengthen consumer protection. This would

result in further fragmentation of the Internal Market and would create more obstacles to cross-border trade.

Ensure a more competitive and In theory, the repeal of the Directive would result in fairer fairer level playing field for the competition between different players in the travel sector. businesses operating in the travel However, this does not take into account the possibility of

market. - national legislation being retained with would lead to even

greater national differences for businesses operating in the travel market (both between businesses on the domestic market and between businesses established in different

Member States).

Reduce unjustified compliance costs for The repeal of the Directive might reduce and eliminate some

businesses in the package travel market; + unnecessary compliance costs. The extent of this reduction

will however depend on number of Member States that decide to repeal or revise their national legislation in this field.

Objective 2: To achieve a high level of consumer protection in the package travel sector, by:

Reduce consumer detriment and In the absence of EU legislation, there is likely to be a increase transparency for travellers significant decrease in the number of protected consumers who buy combinations of travel and an increase of consumer detriment. This could, however, services currently not covered by

the PTD by addressing new market --

be remedied at national level.

developments;

Reduce consumer detriment The repeal of the Directive might in theory reduce the

stemming from unclear and -- detriment stemming from unclear and outdated provisions.

Any such reduction would however, be offset by an increase Policy Objectives Option Comments

Rating*

outdated provisions. of detriment for consumers travelling without protection.

Option Rating from -3 (extremely poor) to +3 (very highly effective)

5. Policy Option 5 – Modernisation of the Directive and coverage of "one-trader" packages (PO5)

PO 5 introduces a number of legislative changes compared to the current PTD in relation to:

• - 

  definitions and scope;

• - 

  information requirements;

• - 

  clarification of obligations and liabilities;

• - 

  contract changes and other issues.

The detailed description of changes proposed measures of PO 5 is presented in Annex 4.

The impact of each of these changes is assessed in depth and presented in a separate subsections. The assessment ends up with an overall summary of key impacts of this policy option.

5.1. Update of definitions and clarification of the scope of Directive

5.1.1. Functioning of the Internal Market and competition

A clear inclusion of "one-trader" packages under the scope of the Directive would result in a levelling of the market playing and in an improvement in competition. In several Member States today, two traders may sell essentially the same services, but only one of them incurs costs of complying with the Directive. Since all businesses selling pre-arranged travel package and “one-trader” packages under this option would be incurring the same compliance costs, businesses would compete on more equal terms. The strengthened harmonisation of legislation would eliminate obstacles to cross-border trade and enhance the competition.

5.1.2. Competitiveness, trade and investment flows

It is unlikely that any costs incurred will result in a change from the current situation in terms of the global competitive position of EU firms or productivity. There is a possibility that some businesses may try to relocate their websites outside of the EU in order to avoid compliance with the Directive. However, since they would be obliged to comply with the EU laws if they sell packages on the EU market, it is not expected that there would be a significant relocation of economic activity.

5.1.3. Compliance costs for businesses

Inclusion of "one-trader" packages in the definition of a travel package

The exact number of businesses selling "one-trader" packages that are not subject to the PTD is not known.. In some MS, national legislation already covers some online "one-trader"

packages (e.g. DE and SE 179 ) and some large operators based in these countries may be

assumed to already comply with package travel requirements across all countries in which they operate. However, it cannot be assumed that even in those MS all operators who create the perception of selling packages comply, in practice, with all PTD-requirements, including bankruptcy protection. Furthermore, feedback from stakeholders confirms that not all "onetrader" l packages sold in high street comply with all PTD requirements. In order to quantify this number, the following assumptions have been made:

o the market of combined travel arrangement market is estimated at 23% of the

EU travel market, accounting for 118 million packages. For business trips, this market represents the 30% of the total, i.e. 24 million packages;180

o the market for "one-trader" holiday packages is estimated at 17% of the travel

market and amounts to approximately 87 million trips, for business trips this is 22% i.e. 18 million packages;

o business trips organised by TMCs account for 80-85% of all business trips.

Therefore, it is considered that most business travellers do not use pre-arranged packages, but rather prefer more combined solutions. The business trips arranged by TMCs tend to fall in the category of "one-trader" packages or independent travel arrangements. In light of such assumptions, the market of combined travel arrangements for business purposes has been estimated at around 24 million trips (out of which 16 million are "one-trader" packages organised by TMCs) while independent travel arrangements have been estimated at around 56 million trips (out of which 50 million trips are arranged

by TMCs). 181

It has been assumed that 50% of "one-trader" packages are subject to the current PTD.

179 Consumer Law Compendium, p.241-244.

180 See Annex 2 for explanations.

181 It is reasonable to assume maintaining the same ratio as for holidays' trips among "one-trader" packages,

"multi-trader" travel arrangements and independent travel arrangements. See estimates based on Eurostat in Annex 2.

This is based on stakeholders’ feedback and the result of the Consumer Detriment Study, which seem to suggest that at least 50% of these travel arrangements are sold in high street and therefore are already subject to the PTD.

Hence, under PO5, approximately 44 million “one-trader” holidays packages and 1 million of B2B trips would be brought under the scope of the PTD while 8 million of "one-trader " B2B trips organised by TMC will be excluded from the scope.

The impact of this change would be that businesses selling such products would be required to comply with the Directive’s requirements, including making provisions for insolvency protection, providing all information stipulated to travellers, becoming liable in the event of non-performance of the contracts, etc.

TMCs selling business trips excluded from the scope which would no longer need to comply with the Directive's requirements will have reduced compliance costs. These costs and savings are assessed below in the appropriate sections.

Businesses would benefit from increased regulatory clarity (regarding which travel arrangements are covered by the PTD and which are not) and this should result in a decrease in litigation costs

For cruises, the clarification is not expected to bring additional businesses or packages within the scope of the Directive.

5.1.4. Impact on consumers and households

It is possible that some consumers may experience an increase in the price of “one-trader” packages, as businesses might pass on the additional costs of ensuring compliance. This impact will depend on supply and demand elasticity. However, in any case, this is likely to be

less than 2% of the total price of the package 182 and broadly comparable with the cost of

obtaining commercial travel insurance and, as such, unlikely to be detrimental to consumers. In a competitive market, price increases on the end product are normally minimised to the extent possible.

Inclusion of "one-trader" packages would result in reducing consumer detriment. Travellers would receive refunds of advance payments and assistance with repatriation costs in the event of insolvency, redress in the event of non-performance of contracts and spend less time and effort in seeking compensation.

The Table below shows estimates of the level of consumer detriment resulting from

combined travel arrangements 183 on an annual basis. It should be noted that the value of

detriment for combined travel arrangements covers both "one-trader" tpackages and "multitrader" travel arrangements where some of "one-trader" packages are already compliant with the Directive.

182 Dividing the average price of a combined travel arrangement (€741) by the cost of compliance per package of

€10.5 - €12.5 puts the compliance cost at between 1.4% and 1.7%of the overall cost of the package.

183 Study on Consumer detriment in the area of dynamic packages, ibidem.

Table 6 Detriment associated with combined travel arrangements not currently under scope of the PTD

Number of Value of purchased Value of net detriment combined combined travel in population (€)

travel arrangements(€) 184

arrangements

EU-27 118 million

holidays 87 billion 1,065 billion

% of "one Number of Value of trips to be Value of net detriment trader" "one-trader" made compliant (€) associated with packages to packages to be products to be made

be made made compliant compliant ( €) 185

compliant

50% 43,6 million 32,3 billion 395 million

The value of net detriment associated with 44 million of “one-trader” packages (with a value of €32 billion) brought under the scope of the PTD, has been estimated €395 million.

Bringing these trips under the scope of the Directive would not necessarily mean that the detriment would disappear completely but would significantly decrease. The incidence of problems with pre-arranged packages is 3.1% compared to 8.2% for combined travel arrangements and that the average cost per problem with pre-arranged packages amounts to €191 compared to €592 for combined travel arrangements. It could be assumed that the detriment per package and incidence of problems for "one-trader" packages brought under the scope of the Directive would be the same as for pre-arranged packages The estimated

reduction of traveller's detriment would be up to 88% 186 i.e. the level of detriment ", would

decrease up to €348 million if 50% of "one-trader" packages are brought under the scope of

the PTD. 187

5.2. Update of information requirements

5.2.1. Functioning of the Internal market and competition

184 Number of combined travel arrangements multiplies by the average cost of combined travel arrangement i.e.

€741.

185 Figures in this column are calculated by multiplying the figures in the previous column by the ratio of net

detriment for all combined travel arrangements e.g. 395 million =32,3 billion x (1 billion (net detriment for all combined travel arrangements)/87 billion (value of all combined travel arrangements i.

186 The consumer detriment for 100 pre-arranged l packages amounts to €592 (100*3.1% incidence of problems

*€191 average cost of problem) compared to €4,862 for 100 combined travel arrangements (100*8.2% incidence of problems* €593 average cost of problem). (€4,862-592)/€4,862 = 88%.

187 It should be noted that the figures on the incidence of problems and average cost per problem cover all

combined travel arrangements i.e. some "one-trader" packages where some of them are already compliant with the PTD and some "multi-trader" travel arrangements for which the level of incidence of problems and an average cost of problem are likely to be higher.

Changes in requirements for brochures

Repealing provisions that apply solely to brochures is expected to result in fairer competition between the different businesses in the travel sector since the current Directive places an extra burden on businesses that issue brochures (in terms of having to issue updated versions to reflect changes in prices as well as requiring different information in different Member States resulting from the fact that the Directive is based on minimum harmonisation).

Changes to information requirements

There are currently wide variations in the stipulations of different Member State's legislations regarding the information that should be provided. This constitutes a barrier to cross-border trade (harmonisation of information requirements was rated as either “important” or “very important” for over 60% of businesses responding to the public consultation). PO5 would remove this barrier enabling businesses to produce the same information (albeit in different languages) across EU and may assist in streamlining the collection and distribution of information.

5.2.1.1.Administrative costs for businesses

Changes to information requirements

The proposed set of information requirements is set out in the table below, separating the "business as usual" information from the administrative burden.

Table 7 Information Requirements for PO 5

PTD requirements Business as Additional usual burden

• a) 

  the identity such as the trading name, the geographical

Pre-contract address of the organiser and, where applicable, the retailer, as (very well as their telephone number and e-mail address limited)

• b) 

  the total price (including all taxes and additional applicable fees and charges), the arrangements for payment and, where applicable, the existence and the conditions of deposits or other financial guarantees to be paid or provided by the traveller

(c) the travel destination(s), the itinerary and, where periods of stay are involved, the relevant periods, with dates;

• d) 

  if transport is included, the means, characteristics and categories of transport, the points, dates and time of departure and return or, where the exact time is not yet determined, the (very part of the day (morning, afternoon, evening or night) of limited) departure and return, the duration and places of intermediate stops and transport connections;

PTD requirements Business as Additional usual burden

• e) 

  if accommodation is included, the location, main features and tourist category including, where available, the rating under a national or international hotel classification system applicable in the host state;

• f) 

  whether any meals are provided and if so, the meal plan; and visits, excursion(s) or other services which are included in v the total price agreed for the package

• g) 

  whether a minimum number of persons is required for the package to take place and, if so, the deadline before departure for informing the traveller in the event of cancellation

• h) 

  general information on passport and visa requirements in order to participate in the package tour for nationals of the Member State or States concerned and in particular on the periods for obtaining visa and, if any, health formalities required for the travel package

• i) 

  that the product is a travel package and, as a consequence, the traveller will benefit from legal protection for travel packages under EU law

The contract would contain the pre-contractual information

listed in a) – j) above, plus: - -

• a) 

  special requirements which the traveller has communicated to the trader and which both have accepted

• b) 

  if different from the contact details provided earlier, the contact details of the organiser or the person who is acting in his name or on his behalf whom the traveller can contact to complain about any improper performance which he perceives on the spot

• c) 

  information that the traveller may terminate the contract at any time before departure against compensation without stating any reason

In the

contract d) the possibility of having recourse to an amicable dispute settlement, where applicable

• e) 

  information that the organiser

• - 

  is responsible for the proper performance of all included travel services

• - 

  is obliged to provide assistance if the traveller is in difficulty

-is obliged to procure insolvency protection to guarantee a refund of all payments made by the traveller, and, where passenger transport is included in the package, his repatriation, as well as the name of the entity providing the insolvency protection and its contact details, including its geographical address

PTD requirements Business as Additional usual burden

• a) 

  the name, address and telephone number of the organiser's local representative or, failing that, of a local agency whose assistance a traveller in difficulty could request.

Where no such representatives or agency exist, the traveller must in any case be provided with an emergency telephone number or any other information that will enable him to contract the organiser;

Before

departure b) in the case of journeys or stays abroad by minors that include accommodation, information enabling direct contact to

be established with the minor or the person responsible at the minor's place of stay.

• c) 

  the necessary receipts, vouchers or tickets, including the (even precise times of departure, intermediate stops, transport though new connections and arrival. requirement)

• * 

  new requirements

The majority of the requirements are essentially the same as in the current Directive. The introduction of a limited number of new information requirements are not considered to be considerable burdensome for business. The impacts of the new information requirements are also reduced by the fact that compared to the existing PTD, the information requirements are simplified and some are also scrapped (e.g. mandatory information on insurances.) Furthermore, some of the new information requirements are contain information that most traders anyway would provide (e.g. necessary tickets, email address, etc.) Thus they are not expected to have a significant impact on the administrative burden on businesses.

Changes in requirements for brochures

The changes in requirements for brochures would significantly reduce the administrative costs for businesses.

The number of businesses using brochures and the number of brochures that they re-issue as a result of the Directive’s requirements is not exactly known. However, based on a number of

assumptions and information provided by stakeholders (see Table 8) 188 , it has been estimated

that the annual saving would amount to €400 million.

Table 8 Assumptions regarding cost of brochure reprinting

Item Assumption

Number of businesses 250 - This is based on 90,000 travel agents/tour operators in the EU, of which large reprinting brochures as businesses only produce brochures (0.5%) and of these, only tour operators and tour a result of the Directive operators acting also as retailers (total 55% of the market as estimated by ABTA).

Cost of reprinting per €1.6m - This is calculated by using an estimate of approximately €1 per reprint as estimated by ABTA. It is estimated that approximately 30m reprints are made as a

188 DRV, ABTA.

business result of the Directive in UK at a cost of €30m. An estimated 6,826 travel agents/tour operators existed in UK in 2008 and applying 0.5% to calculate the number of large businesses and 55% of those to calculate the number of tour operators and those tour operators who also act as retailers gives a total of approximately 19 businesses. Dividing €30m by 19 businesses gives approximately €1.6m per business.

Overall, PO5 will result in a decrease in administrative burden from €409 to €18.5 million.

This is mostly due to the removal of the requirement for brochures (approximately €400m).

There is, however, an increase in administrative costs due to the fact that an increased number of businesses and products will be brought under the scope of the Directive ("one-trader" packages), but this is clearly offset by the reduction in costs to those businesses required to reprint brochures. The table below presents the comparison of administrative costs of PO 5 and baseline scenario.

Table 9 Comparison of administrative costs

BS Cost/€ PO 5 Cost/€

Total administrative costs €421 million €31.1million

Total administrative burden €409 million €18.5 million

Total business as usual €12 million €12.6 million

Average cost per business €4,683 €346

Average cost per package €2.63 €0.15

Average administrative burden €2.56 €0.09

Removal of special rules regarding information requirements for last minute bookings

This aspect is expected to place some additional burden on businesses in Member States where exemptions from information requirements for last minute bookings have been established. This burden is not expected to be significant since many consumers and businesses already make use of electronic communications.

Changes to form in which information should be provided

There are potential reductions in administrative costs arising from the fact that businesses would be able to provide information to customers in a durable medium. It is, however, not possible to quantify the amount of savings this represents. Still, the savings are not expected to be significant since many businesses already make use of electronic communications.

5.2.1.2.Cross-border administrative costs for businesses

In the baseline scenario, it has been calculated that the cross border requirements (associated with differing information requirements) result in total costs of €26 million for the industry. The businesses wishing to sell cross-border need to check the relevant national legislation in place in different Member States.

PO5 would eliminate these costs and represent savings to businesses in the EU of over €5 million annually with an additional approximate one-off saving of €21 million. The Table below sets out the administrative costs associated with information requirements under the baseline scenario for businesses engaging in cross border trade. PO5 which is based on full harmonisation of information requirements would eliminate these costs.

Table 10 Administrative costs associated with cross-border aspects of information requirements

Baseline Option 5 Cost/€ Costs/€

One off costs for researching MS requirements and

legal advice: 21 million 0

Recurring administrative costs: 5.1 million 0

5.2.2. Impacts on consumers and households

The proposed elimination of specific information requirements related to brochures would not have any overall negative effect. PO 5 maintains the information requirements that should be necessary in order to make an informed transactional decision. Therefore, the abolishment of additional information requirements in some Member States, due to fully harmonised information rules, is likely to only have a minimal effect, if any, on the overall level of consumer detriment.

There should also be little or no increase in detriment associated with allowing businesses to provide information in a durable form, since, in theory, the same information should be available to them regardless of the form.

The removal of the obligation to provide prices in the brochures is not expected to have major impacts on the marketing of package travel. Since prices are often crucial in order to have effective marketing and with the experience from other sectors (where no obligation in this regard exists) tour operators are still likely to indicate prices in their brochures. However, there would probably be more use of price lists in annexes or indicative prices with a reference to updates published on the Internet. As a consequence, for consumers not having access to the Internet, price comparisons might become more cumbersome.

New information requirements are to be introduced under PO5. They include information:

• that the product is a travel package and, as a consequence, the traveller will benefit from legal protection for packages under EU law (pre-contract)

• that the organiser:

• - 

  is responsible for the proper performance of all included travel services

• - 

  is obliged to provide assistance if the traveller is in difficulty -is obliged to procure insolvency protection to guarantee a refund of all payments made by the traveller, and, where passenger transport is included in the package, his repatriation, as well as the name of the entity providing the insolvency protection and its contact details, including its geographical address (contract); and

• information that the traveller may terminate the contract at any time before departure against compensation without stating any reason (contract).

The Consumer Detriment Study found out that 68% of consumers purchasing "unprotected

travels" mistakenly thought that they were protected. 189 Therefore, the fact that consumers

would be informed whether they are purchasing a protected package would be particularly beneficial to consumers.

5.3. Clarification of the liabilities and obligations of the professional parties

5.3.1. Functioning of the Internal market and competition

Strengthened harmonisation of rules concerning the liabilities of the professional parties will contribute to a levelling of the market playing field and would eliminate some obstacles to cross-border trade.

For example, in Member States where retailers can be held responsible for the performance of the package contract (e.g. France), foreign retailers may be discouraged from selling packages here. The harmonised approach of PO5 would eliminate such disincentives to cross-border operation.

5.3.2. Compliance costs for businesses

Providing information

Making the organiser or anybody acting on his behalf responsible for providing information is not expected to increase compliance costs for businesses. In the majority of the Member States the organiser and/or the retailer is/are currently liable for providing information to the consumer. In practice, the organisers are often generating the necessary information which is then provided by the seller (who has a direct contact with consumers).

Performing the contract properly

The party having liability for the contract performance is responsible for the provisions of all the services included in the contract, also those provided by sub-contractors.

If the contract is not properly performed, the liable party may have to pay compensation to the consumer. In most cases, businesses take out liability insurance for this purpose which usually covers:

189 http://ec.europa.eu/consumers/rights/docs/study_consumer_detriment_dyna_packages_en.pdf.

• - 

  material damages;

• - 

  body injuries or death of customers; and

• - 

  in some cases, specific liability insurances (e.g. covering special risk such as diving)

The specific liability insurances vary greatly in cost between operators and depend on a variety of factors. The premium rates for such insurance vary from 0.5% to 1.5% of a

business’s annual turnover 190 .

Sub-option 1 - responsibility rests with retailers/sellers

Under this sub-option, only in two Member States (France and the Czech Republic) 191 would

the situation regarding the liability of the professional party for the proper performance of the contract not change. Hence, in a majority of Member States there would be a transfer of liabilities and associated costs from the organiser to the retailer/seller. A number of industry and Member State Authority stakeholders consulted during the impact assessment have stressed the fact that organisers generally have a much closer relationship with service providers than sellers/retailers do. As a result, if responsibility is transferred to retailers who do not have such control, there may be an increase in the number of business-to-business claims from sellers/retailers against the organiser of the contract, in the event that contracts are not performed correctly. Making sellers/retailers responsible for the performance of contracts is also likely to affect SMEs to a greater extent than the other two sub-options. SMEs are much more represented in this sub-group of businesses, with organisers tending to be larger businesses. In essence, all sub-options under PO5 represent a transfer of liabilities and associated costs between businesses rather than an increase in overall burden. However, as sellers may face increased costs in setting up additional contracts with a potentially large number of service providers, it is possible that this sub-option may result in an increase in overall costs for the travel sector.

Sub-option 2 – responsibility rests with organisers and joint liability between the organiser and retailer in case the organiser is based outside the EEA;

In the majority of Member States, the organiser is responsible for the performance of the contract. Consequently, this sub-option would leave the situation in practice mostly unaltered.

Only in the Czech Republic and France 192 , where the consumer can turn with his claim to the

trader (even though the organiser should be liable), there is likely to be a small change with a shift in responsibility from retailers/sellers to organisers being required. Under this option, there may be also a slight decrease in consumer protection in all countries with joint liability and a decrease of costs for some businesses in those MS where there is joint responsibility. The fact that organisers generally have a closer relationship with service providers than retailers/sellers could suggest that making them responsible for the performance of the contract may contribute to a reduction in problems experienced by consumers. Retailers

190 Information provided by ECTAA, see also section 1.1.

191 Consumer Law Compendium, p,318-321.

192 Ibidem.

selling packages organised by companies outside the EEA could be impacted as consumers might seek redress from them. This impact is, however, expected to be minor.

Sub-option 3 – joint responsibility

Joint responsibility already exists in Belgium, Cyprus, Slovakia, Greece, Denmark, Spain and some variations of joint liability also exist in Bulgaria, Ireland, Austria, Malta, Lithuania,

Luxembourg, Portugal, Romania, Italy and France 193 . This sub-option would therefore

represent no change (and consequently no costs and benefits) for businesses operating in these Member States. Under the joint-responsibility sub-option, the traveller can essentially choose who to make a claim against (the retailer or the organiser) in the event of non-performance of the contract. The cost impacts of this are likely to be higher for sellers/retailers than for organisers. This is partly due to the fact that it is likely that travellers would in most cases approach the sellers/ retailers (they are the main point of contact when concluding the contract, rather then organisers who may be named on the contract but with whom the

traveller has had no previous direct contract 194 ). Therefore any transfer of the ensuing costs to

organisers would need to be done on a business-to-business basis with reference to contracts concluded between the retailer and the organiser. Another potential cost increase which has been highlighted by stakeholders relates to the possibility for double costs (i.e. where both organiser and retailers have to purchase extensive liability insurances) and by that "double" consumer protection (which should be redundant unless one of the parties goes bankrupt).

Providing prompt assistance if the consumer is in difficulty

PO5 envisages amending the Directive to clearly make the organiser responsible for providing such assistance. This is only a minor clarification as compared to the status quo as currently there is not a single Member State where the retailer/seller is specifically stated to be solely responsible. In practise, large tour operators often take it upon themselves to assist consumers in difficulties, as much as part of providing a service (and therefore maintaining their reputation and competitive edge) as being due solely to the requirements of the Directive. They usually have representatives on site to assist with any problems that might arise for their customers. The business model of combined travel arrangement providers tends to involve a wider range of service providers at lower volumes than the pre-arranged travel package holiday organisers. Therefore, it does not then make the same financial sense to have representatives in all destinations. There would probably be an increase in the number of help centres which are not localised at the holiday spots. The organiser of "one-trader" packages might also need assistance of other service providers to help consumers in difficulty.

A strict liability for proper performance of the contract

The Directive does not specify what kind of liability it imposes. In a majority of the Member States, the liability is interpreted rather strictly. Thus, there would be no increase of compliance costs expected in a majority of Member States for pre-arranged packages.

193 Ibidem.

194 The consumer detriment study found that approximately 49% of consumers making complaints regarding

combined travel arrangements complained to the seller, whereas only 10% made complaints to the holiday representative onsite.

However, for instance, in the UK (which seems to imply "culpa liability" for personal damages) the revised provisions may lead to an increase in compliance costs.

Providing evidence of security/insolvency protection

PO5 involves making the organiser or anyone acting in his name liable for providing evidence of security/insolvency protection. In practice this would mean that the seller, who is the one having contact with the consumer, would then have to show proof of that the package is secured against insolvency. The organiser would financially be responsible for providing the bankruptcy protection. This only represents a small change to the current situation and will normally require sellers to ask the organisers for evidence of having taken out the relevant protection for their products. Whilst there may be some issues over the extent of proof that sellers are expected to obtain, this aspect is not expected to impose any significant costs on sellers/retailer, nor organisers for that matter.

With regard to financial liability for providing the protection, most of Member States have adopted the Directive’s wording and oblige the "organiser and/or retailer" to provide security in the event of insolvency. Specifying that it is the organiser that would be financially liable would, therefore, shift this burden to the organiser. Thus, some benefits in terms of clarifying the business to business costs may occur. In this regard, sellers can avoid incurring double costs where both organiser and sellers/retailers take out insolvency protection.

5.3.3. Impact on SMEs

Most of the sub-options are not expected to result in any significant burden for SMEs. However, shifting responsibility for performance of contracts to retailers/sellers (sub-option 1) would place a significantly higher burden on those businesses compared with the current situation. Given that SMEs are represented to a higher degree among travel agents than organisers, the sub-option 1 would imply that SMEs would be more likely to be impacted negatively than larger businesses. However, this would affect only online travel agents as brick and mortar travel agencies selling "one-trader" packages are already subject to all the PTD requirements.

5.3.4. Impacts on consumers and households

For the liability for the proper performance of the contract, travellers would benefit from clarity over which party they should approach regarding non-performance of the contract under each of the sub-options. The sub-option that makes sellers/retailers responsible for the performance of the contract is compatible with the fact that travellers tend to make more complaints directly to the seller of the product. This should also prevent them being passed around between sellers/retailers and organisers. The joint responsibility would appear to be the easiest sub-option for the traveller since they can choose to which party they are going to direct their complaint. This party would then be responsible for dealing with the complaint or claim. However the joint-responsibility might result in slight increase of prices for consumers as there is a risk of double costs (i.e. where both organiser and retailers will take insurances for the same liabilities).

Travellers would also benefit from the clarification of the liability rules. They would also be more assured and confident in making purchases if they are provided with evidence that their travel package is protected against insolvency.

The clarification of liabilities for providing information and assisting consumers in difficulties is not expected to have any significant impact on consumers.

5.4. Contract changes and other issues

5.4.1. Functioning of the internal market and competition

The harmonisation of rules and extension of scope to cover "one-trader" packages equal the treatment of businesses selling similar products and improve the competition. Currently, due to divergent rules in Member States on price revision or essential terms of the contract, businesses are not able to compete on an equal footing with those in other Member States. For example, in the UK and Cyprus, national legislation requires that businesses incur the first 2% of price increase before passing on to consumers and in Italy businesses are currently not able to charge price increases higher than 10%.

5.4.2. Compliance costs for businesses

Price revision

Although comprehensive data regarding price changes (the size and frequency) made by businesses for the reasons permitted in the Directive are not available, consultation with businesses participating in the public consultation provided some limited information on their incidence and scale.

Figure 1 Amount, on average, by which each reason tends to increase the price

level of price chang e

18 % 1 7% 17% 1 7%

16 %

14 % 13% 13 % e s

0% 12 %

<2%

n s 10 % 8 % 8 % 2-5%

s p

o

8 % 5-10% f re o 6 % 10 -20 %

% 4% 4% 4% >20%

4 %

2 % 0 % 0 % 0 % 0% 0 %

0 % Va riat io ns in t ran sporta tion cos ts, Va riat io ns in t axes , dut ie s a nd fe es Variation s in exc hang e rat es applied inc luding th e c ost of fu el (fu el chargea ble fo r s ervic es such as t o t he pac kag e surcha rge s) landing t axes , e mb ark ation /dise mb ark ation fees at ports and airp ort s

Table 11 Price changes in the contract

Number of respondents ticking % Reason for Price Change

Percentage of total annual sales subject to 5- 11- 21-

a price increase (due to reasons below) <1% 1-4% 10% 20% 50% >50%

Variations in transportation costs, including

the cost of fuel (fuel surcharges) 17% 0% 4% 0% 13% 4%

Variations in taxes, duties and fees chargeable for services such as landing

taxes, embarkation/disembarkation fees at 8% 8% 8% 4% 8% 4%

ports and airports

Variations in exchange rates applied to the

package 8% 4% 13% 8% 0% 0%

The results presented in the table and figure above are not sufficiently robust to draw quantitative conclusions regarding the overall levels and incidence of price increases, since the sample was small and not all respondents answered the relevant question but illustrative conclusions can be drawn.

For example, almost 60% of those that actually provided information on the level of price increases due to variations in transport costs indicated that price increases were less than 2% of the price; 45% of those responding also indicated that this was a reason for price increases in respect of less than 1% of annual sales.

PO5, by including "one-trader" packages in the scope of the PTD, would enable a greater number of businesses to make price revisions (currently providers of non-compliant "onetrader" packages rarely revise the prices after conclusion of the contract).

This would be of particular relevance to SMEs which are represented to a greater extent in the "one-trader" packages market than in the pre-arranged travel package sector

Table 12 Price changes in the contract- comparison of sub-options

Sub-option 1 Sub-option 2 Sub-option 2

Stakeholder (Maximum increase (Clarifying that increase of (Making prices in the contract capped at 10% price above 5% entitles binding, with exceptions)

percentage) consumer to cancel a contract)

No significant costs for

businesses as there are Businesses would gain clarity Higher costs than sub-option 1, only limited number of that if they increase the price as businesses would not be able

cases in which there above 5%, consumers would be to increase the price due to able to cancel a contract without changes in the transportation

Businesses would be a real necessity penalty. costs or exchange rates.. (larger + to increase prices more Businesses might increase the

SMEs) than 10%.

195 Businesses

general prices before the

would gain clarity that, if conclusion of the contract in they increase the price order to "insure" themselves

above 5%, consumers

would be able to cancel a against the cases in which they would need to increase prices

contract without penalty. after the signature of the

contract.

Essential terms of the contract

It is expected that specifying in the Directive what is regarded as the essential terms of the contract would have only a small impact on costs incurred by businesses.

The majority of stakeholders already view most of the terms mentioned in the Directive's annex as essential terms. Consequently, it is not expected that their behaviour would change significantly.

However, a specification of what should be regarded as the essential terms may be more burdensome for businesses than today. For example currently businesses do not have to provide a name of the carrier in the pre-contractual information.

If this was changed, this might lead to more consumers asking for termination of their contracts. Similarly, consumers would be also able to terminate the contract if the price of the package increases. This would result in an increase of compliance costs for businesses. However, it is unlikely that consumers will terminate their travel arrangements if the price increase is minor or unless the consumer has justified reasons not to be transported by that particular carrier.

Termination rights for travellers

In serious unforeseen and extraordinary situations (force majeure cases), the majority of businesses act reasonably and, in order to maintain their reputation, cancel trips themselves. However, perceptions may differ between the organisers and the travellers as to the implications for any travels (not just in terms of safety, but also in terms of enjoyment of the trip e.g. in the case of an ecological accident such as a nearby oil spill which might prevent access to a key part of the travel). Consumers would be able to terminate a contract against compensation for any reasons.

As businesses would get the compensation, this right would not generate additional costs.

5.4.3. Impacts on consumers and households

Price revision and essential terms

For the majority of travellers whose travels are already within the scope of the Directive, no additional costs concerning price revision are anticipated. However, full harmonisation may

increase costs, for instance for those travellers in the UK and in Cyprus 196 who are faced with

a price increase below 2% of the package price (this would be the case under both suboptions).

However, travellers purchasing "one-trader" packages brought into the scope of the Directive would potentially face additional costs as suppliers of such packages would now be able to amend the price and charge the increase to the consumer.

The potential costs for consumers would be, however, offset by giving them the right to terminate the contract if the price was increased above 5% (sub-option 2).

In case of minor price increases (majority of price increases are below 5%) consumers would most likely accept it. Capping maximum price increases at 10% (sub-option 1) would additionally protect consumers which may otherwise face price increases above this threshold.

Table 13 Price changes in the contract- comparison of sub-options

Sub-option 1 Sub-option 2 Sub-option 2

(Maximum increase (Clarifying that increase (Making prices in the

Stakeholder capped at 10% of price above 5% contract binding, with

percentage) entitles consumer to exceptions) cancel a contract)

Consumers would

see price increases Consumers would gain It is possible that, in order capped at 10% even clarity that they can to compensate for in those cases where cancel a contract without uncertainty, businesses actual variation in penalty if a price is would increase the prices

Consumers costs is higher.

increased by 5% or more. before the signature of the

Consumers would contract. However, benefit as business consumers would enjoy a would be obliged to higher protection as prices pass on the reduction would be more stable.

of costs on the price of a package.

Termination rights for travellers

It is clear that consumers would benefit from gaining the right to decide for themselves whether they wish to embark on a holiday in the event of a force majeure situation, such as for example the outbreak of violent conflict or an ecological disaster.

5.5. Summary of key impacts

5.5.1. Economic impacts

5.5.1.1.Compliance costs for businesses

Under the baseline scenario, it has been estimated that businesses selling PTD-covered packages currently incur compliance costs of around €7.5 - €9.5 per package and €3 of administrative costs.

Assuming that 50% of one-trader packages are already covered by the current PTD, the additional compliance costs would amount to €335-€424 million (low-€7.5 and high-€9.5 estimate of compliance costs per package). These additional compliance costs for the industry will be offset (at least partially):

Table 14: Compliance costs for businesses under PO5

Additional yearly compliance costs for businesses

Number of trips to be made Low estimate of compliance high estimate of compliance compliant costs (€7.5 per package) costs (€9.5 per package)

43,6 million holiday trips €327 million €414,2 million

1 million B2B trips €7,5 million €9,5 million

Total €334,5 million €423,7

Annual savings for business trips

Number of trips to be Low estimate of savings of high estimate of savings of excluded from the scope compliance costs (€7.5 per compliance costs (€9.5 per

package) package)

8 million B2B trips €60 million €76 million

These additional compliance costs for the industry will be offset (at least partially under the medium and high estimate of "one-trader" packages to be made compliant with the PTD) by the reduction of administrative costs and cost savings stemming from the exclusion of business trips organised by TMCs from the scope of the Directive.

The reduction of administrative costs would stem mostly from the removal of requirements

for brochures and is estimated at €390 million 197 . In addition, businesses trading crossborder

would save €5 million of recurring administrative costs.

Exclusion of business trips arranged by TMCs would bring savings between €60-€76 million assuming that 50% of B2B trips organised by TMCs are subject to the current

PTD. 198

The overall impact on the industry would be a benefit of €51-€123 million annually (low€7.5 and high-€9.5 estimate of compliance costs)

These figures have to be considered as a high estimate. Firstly, package travel organisers would have some savings as it would be easier for them to seek redress from transport carriers, in case of costs related to delays, cancellations, assistance or accidents regulated by the EU Passenger Rights. The introduction of a limitation to provide alternative arrangements in case of long lasting force majeure events, would, furthermore, save costs for the industry. Secondly, it is also likely that the mutual recognition of insolvency funds would imply a reduction in the costs. As already noted, the difference between costs of insolvency protection for traders established in different MS can be very significant. Competition between various insolvency protection schemes may bring significant savings to businesses, since it can be expected that they would seek to subscribe to the most convenient fund once the mutual recognition system is in force across the EU.

5.5.1.2. Impact on SMEs

SMEs selling "one-trader" packages newly brought under the scope of the PTD would incur increased compliance costs.

Those costs would amount to a maximum of €7.5 - €9.5 plus €0.15 of administrative costs per package. SMEs which are selling "one-trader" packages at high street (brick and mortar travel agencies) are already subject to all the PTD requirements. The additional costs would therefore affect mostly online sellers of these travel arrangements. SMEs would also benefit from increased harmonisation and clarity of rules across the EU as they would be able to rely on one set of rules across the EU.

Micro-enterprises account for 92% of all travel agencies and tour operators (79,000 companies). The exclusion of micro and small businesses from the scope of the Directive would not be therefore a viable option.

Firstly, it would result in unfair competition between businesses selling competing products whilst having different regulatory regimes and hence facing uneven compliance costs.

Secondly, it would significantly increase consumer detriment, as consumers would not be able to easily determine the rights they enjoy, as these would depend on the size of the business they are purchasing from.

Overall, excluding or applying a lighter regime for small and/or micro enterprises would be contrary to the objectives of the revision process, i.e. achieving a high level of consumer

protection and improving the functioning of the Internal Market 199 .

5.5.1.3. Impacts for consumers

Travellers would experience the following impacts:

• - 

  a reduction in the overall detriment: the estimated reduction of the detriment

would be up to 88% 200 i.e. the level of detriment would decrease up to €348

million if 50% of "one-trader" packages were brought under the scope of the

PTD.

• - 

  full harmonisation may lead to an increase of the level of consumer protection in a few Member States as more packages would be covered.

In addition consumers could expect some savings/ benefits due to:

• Increased transparency. Consumers will know when or when not they are

buying a protected travel package. Significant information must always be

presented to the traveller before the contract is signed;

• More contractual flexibility. In addition to the right to transfer the contract,

consumers will be able to cancel the contract before the departure by paying a reasonable compensation to the organiser. In force majeure situations at the place of destination or in instances where a significant breach of contract can be anticipated, consumers can before the departure terminate the contract without

paying any compensation;

• Clear rules on liability. The travellers will have one interlocutor if something

goes wrong with the performance of the contract. Due to his liability for the performance of the services, the organiser will have incentives to be diligent when

choosing his sub-contractors;

• Clearer remedies if the travel package contract is not properly performed.

5.5.1.4. Impacts for public authorities

All MS would be affected as this option would require some changes in the domestic legislation. MS would bear the usual cost which accompanies the implementation of EU legislation.

Requiring Member States to set up mandatory insolvency is likely to result in additional costs which are estimated to be around €22 million.

5.6. Impacts of key provisions

In the light of consumer and business problems described in chapter 2 of the report, the following changes to the substantive provisions of the Directive have been proposed and assessed:

Table 15: Assessment of key provisions

Substantive provision MS impacted Impact of the provision

Introduction of termination rights for All MS would be In serious unforeseen and extraordinary travellers against compensation impacted, but less impact situations (force majeure cases), the

in MS such as CZ, DE, majority of businesses act reasonably and, BE, DK, EE, EL, FI, in order to maintain their reputation, HU, LT, LV, PT and ES cancel trips themselves. However, where variations of such organisers and travellers might have termination rights different opinions as to the implications of already exist. extraordinary situations for the trip. This may result in some increase of compliance costs for businesses however the compensation paid by consumers is supposed to cover these costs. Consumers would benefit from gaining the right to decide for themselves whether they wish to embark on a holiday in the event of a force majeure situation, such as for example the outbreak of violent conflict or

an ecological disaster.

If termination right against compensation is introduced, consumers would be able to terminate the contract at any time paying a fee to businesses. If the fee is carefully proportionate, then businesses would face

a very limited impact.

Clarification of right to compensation All MS except for AT, The consumer would be entitled to for non-material damages BE and EE that already compensation for both material and nonexplicitly

 provide for material (moral) damages (e.g. loss of

compensation for loss of holiday enjoyment) in cases of nonenjoyment.

performance or improper performance of

the contract. For businesses the

clarification should not bring significant

costs, since this is an existing possibility,

although not often used by consumers.

Flexibility of MS as to the method of Limited effect on No additional compliance costs for providing insolvency protection whilst Member States. They companies. Businesses would benefit from adding explicit rules on the will have to establish mutual recognition of schemes across the effectiveness of the national central contact points to EU, as increased competition among funds insolvency protection schemes, the facilitate the mutual in the internal market is likely to drop the mutual recognition of security recognition. insurance costs. Businesses offering provided under the law of the MS of services cross-border would particularly establishment, as requesting the well benefit from reduced costs through mutual as establishment of central contact recognition as they would not need to points (minimum harmonisation rule). provide the insolvency protection in each

MS they operate.

Consumers would get access to more

offers at competitive prices.

Reinforced rules on the possibilities to All Member States Package travel organisers could have some seek redress from the transport carrier savings as it would be easier for them to in case of costs related to delays, recuperate at least part of the cancellations, assistance or accidents compensation paid to travellers in case of regulated by the EU Passenger Rights. delays, cancellations, assistance or Consumers would continue to be able accidents regulated by the EU Passenger to choose whom to seek compensation Rights. The extent of this saving is and assistance from (transport carrier however unknown as two of these or the organiser of the package). Regulations201 have not yet entered into

force and the APR is currently under review. At present, the possibility of seeking redress often depends on the specific arrangements between two

business parties202.

The liability of the organiser to This would require Compared to the legal situation today, this provide alternative arrangements for legislative amendments would mainly result in a cost reduction for the continuation of the package in case in all Member States. organisers203. Consumers would in most of force majeure events would be instances not be significantly affected, but limited (e. g. to a maximum number of would incur increased detriment in three or four days). This provision situations where it is not possible for the would reflect the rules set out in EU traveller to return to immediately the place Passenger Rights Regulations. of destination within four days after the

return. It can also be expected that such a cap on the liability to provide assistance would make it easier for organisers to

insure this risk.

Introduction of minimum one year Member States will not Overall, this provision would bring prescription period for claims for be affected by such a slightly increased legal certainty for damages or price reduction (minimum minimum requirement consumers, but since most Member States harmonisation rule). already have at least one year prescription

periods, no major cost or impacts are

expected.

5.7. Social Impacts

Limited effects are also expected to result from the implementation of PO5.

Businesses selling combined travel arrangements brought under the scope of the PTD would incur additional costs and this might have a limited negative effect on employment. PO5, by making the retailers responsible for the performance of the contract (under sub-option 1) might have implications for the financial viability for some SMEs (who would have to a greater extent take out liability insurance with possible knock on effects to employment).

However, fairer competition for those businesses which are already subject to the PTD may provide opportunities for absorbing any job losses.

5.7.1. Impact on fundamental rights

This option would ensure a high level of consumer protection in areas which are currently unregulated by EU legislation.

It fully complies with the provisions of the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on freedom to conduct business is not significantly impacted as, on one hand, there would be more compliance costs, but on the other one, there would be significant reductions in administrative burden.

5.8. Environmental impacts

The environmental impacts identified under the baseline scenario (need reprint the brochures) would be eliminated. However this savings are likely to be insignificant when compared to the overall environmental impacts of the travel industry.

5.9. Assessment against objective

Policy Objectives Option Rating* Comments

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to The full harmonisation of option 5 would contribute to

cross-border trade; ++ the better functioning of the Internal Market in the

package travel sector , eliminating legal fragmentation and obstacles to cross-border trade.

Ensure a more competitive and This option would result in fairer competition between fair level playing field for the different market players in the travel sector as sellers of businesses operating in the travel + pre-arranged packages and sellers of "one-trader" market. packages would need to comply with the same legal

requirements.

Reduce unjustified compliance costs ++ This option would significantly reduce unjustified costs for businesses in the package travel for businesses by excluding business trips organised by

market; (- for compliance TMCs from the scope of the Directive, eliminating

costs for new special requirements for information to be provided in packages brought the brochures and limiting organisers obligation to assist under the scope) consumers in force majeure events.

Objective 2: To achieve a high level of consumer protection in the package travel sector, , by:

Reduce consumer detriment and "One-trader" packages would be brought under the increase transparency for scope of the PTD. Reduction of traveller's detriment is travellers who buy combinations estimated to up to €326 million (assuming 50% of "oneof travel services currently not trader" packages would be brought under the scope of covered by the PTD by +/++ the PTD). The transparency would also increase as addressing new market under the pre-contractual information, consumers would developments; be also informed whether they are buying a protected

package.

Reduce consumer detriment This option would update and clarify some of the PTD stemming from unclear and provision. Clarification of responsibilities of the outdated provisions. professional parties would enhance consumers' ability to

++ seek redress in case something goes wrong. Consumers would also benefit from a right to termination the contract if they made mistakes and would gain more certainty as to the prices of the package.

6. Policy Option 6 - - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements

Assessment of relevant economic impacts

6.1. Functioning of the Internal market and competition

PO6 would result in a more even playing field and competition between sellers of combined travel arrangements and pre-arranged packages. This option is also likely to strengthen the harmonisation of the internal market and increase cross border trade as consumers increasingly recognise that these products are covered under the PTD and the same legislation applies across Member States. Making "multi-trader" assisted travel arrangements subject exclusively to the obligations to declare that they do not constitute a package and to procure insolvency protection, would increase transparency for consumers and ensure fair competition, while avoiding unnecessary costs associated with all obligations applying to packages

6.2. Compliance costs for businesses

There are 31 million "multi-trader" holiday travel arrangements and 6 million business "multitrader" travel arrangements sold annually. However, the exact share of "multi-trader" assisted travel arrangements and "multi-trader" packages is not known.

The "lighter regime" provided by PO6 would be particularly beneficial for SMEs currently selling "multi-trader" and "one-trader" packages as it could be difficult for them to cover liability for the performance of all services provided by different traders. These companies would be able to adapt their business activities so as to face only some PTD requirements (insolvency protection and an obligation to display the "This is not a package" disclaimer). It is impossible to quantify precisely how many businesses would do this.

High-street travel agents selling "one-trader" packages in most cases need to already comply with the current PTD, as interpreted by the ECJ. A change of the business model for them would imply inconvenience for their customers, i.e. a need to make separate payment transactions. Online traders selling "one-trader" packages (for which it is less clear to what extent they are covered under the current PTD as interpreted by the ECJ, although they are covered by national legislation in a number of Member States) would need to ensure that the services they offer are no longer booked within one booking process (i.e. no longer put in a single "shopping basket" by consumers). The additional services would need to be offered after the booking of the first travel service is confirmed, which would imply some redesigning of their websites and, sometimes, a further clarification of their commercial agreements with other traders. Sellers of "multi-trader" packages could adapt their websites more easily but they would need to stop charging an inclusive price for packages: this might imply the risk of losing those customers who might find the separate payment transactions

less convenient. It is therefore assumed that only around 25% of "one-trader" packages 204 and

roughly 50% of multi-trader packages would in the future be sold as "multi-trader" assisted travel arrangements.

With regard to the number of businesses affected by PO 6, it has been estimated that suboption 1 on liability would potentially impact on 6,565 businesses and sub-option 2 on 24,043 businesses (see table 16 and box 4)

This option is likely to capture travel products which resemble a package, in particular:

• websites of airlines or other transport providers (including car rentals) from which a traveller has been redirected to purchase other travel components relating to accommodation and/or car rentals on linked/partner's websites; and

• websites of hotels from which a traveller has been redirected to purchase other components relating to transport (including car rentals) on linked/partner's websites.

Capturing the full range of "other tourists services" (e.g. spas, cafes, restaurants) is not the intention of PO6 and is therefore not included in these estimates.

Table 16 Determining the number of businesses likely to be affected by option 6.

% Number

Assumed of Businesses

HOTELS

Total number of hotels and other accommodation across the EU-27 from which a

package could, in theory, originate 200,000

Number of hotels and other accommodation with an online presence 50% 100,000

Number of hotels and other accommodation with an online presence and linking to

other websites 25% 25,000

Number of above hotels and other accommodation which would sell "multi-trader" travel arrangements and would qualify under Option 6 as the initial web site - and hence, be 20% 5,000 treated as an organiser of the package -

CAR RENTALS

Total number of car rentals across the EU-27 13,000

Number of car rentals with an online presence 50% 6,500

Number of car rentals with an online presence and linking to other websites 25% 1,625

Number of car rentals with online presence which would qualify under Option 6 as the

initial web site - and hence, be treated as an organiser of the package - 5% 81

AIRLINES

Total number of airlines across the EU-27 from which a package could, in theory,

originate 300

Number of airlines with an online presence 80% 240

Number of airlines with an online presence and linking to other websites 75% 180

Number of airlines with an online presence and linking to other websites which would qualify under Option 6 as the initial web site - and hence, be treated as an organiser of 20% 36 the package -

ALLOTHER TRANSPORT (EXCEPT AIRLINES AND CAR RENTALS)

Total number of all other transport across the EU-27 from which a package could, in

theory, originate 57,900

Number of other transport with an online presence (assume 50%) 50% 28,950

Number of other transport with an online presence and linking to other websites (assume

25%) 25% 7,238

Number of other transport with an online presence and linking to other websites which would qualify under Option 6 as the initial web site - and hence, be treated as an 20% 1,448 organiser of the package -

TOTAL (initial service providers) 6,565

TOTAL (service providers with an online presence and linking to other websites) 34,043

Overall TOTAL of Businesses 271,200

Box 4 Methodology and assumptions for estimating the number of affected businesses

• - 

  Based on Eurostat data, there were 201,802 hotels and similar establishments (this includes hotels, apartment hotels, motels, roadside inns, beach hotels, residential clubs, rooming and boarding houses, tourist residences and similar accommodation). This number does not, however, include “other collective accommodation establishments” which include holiday dwellings, tourist campsites, youth hostels, tourist dormitories, group accommodation, school dormitories and other similar accommodation - numbering around 237,000 across the EU-27.

• - 

  The estimate of the number of car rental businesses (13,000) is based on the basis the data in Eurostat’s

  Structural Business Statistics database 205 .

• - 

  The estimate of 300 airlines is based on Eurostat values; and

• - 

  57,900 transport businesses in addition to airlines and car rentals is based on the number of railway

  businesses (887) plus number of businesses involved in other passenger land transport 206 ( 37,000) plus

  number of businesses involved in water transport (includes freight) 207 (20,000).

Estimates of the number of businesses that would be affected under PO6 are based on the following assumptions:

• - 

  businesses with an online presence: it has been assumed that 50% of hotels, other accommodation establishments, car rental and transport businesses (with the exception of airlines) sell their products online, while 80% of airlines have an online presence. The assumption on the proportion of hotels that

sell their services via the internet broadly corresponds with Eurostat data 208 , the relevant percentages for

other stakeholders are based on guesstimates as Eurostat does not provide data to sufficient level of

detail 209 ;

• - 

  businesses with an online presence and linking to other websites: it has been assumed that 25% of businesses with online presence link to other websites. However, in the case of airlines, it has been assumed that 75% of airlines with online sales link to other websites; and

• - 

  businesses with interlinked websites which could qualify as initial website: assumed to be 20% of businesses with interlinked websites for hotels, airlines and other transport, with the exception of car rentals where this is assumed to be 5% (in other words, it is considered rather unlikely (and counterintuitive) that many car rentals would qualify as an initial service provider in that a consumer would first purchase car rental and then get redirected to another website to purchase other travel components relating to accommodation and/or or other transport on linked/partner's websites).

It is considered that travel agents and tour operators are unlikely to sell "multi-trader" travel arrangements, rather focussing on standalone products or “"one-trader" packages".

Under PO6, traders selling "one-trader" and "multi-trader" packages would incur additional compliance costs estimated at €7.5-€9.5 per package. Traders selling multi-shop assisted travel arrangements would incur one-off administrative costs (see below) related to displaying "This is not a package" disclaimer and a cost of insolvency protection. The current estimated cost of insolvency protection for packages amounts to roughly €3 per package. Based on the available figures and in particular on the experience of the UK "Flight Plus" scheme which is a very similar model, the assumption is that this cost would remain roughly the same also for "assisted travel arrangements".

Given above the total additional compliance cost for the industry of PO6 could be estimated at €528-€654million annually (low-€7.5 and high-€9.5 estimate of compliance costs per

package). 210

Table 17 Additional compliance costs incurred per package to comply with the PTD - PO6

Number of trips to be made Low estimate of compliance high estimate of compliance covered as packages costs (€7.5 per package) costs (€9.5 per package)

15,4 million holiday trips €115,5 million €146,3 million

3 million B2B trips €22,5 million €28,5 million

Total €138 million €174,8 million

Number of trips to be Low estimate of compliance covered as assisted travel costs (€3 per package) arrangements

15,4 million holiday trips €46,2 million

3 million B2B trips €9 million

Total €55,2 million

However, using the above assumptions that some traders might adapt their business models and no longer sell packages, the additional yearly compliance costs of PO6 could be estimated at €386-€444 million annually (low- €7.5 and high- €9.5 estimate of compliance costs per

package) 211 .

Table 18 Reduced compliance costs for "one-trader" and "multi-trader" packages sold which could be sold as assisted travel arrangements in the future

Number of trips to be made Low estimate of "savings" high estimate of compliance compliant (€4.5 per package) costs (€9.5 per package)

22,3 million "one-trader" €100,4 million €145 million packages

9,2 million "multi-trader" €41,4 million €59,8 million packages

Total €141,8 million €423,7

6.2.1. Administrative costs for businesses

Some additional administrative costs for businesses brought under the scope of the PTD: -

€2.8million annually 212 . Providers of "multi-trader" travel arrangements, subject only to the

lighter information regime, would incur administrative costs of €500 per company (€17

million for the whole industry 213 ) to provide the message "this is not a package" in a durable

medium to their customers.

6.3. Impacts on SMEs

Similarly to PO5, this option would increase compliance costs for businesses including SMEs selling "multi-trader" packages. However, PO6 provides for a lighter regime which would be particularly beneficial for SMEs currently selling "one-trader" and "multi-trader" packages which might be ill-placed to assume liability for the performance of different services included in the travel combination. These companies would be able to adapt their business activities and face only some PTD requirements (insolvency protection and an obligation to display the "This is not a package disclaimer") incurring lower compliance costs (on average €3 per package) compared to sellers of packages (on average €7.5-€9.5 per package).

PO6 would impact hotels, car rentals, airlines and businesses operating in the transport sector other than airlines and car rentals. Most of these businesses, excluding airlines, are SMEs/micro businesses (99%/73% for hotels, 99%/94% car rentals, 99%/90% other transport

services) 214 . For this reason, the goals which option 6 aims to reach would be hampered if

such businesses were to be excluded from the scope.

6.4. Impact on consumers and households

Compared to PO5, this option would bring additionally around 31 million "multi-trader" travel arrangements within the scope of the Directive, bringing additional protection for consumers purchasing combined travel arrangements. As estimated under PO5, the baseline detriment for 15.5 million of "multi-trader" packages is expected to reduce by 88%. Given that the most prevalent problems causing detriment concern provisions of information (22% of EU-17 problems with combined travel arrangements) and services not provided at all or of lower standard (17% of problems) that would be to an extent tackled by the "lighter protection",

The yearly consumer detriment could be reasonably estimated to decrease by €508 million. However, using the same assumptions as above that some traders might adapt their business models and no longer sell packages the total reduction of yearly consumer detriment could be

estimated at €430 million 215 . it is assumed that the detriment for "multi-trader" assisted travel

arrangements would be 30% lower compared to the decrease of detriment for packages.

Moreover, the "This is not a package"- disclaimer would enable consumers to make informed choices.

On the other hand, some consumers may experience an increase in the prices of "multi-trader" and "one-trader" packages of around €7.5-9.5 per packages and of around €3 for "multitrader" assisted travel arrangements if businesses pass on their increased compliance costs. But, similarly to PO5, such possible price increase case would be less than 2% of the total price of the package.

It is interesting to note, in this context, that 68% of surveyed consumers were willing to pay

additionally €3 for insolvency protection for standalone airline tickets 216 which shows that

consumers would be similarly likely to accept the potential increased prices for "multi-trader" assisted travel arrangements offering them protection against insolvency.

Table 19 Detriment associated with "multi-trader" travel arrangements

Number of Value of purchase Value of net combined of combined travel detriment in

travel arrangements (€) population (€) arrangements

EU-27 118 million 87 billion 1,065 billion

Number of Value of trips to be Value of net "multimade compliant detriment trader" travel (€) associated with arrangements products to be to be made made compliant €) compliant

PO5 43,6 million "one-trader" 32,3 billion 395 million packages

PO6 15,5 million "multi-trader" 11,4 billion 139,6 million packages

PO6 15,5 million "multi-trader"

assisted travel 11,4 billion 139,6 million

arrangements

6.5. Impact on public authorities

Similar effects as PO5.

6.6. Social impacts Similar effects as PO5.

6.6.1. Impact on fundamental rights:

Similar effects as PO5.

6.7. Environmental impacts

Similar effects as PO5.

6.8. Assessment of sub-options

Sub-option 2 Sub-option 3

Stakeholder/ Sub-option 1 (liability of

Impact a single service provider) (liability of each of the (joint liability of all traders unless involved service the parties designate only one

providers) trader to be liable)

MS impacted All MS impacted. All MS impacted. All MS impacted

Around 6,500 businesses Around 34,000 Depending on the business are likely to be impacted businesses (which arrangement, between 6,500-34,000

Impact on by compliance costs- they include the 6,500 companies would be impacted. If one businesses could be liable for services businesses under Subliable party is not designated, then provided by different option 1) are likely to any company could be liable for

companies. bear the compliance services provided by different costs. companies.

Greater clarity as to who is Where travellers wish to One interlocutor for consumers to seek assistance or seek assistance and redress. In cases

Impact on responsible for compliance redress, there could be a where parties do not designate one

consumers with the PTD and from whom travellers can seek number of parties that trader, consumer could decide who to

assistance or redress. they would have to turn to. interact with.

6.9. Assessment against objective

Policy Objectives Option Rating* Comments

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to Similarly to PO5, the strengthened harmonisation would cross-border trade; contribute to the better functioning of the Internal

Market, eliminating legal fragmentation and obstacles to cross-border trade. Making "multi-trader" assisted travel

++ arrangements subject exclusively to the limited

obligations would ensure fair competition, while avoiding unnecessary costs associated with all

obligations applying to packages Policy Objectives Option Rating* Comments

Ensure a more competitive and This option would result in fairer competition between fair level playing field for the different market players in the travel sector compared to businesses operating in the travel ++/+++ PO5 as more competing products would be brought market. under the scope of the PTD levelling the market playing

field.

Reduce unjustified compliance costs Similarly to PO5, this option would significantly reduce

for businesses in the package travel unjustified costs for businesses by excluding business market; trips organised by TMCs from the scope of the

++ Directive, eliminating special requirements for information to be provided in the brochures and limiting

(- for organisers obligation to assist consumers in force compliance cost majeure events. PO6 also provides for a lighter regime for travels which would be particularly beneficial for SMEs brought under currently selling "one-trader" and "multi-trader" the scope) packages which might be ill-placed to assume liability for the performance of different services included in the travel combination. These companies would face only

some PTD requirements.

Objective 2: To achieve a high level of consumer protection in the package travel sector, by:

Reduce consumer detriment and The number of consumers protected by the PTD would increase transparency for increase. Bringing "multi-trader" packages under the travellers who buy combinations scope of the PTD will reduce the consumer detriment of travel services currently not associated with these products. The total reduction of covered by the PTD by ++/+++ consumer detriment could be estimated at €508 million addressing new market or €430 million if some companies change their business developments; models.

Reduce consumer detriment Similarly to PO5, this option would update and clarify stemming from unclear and some of the PTD provision reducing consumer

outdated provisions. ++ detriment. Consumers, among others, would benefit

from increased foreseeability in relation to prices, more clear liabilities and a right to terminate the contract

against compensation.

7. Assessment of Option 7 - Modernisation of the Directive and coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7)

7.1. Functioning of the Internal market and competition

This option is also likely to strengthen the harmonisation of the internal market and increase cross border trade as consumers increasingly recognise that all combined travel arrangements are covered under the PTD and the same legislation applies across Member States. However, by extending the scope to "multi-trader" travel arrangements which are not directly competing with "packages" it would generate disproportionate and unfair costs for these companies.

7.2. Compliance costs for businesses

Compared to PO5, PO7 extends the scope of the PTD to cover 31 million "multi-trader" travel arrangements and 6 million business trips.

However, by extending the scope to all "multi-trader" travel arrangements and by making them subject to all PTD obligations, this option would generate disproportionate and unfair costs for companies acting merely as intermediaries, since they might not be able to guarantee the performance of all services included in the travel combination.

The total additional compliance costs of PO7 could be estimated at €610-€773 million

annually 217 (low-€7.5 and high-€9.5 estimate of compliance costs per package).

Additional costs for the industry are likely to be partially offset in the medium term by increased competition and transparency in the sector bringing reduced costs for traditional package providers benefitting from lower compliance costs (see assessment of PO5).

Table 20 Additional compliance costs incurred per package to comply with the PTD

Number of trips to be rbought Low estimate of compliance high estimate of compliance under the scope of the PTD costs (€7.5 per package) costs (€9.5 per package)

74,4 million holiday trips €558 million €706,8 million

7 million B2B trips €52 million €66,5 million

Total €610 million €773million

7.3. Impacts on SMEs

Similarly to PO5 and PO6, mostly SMEs would be impacted by increased compliance costs. Compared to PO6, this option does not provide for any lighter regime. All travel companies with online presence and linking to other travel providers would be subject to all PTD requirements which could be considered as dispropo rtionate burden.

7.4. Impact on consumers and households

Compared to PO5, PO7 would bring 31 million travel arrangements, representing a value of approximately €23 billion, within the scope of the Directive. Using the same approach as under PO5, the table below shows estimates of the level of consumer detriment resulting from combined travel arrangements brought under the scope of the PTD. It could be estimated that the yearly consumer detriment would decrease by €593 million.

Table 20 Detriment associated with "multi-trader travel arrangements

Number of Value of purchase of Value of net detriment combined travel combined travel in population (€) arrangements arrangements(€)

EU-27 118 million 87 billion 1,065 billion

Number of Value of trips to be Value of net detriment combined travel made compliant (€) associated with arrangements to products to be made be brought under compliant €) the scope of the PTD

PO5 43,6 million 32,3 billion 395 million

PO7 31 million 22,8 billion 279 million

It is possible (and likely) that some consumers may experience an increase in the price of "multi-trader" travel arrangements as businesses may pass on the increased compliance costs. This will however depend on supply and demand elasticises. However, any price increase per package is likely to be around 1% (i.e. €7,65 - €9.65€ - /€741) of the total price of the package.

7.5. Impact on public authorities

Similar effects as PO5 and PO6.

7.6. Social impacts

Similar effects as PO5 and PO6.

7.6.1. Impact on fundamental rights:

Similar effects as PO5 and PO6.

7.7. Environmental impacts

Similar effects as PO5 and PO6.

Policy Objectives Option Rating* Comments

Objective 1: To improve the functioning of the Internal Market in the package travel sector, by:

Reduce costs and obstacles to Similarly to PO5, the strengthened harmonisation

cross-border trade; ++ would contribute to the better functioning of the

Internal Market, eliminating legal fragmentation and obstacles to cross-border trade. However, by

Policy Objectives Option Rating* Comments

extending the scope to "multi-trader" travel arrangements which are not directly competing with "packages" it would generate disproportionate and

unfair costs for these companies

Ensure a more competitive and This option would result in fairer competition fair level playing field for the between different market players in the travel sector

businesses operating in the ++ compared to PO5.

travel market.

Reduce unjustified compliance ++ Similarly to PO5, this option would significantly

costs for businesses in the package reduce unjustified costs for businesses by excluding travel market; (-- for compliance business trips organised by TMCs from the scope of

cosrs for new multithe Directive, eliminating special requirements for trader travel information to be provided in the brochures and

arrangements limiting organisers obligation to assist consumers in brought under the force majeure events.

scope)

Objective 2: To achieve a high level of consumer protection in the package travel sector, by:

Reduce consumer detriment and The number of consumers protected by the PTD increase transparency for would increase. Bringing "multi-trader" travel travellers who buy arrangements under the scope of the PTD will reduce combinations of travel services the consumer detriment associated with these currently not covered by the +++ products. The total yearly reduction of detriment PTD by addressing new could be estimated at €508 million. market developments;

Reduce consumer detriment Similarly to PO5, this option would update and stemming from unclear and clarify some of the PTD provision reducing consumer

outdated provisions. ++ detriment. Consumers, among others, would benefit

from increased foreseeability in relation to prices, more clear liabilities and a right to terminate the

contract against compensation.

ANNEX 6

C ALCULATION OF A DMINISTRATIVE C OSTS

SPREADSHEET 1- ADMINISTRATIVE COSTS OF OPTION 1 (INFORMATION REQUIREMENTS)

C o unc il D ire c t iv e 9 0 / 3 14 / E E C o n pa c k a ge t ra v e l, pa c k a ge ho lida ys a nd pa c k a ge t o urs P ric e T o t a l

( pe r F re q N br T o t a l nbr Equipm e nt Out s o urc ing T o t a l B us ine s s a s T a rif f T ime A dm inis t ra t iv e

a c t io n ( pe r o f o f C o s t s ( pe r c o s t s ( pe r e nt it y A dm inis t ra t iv e Us ua l C o s t s ( % ( € pe r ho ur) ( ho ur) B urde n ( A C -

o r ye a r) e nt it ie s a c t io ns e nt it y pe r ye a r) pe r ye a r) c o s t o f A C ) B A U)

e quip)

P re - C o nt ra c t Ass. Orig. Descriptio n o f required

No . Type o f o bligatio n B a s e line Target gro up e i e i

A rt. A rt. actio n(s) Submitting the info rmatio n A ll co mpanies

No n-labelling info rmatio n fo r 1 1§1 (sending it to the designated Either the mo netary amo unt o r the percentage o f the price which is to be 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) paid o n acco unt, and the timetable fo r payment o f the balance; Submitting the info rmatio n A ll co mpanies

No n-labelling info rmatio n fo r 2 (sending it to the designated 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) The meal plan; Submitting the info rmatio n A ll co mpanies

No n-labelling info rmatio n fo r 3 (sending it to the designated 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) The itinerary; Submitting the info rmatio n The type o f acco mmo datio n, its lo catio n, catego ry o r degree o f co mfo rt A ll co mpanies

No n-labelling info rmatio n fo r 4 (sending it to the designated and its main features, its appro val and to urist classificatio n under the 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) rules o f the ho st M ember State co ncerned; Submitting the info rmatio n A ll co mpanies

No n-labelling info rmatio n fo r 5 (sending it to the designated The destinatio n and the means, characteristics and catego ries o f 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) transpo rt used; Submitting the info rmatio n Whether a minimum number o f perso ns is required fo r the package to A ll co mpanies

No n-labelling info rmatio n fo r 6 (sending it to the designated take place and, if so , the deadline fo r info rming the co nsumer in the event 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) o f cancellatio n. Submitting the info rmatio n General info rmatio n o n passpo rt and visa requirements fo r natio nals o f A ll co mpanies

No n-labelling info rmatio n fo r 7 (sending it to the designated the M ember State o r States co ncerned and health fo rmalities required 15 1 15,0 3,00 72.000 216.000 3.240.000 0% 3.240.000

third parties recipient) fo r the jo urney and the stay; Submitting the info rmatio n Large co mpanies

No n-labelling info rmatio n fo r 8 (sending it to the designated 0,0 1,00 250 250 1.600.000 400.000.000 0% 400.000.000

third parties recipient) Reprinting co sts fo r bro chures o utso urced Submitting the info rmatio n Po ssibility to revise (prio r to co ncluding co ntract) any o f the particulars A ll co mpanies

No n-labelling info rmatio n fo r 9 (sending it to the designated set o ut in bro chures must be stated therein if later wish to revise things 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

third parties recipient) such as price* In t he C o nt ra c t 0 0

Submitting the info rmatio n A ll co mpanies Info rmatio n labelling fo r third

10 (sending it to the designated The tra ve l de s tina tio n(s ) a nd, whe re pe rio ds o f s ta y a re invo lve d, the 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) re le va nt pe rio ds , with da te s ; Submitting the info rmatio n A ll co mpanies

Info rmatio n labelling fo r third 11 (sending it to the designated The m e a ns , c ha ra c te ris tic s a nd c a te go rie s o f tra ns po rt to be us e d, the 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties

recipient) da te s , tim e s a nd po ints o f de pa rture a nd re turn; Submitting the info rmatio n Whe re the pa c ka ge inc lude s a c c o mm o da tio n, its lo c a tio n, its to uris t A ll co mpanies

Info rmatio n labelling fo r third 12 (sending it to the designated c a te go ry o r de gre e o f c o m fo rt, its m a in fe a ture s , its c o m plia nc e with the 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) rule s o f the ho s t M e m be r S ta te c o nc e rne d a nd the m e a l pla n; Submitting the info rmatio n Whe the r a m inimum numbe r o f pe rs o ns is re quire d fo r the pa c ka ge to A ll co mpanies

Info rmatio n labelling fo r third 13 (sending it to the designated ta ke pla c e a nd, if s o , the de a dline fo r info rm ing the c o ns um e r in the e ve nt 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) o f c a nc e lla tio n; Submitting the info rmatio n A ll co mpanies

Info rmatio n labelling fo r third 14 (sending it to the designated 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) Tthe itine ra ry; Submitting the info rmatio n A ll co mpanies

Info rmatio n labelling fo r third 15 (sending it to the designated Vis its , e xc urs io ns o r o the r s e rvic e s whic h a re inc lude d in the to ta l pric e 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) a gre e d fo r the pa c ka ge ; Submitting the info rmatio n A ll co mpanies

Info rmatio n labelling fo r third 16 (sending it to the designated The na m e a nd a ddre s s o f the o rga nize r, the re ta ile r a nd, whe re 15 0,2 3,0 3,00 72.000 216.000 648.000 0% 648.000

parties recipient) a ppro pria te , the ins ure r; The pric e o f the pa c ka ge , a n indic a tio n o f the po s s ibility o f pric e A ll co mpanies

Submitting the info rmatio n re vis io ns (a nd ho w the y s ho uld be c a lc ula te d) unde r Artic le 4 (4) a nd a n Info rmatio n labelling fo r third

17 (sending it to the designated indic a tio n o f a ny due s , ta xe s o r fe e s c ha rge a ble fo r c e rta in s e rvic e s 15 0,2 3,0 3,00 72.000 216.000 648.000 50% 324.000 parties

recipient) (la nding, e m ba rka tio n o r dis e m ba rka tio n fe e s a t po rts a nd a irpo rts ,

to uris t ta xe s ) whe re s uc h c o s ts a re no t inc lude d in the pa c ka ge ; Submitting the info rmatio n A ll co mpanies Info rmatio n labelling fo r third

18 (sending it to the designated 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 parties

recipient) The pa ym e nt s c he dule a nd me tho d o f pa ym e nt; Submitting the info rmatio n S pe c ia l re quire me nts whic h the c o ns um e r ha s c o m munic a te d to the A ll co mpanies

Info rmatio n labelling fo r third 19 (sending it to the designated o rga nize r o r re ta ile r whe n m a king the bo o king, a nd whic h bo th ha ve 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties recipient) a c c e pte d; Submitting the info rmatio n

Info rmatio n labelling fo r third A ll co mpanies 20 (sending it to the designated P e rio ds within whic h the c o ns um e r m us t m a ke a ny c o m pla int c o nc e rning 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0

parties

recipient) fa ilure to pe rfo rm o r impro pe r pe rfo rma nc e o f the c o ntra c t.

B e f o re D e pa rt ure Submitting the info rmatio n The time s a nd pla c e s o f inte rme dia te s to ps a nd tra ns po rt c o nne c tio ns A ll co mpanies Info rmatio n labelling fo r third

21 (sending it to the designated a s we ll a s de ta ils o f the pla c e to be o c c upie d by the tra ve lle r, e .g. c a bin o r 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 parties

recipient) be rth o n s hip, s le e pe r c o mpa rtme nt o n tra in; A ll co mpanies

The na m e , a ddre s s a nd te le pho ne num be r o f the o rga nize r's a nd/o r Submitting the info rmatio n re ta ile r's lo c a l re pre s e nta tive o r, fa iling tha t, o f lo c a l a ge nc ie s o n who s e Info rmatio n labelling fo r third

22 (sending it to the designated a s s is ta nc e a c o ns um e r in diffic ulty c o uld c a ll. Whe re no s uc h 15 1,0 15,0 3,00 72.000 216.000 3.240.000 0% 3.240.000 parties

recipient) re pre s e nta tive s o r a ge nc ie s e xis t, the c o ns um e r mus t in a ny c a s e be

pro vide d with a n e me rge nc y te le pho ne numbe r o r a ny o the r info rm a tio n tha t will e na ble him to c o ntra c t the o rga nize r a nd/o r the re ta ile r;

Submitting the info rmatio n In the c a s e o f jo urne ys o r s ta ys a bro a d by m ino rs , info rm a tio n e na bling A ll co mpanies Info rmatio n labelling fo r third

23 (sending it to the designated dire c t c o nta c t to be e s ta blis he d with the c hild o r the pe rs o n re s po ns ible 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 parties

recipient) a t the c hild's pla c e o f s ta y; Submitting the info rmatio n Info rm a tio n o n the o ptio na l c o nc lus io n o f a n ins ura nc e po lic y to c o ve r A ll co mpanies

Info rmatio n labelling fo r third

24 (sending it to the designated the c o s t o f c a nc e lla tio n by the c o ns um e r o r the c o s t o f a s s is ta nc e , 15 0,5 7,5 3,00 72.000 216.000 1.620.000 0% 1.620.000

parties

recipient) inc luding re pa tria tio n, in the e ve nt o f a c c ide nt o r illne s s .

T o t a l a dminis t ra t iv e c o s t s ( €) 4 2 1.0 6 0 .0 0 0

T o t a l a dm inis t ra t iv e burde n 4 0 9 .0 7 2 .0 0 0 T o t a l bus ine s s a s us ua l 11.9 8 8 .0 0 0 M e dium e s t im a t e - 5 0 % o f " s ingle - po int o f pruc ha s e " dyna mic pa c k a ge s unde r t he s c o pe o f

SPREADSHEET 3- ADMINISTRATIVE COSTS OF OPTION 1 (CROSS-BORDER

C o unc il D ire c t iv e 9 0 / 3 14 / EE C o n pa c k a ge t ra v e l, pa c k a ge ho lida ys a nd pa c k a ge t o urs P ric e

T o t a l ( pe r F re q N br T o t a l nbr E quipm e nt O ut s o urc ing T o t a l B us ine s s a s

T a rif f T im e A dminis t ra t iv e a c t io n ( pe r o f o f C o s t s ( pe r c o s t s ( pe r e nt it y A dm inis t ra t iv e Us ua l C o s t s ( %

( € pe r ho ur) ( ho ur) B urde n ( A C - o r ye a r) e nt it ie s a c t io ns e nt it y pe r ye a r) pe r ye a r) c o s t o f A C )

B A U) e quip)

P re - C o nt ra c t A ss. Orig. Descriptio n o f required

No . Type o f o bligatio n B a s e line Target gro up e i e i

A rt. A rt. actio n(s) No n-labelling info rmatio n fo r Familiarising with the

1 1§1 Four Mem ber States third parties info rmatio n o bligatio n 4 M S A ll co mpanies

No n-labelling info rmatio n fo r Familiarising with the 2 Researching requirements in each M ember State where co mpany wishes 75 20 1.500,0 1,00 10.080 10.080 15.120.000 100% 0

third parties info rmatio n o bligatio n to sell

No n-labelling info rmatio n fo r Familiarising with the Adapting pre-co ntract material info rmatio n requirements to meet A ll co mpanies 3 15 16 240,0 1,00 10.080 10.080 2.419.200 100% 0

third parties info rmatio n o bligatio n requirements in each M S No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies

4 15 4 60,0 1,00 10.080 10.080 604.800 100% 0 third parties info rmatio n o bligatio n Adapting co ntract materials to meet requirements in each M S

No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies 5 1§2 15 4 60,0 1,00 10.080 10.080 604.800 100% 0

third parties info rmatio n o bligatio n Adapting pre-departure materials to meet requirements in each M S No n-labelling info rmatio n fo r Familiarising with the

6 One Mem ber State

third parties info rmatio n o bligatio n 1 M S

A ll co mpanies No n-labelling info rmatio n fo r Familiarising with the

7 Researching requirements in each M ember State where co mpany wishes 75 5 375,0 1,00 3.600 3.600 1.350.000 100% 0 third parties info rmatio n o bligatio n

to sell No n-labelling info rmatio n fo r Familiarising with the Adapting pre-co ntract material info rmatio n requirements to meet A ll co mpanies 8 15 4 60,0 1,00 3.600 3.600 216.000 100% 0

third parties info rmatio n o bligatio n requirements in each M S No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies

9 1§3 1 15,0 1,00 3.600 3.600 54.000 100% 0 third parties info rmatio n o bligatio n Adapting co ntract materials to meet requirements in each M S

15 No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies

10 15 1 15,0 1,00 3.600 3.600 54.000 100% 0 third parties info rmatio n o bligatio n Adapting pre-departure materials to meet requirements in each M S

No n-labelling info rmatio n fo r Familiarising with the

11 Three Mem ber States third parties info rmatio n o bligatio n 3 M S A ll co mpanies

No n-labelling info rmatio n fo r Familiarising with the 12 Researching requirements in each M ember State where co mpany wishes 75 15 1.125,0 1,00 4.320 4.320 4.860.000 100% 0

third parties info rmatio n o bligatio n to sell

No n-labelling info rmatio n fo r Familiarising with the Adapting pre-co ntract material info rmatio n requirements to meet A ll co mpanies 13 1§4

third parties info rmatio n o bligatio n requirements in each M S

15 12 180,0 1,00 4.320 4.320 777.600 100% 0 No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies

14 15 3 45,0 1,00 4.320 4.320 194.400 100% 0 third parties info rmatio n o bligatio n Adapting co ntract materials to meet requirements in each M S

No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies 15 15 3 45,0 1,00 4.320 4.320 194.400 100% 0

third parties info rmatio n o bligatio n Adapting pre-departure materials to meet requirements in each M S No n-labelling info rmatio n fo r Familiarising with the

16

third parties info rmatio n o bligatio n TOTAL (including one off costs)

A ll co mpanies No n-labelling info rmatio n fo r Familiarising with the

17 1§5 Researching requirements in each M ember State where co mpany wishes 21.330.000 100% 0 third parties info rmatio n o bligatio n

to sell

No n-labelling info rmatio n fo r Familiarising with the Adapting pre-co ntract material info rmatio n requirements to meet A ll co mpanies

18 3.412.800 100% 0 third parties info rmatio n o bligatio n requirements in each M S

No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies 19 853.200 100% 0

third parties info rmatio n o bligatio n Adapting co ntract materials to meet requirements in each M S No n-labelling info rmatio n fo r Familiarising with the A ll co mpanies

20

third parties info rmatio n o bligatio n Adapting pre-departure materials to meet requirements in each M S

853.200 100% 0

T o t a l a dminis t ra t iv e c o s t s ( €) 2 6 .4 4 9 .2 0 0

375 T o t a l a dminis t ra t iv e burde n 0

T o t a l bus ine s s a s us ua l 2 6 .4 4 9 .2 0 0

N o o f c o m pa nie s inv o lv e d in A v e ra ge c o s t pe r c o m pa ny 1.4 6 9 1.4 6 9 18 .0 0 0 c ro s s bo rde r t ra de

A s s ume 10 % o f pa c k a ge s a re A v e c o s t pe r pa c k a ge 1,6 5 16 .0 0 0 .0 0 0 c ro s s bo rde r s a le s

A v e A dm in burde n 0 ,0 0

TOTAL (excluding one off costs)

T o t a l a nnua l a dm inis t ra t iv e c o s t s ( €) 5 .119 .2 0 0 T o t a l a nnua l a dm inis t ra t iv e burde n 0 T o t a l a nnua l bus ine s s a s us ua l 5 .119 .2 0 0

SPREADSHEET 4- ADMINISTRATIVE COSTS OF OPTION 3 A

C o unc il D ire c t iv e 9 0 / 3 14 / E EC o n pa c k a ge tra v e l, pa c k a ge ho lida ys a nd pa c k a ge P ric e F re q N br T o t a l nbr Equipm e nt O uts o urc ing T o ta l B us ine s s a s T o ta l t o urs T a rif f T ime ( pe r ( pe r o f o f C o s t s ( pe r c o s t s (pe r e ntity A dm inis t ra tiv e Us ua l C o s t s ( % A dm inis t ra tiv e

( € pe r ho ur) ( ho ur) a c tio n ye a r) e nt itie s a c t io ns e nt ity pe r ye a r) pe r ye a r) c o s t o f A C ) B urde n ( A C -

A ss. Orig. Descriptio n o f required No . Type o f o bligatio n Target gro up e i

A rt. A rt. actio n(s) Submitting the info rmatio n Co mpanies selling

No n-labelling info rmatio n fo r 1 (sending it to the designated packages 500,0 1,00 72.000 72.000 0 36.000.000 0% 36.000.000

third parties recipient)

T o ta l a dm inis t ra tiv e c o s t s (€) 3 6 .0 0 0 .0 0 0 A dministrative co sts by o rigin (€)

T o ta l o ne o f f a ddminis tra t iv e c o s ts 3 6 .0 0 0 .0 0 0

C o unc il D ire c t iv e 9 0 / 3 14 / EE C o n pa c k a ge t ra v e l, pa c k a ge ho lida ys a nd pa c k a ge

P ric e

t o urs T o t a l

( pe r F re q N br T o t a l nbr E quipm e nt O ut s o urc ing T o t a l B us ine s s a s

T a rif f T im e A dminis t ra t iv e

a c t io n ( pe r o f o f C o s t s ( pe r c o s t s ( pe r e nt it y A dminis t ra t iv e Us ua l C o s t s ( %

( € pe r ho ur) ( ho ur) B urde n ( A C -

o r ye a r) e nt it ie s a c t io ns e nt it y pe r ye a r) pe r ye a r) c o s t o f A C )

B A U)

e quip)

A ss. Orig. Descriptio n o f required No . Type o f o bligatio n Target gro up e i

A rt. Art. actio n(s) Co mpanies selling

Submitting the info rmatio n No n-labelling info rmatio n fo r "single-po int o f 1 (sending it to the designated 500,0 1,00 36.000 36.000 0 18.000.000 0% 18.000.000

third parties purchase" dynamic recipient)

packages Submitting the info rmatio n Co mpanies selling No n-labelling info rmatio n fo r

2 (sending it to the designated linked travel 500,0 1,00 34.000 34.000 0 17.000.000 0% 17.000.000 third parties

recipient) arrangements

T o t a l a dm inis t ra t iv e c o s t s ( €) 3 5 .0 0 0 .0 0 0 Administrative co sts by o rigin (€)

T o t a l o ne o f f a ddminis t ra t iv e c o s t s 3 5 .0 0 0 .0 0 0 SPREADSHEET 6- ADMINISTRATIVE COSTS OF OPTION 5

C o unc il D ire c t iv e 9 0 / 3 14 / E E C o n pa c k a ge t ra v e l, pa c k a ge ho lida ys a nd pa c k a ge t o urs P ric e T o t a l

( pe r F re q N br T o t a l nbr E quipm e nt O ut s o urc ing T o t a l B us ine s s a s T a rif f T im e A dm inis t ra t iv e

a c tio n ( pe r o f o f C o s t s (pe r c o s ts ( pe r e nt it y A dm inis t ra t iv e Us ua l C o s t s ( % ( € pe r ho ur) ( ho ur) B urde n (A C -

o r ye a r) e nt it ie s a c tio ns e nt it y pe r ye a r) pe r ye a r) c o s t o f A C ) B A U)

e quip)

P re -C o nt ra c t A ss. Orig. Descriptio n o f required

No . Type o f o bligatio n O pt io n 5 Target gro up e i e i

A rt. A rt. actio n(s) The to tal price (including all taxes and additio nal applicable fees and Co mpanies

Submitting the info rmatio n No n-labelling info rmatio n fo r charges), the arrangements fo r payment and, where applicable, the 1 1§1 (sending it to the designated 15 0,3 4,5 3,00 72.000 216.000 972.000 100% 0

third parties existence and the co nditio ns o f depo sits o r o ther financial guarantees to recipient) be paid o r pro vided by the traveller

Submitting the info rmatio n Co mpanies No n-labelling info rmatio n fo r

2 (sending it to the designated The travel destinatio n(s), the itinerary and, where perio ds o f stay are 15 0,4 6,0 3,00 72.000 216.000 1.296.000 100% 0 third parties recipient) invo lved, the relevant perio ds, with dates;

Submitting the info rmatio n If acco mmo datio n is included, the lo catio n, main features and to urist Co mpanies No n-labelling info rmatio n fo r

4 (sending it to the designated catego ry including, where available, the rating under a natio nal o r 15 0,3 4,5 3,00 72.000 216.000 972.000 100% 0 third parties

recipient) internatio nal ho tel classificatio n system applicable in the ho st state; If transpo rt is included, the means, characteristics and catego ries o f Co mpanies

Submitting the info rmatio n transpo rt, the po ints, dates and time o f departure and return o r, where the No n-labelling info rmatio n fo r

5 (sending it to the designated exact time is no t yet determined, the part o f the day (mo rning, afterno o n, 15 0,3 4,5 3,00 72.000 216.000 972.000 0% 972.000 third parties

recipient) evening o r night) o f departure and return, the duratio n and places o f intermediate sto ps and transpo rt co nnectio ns;

Submitting the info rmatio n whether a minimum number o f perso ns is required fo r the package to Co mpanies No n-labelling info rmatio n fo r

6 (sending it to the designated take place and, if so , the deadline befo re departure fo r info rming the 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 third parties

recipient) traveller in the event o f cancellatio n general info rmatio n o n passpo rt and visa requirements in o rder to Co mpanies

Submitting the info rmatio n No n-labelling info rmatio n fo r participate in the package to ur fo r natio nals o f the M ember State o r 7 (sending it to the designated

third parties States co ncerned and in particular o n the perio ds fo r o btaining visa and, 15 1 15,0 3,00 72.000 216.000 3.240.000 0% 3.240.000

recipient) if any, health fo rmalities required fo r the travel package

Submitting the info rmatio n whether any meals are pro vided and if so , the meal plan; and visits, Co mpanies No n-labelling info rmatio n fo r

11 (sending it to the designated excursio n(s) o r o ther services which are included in the to tal price agreed 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 third parties

recipient) fo r the package Submitting the info rmatio n The identity such as trading name, geo graphical address o f the o rganiser Co mpanies

No n-labelling info rmatio n fo r 12 (sending it to the designated and, where applicablre the retailer as well as their telepho ne number and e 15 0,2 3,0 3,00 72.000 216.000 648.000 0% 648.000

third parties recipient) mail address Submitting the info rmatio n Co mpanies

No n-labelling info rmatio n fo r 13 (sending it to the designated that the pro duct is a travel package and, as a co nsequence, the traveller 15 0,6 9,0 3,00 72.000 216.000 1.944.000 0% 1.944.000

third parties recipient) will benefit fro m legal pro tectio n fo r travel packages under EU law In t he C o nt ra c t

Submitting the info rmatio n Co mpanies

15 No n-labelling info rmatio n fo r (sending it to the designated 15 1,4 21,0 3,00 72.000 216.000 4.536.000 100% 0 third parties recipient) The pre -co ntrac t info rma tio n (B AU) plus :

Submitting the info rmatio n Co mpanies No n-labelling info rmatio n fo r

16 (sending it to the designated 15 2,1 31,5 3,00 72.000 216.000 6.804.000 0% 6.804.000 third parties

recipient) The pre -co ntrac t info rma tio n (Admin burde n) plus : if diffe rent fro m the co nta ct de ta ils pro vide d ea rlier, the co nta c t de ta ils o f Co mpanies

Submitting the info rmatio n No n-labelling info rmatio n fo r the o rga nis e r o r the pers o n who is ac ting in his na m e o r o n his behalf 17 (sending it to the designated 0

third parties who m the tra ve ller ca n c o nta ct to co mpla in a bo ut a ny im pro pe r 15 0,4 3,0 3,00 72.000 216.000 648.000 100%

recipient) pe rfo rma nc e whic h he perc e ives o n the s po t Co mpanies

Submitting the info rmatio n No n-labelling info rmatio n fo r

18 third parties (sending it to the designated info rm atio n tha t the tra ve ller ma y te rm inate the c o ntrac t a t any tim e 15 0,2 3,0 3,00 72.000 216.000 648.000 50% 324.000

recipient) be fo re depa rture agains t c o m pe ns a tio n witho ut s tating any re as o n

Submitting the info rmatio n Co mpanies

19 No n-labelling info rmatio n fo r (sending it to the designated s pec ia l requirem e nts whic h the travelle r has c o mm unica te d to the tra de r 15 0,4 6,0 3,00 72.000 216.000 1.296.000 100% 0 third parties recipient) and whic h bo th ha ve a cc epte d

Submitting the info rmatio n Co mpanies No n-labelling info rmatio n fo r

(sending it to the designated The po s s ibility o f having re c o urs e to an am ic a ble dis pute s ettlem e nt, 15 0,2 3,0 3,00 72.000 216.000 648.000 0% 648.000 third parties recipient) where a pplica ble;

• - 

  is o bliged to pro vide as s is tance if the tra ve ller is in diffic ulty Co mpanies -is o blige d to pro c ure ins o lvency pro tec tio n to guara ntee a re fund o f a ll pa yme nts ma de by the tra ve ller, a nd, where pa s s enge r trans po rt is included in the pa ckage, his re pa tria tio n, as well a s the nam e o f the e ntity pro viding the ins o lve nc y pro tec tio n and its co nta ct de tails , inc luding its ge o graphica l addres s

Submitting the info rmatio n info rm atio n tha t the o rganis er No n-labelling info rmatio n fo r

(sending it to the designated - is res po ns ible fo r the pro pe r pe rfo rm a nc e o f all inc lude d tra ve l s e rvic es 15 0,2 3,0 3,00 72.000 216.000 648.000 0% 648.000 third parties

recipient) - is o bliged to pro vide as s is tance if the tra ve ller is in diffic ulty -is o blige d to pro c ure ins o lvency pro tec tio n to guara ntee a re fund o f a ll pa yme nts ma de by the tra ve ller, a nd, where pa s s enge r trans po rt is included in the pa ckage, his re pa tria tio n, as well a s the nam e o f the e ntity pro viding the ins o lve nc y pro tec tio n and its co nta ct de tails , inc luding its ge o graphica l addres s

B e f o re D e pa rt ure Submitting the info rmatio n Co mpanies No n-labelling info rmatio n fo r

(sending it to the designated the nec es s ary re ce ipts , vo uchers o r tic ke ts , inc luding the prec is e tim es 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 third parties

recipient) o f de pa rture, inte rm edia te s to ps , tra ns po rt c o nne ctio ns and arrival. the nam e , a ddre s s a nd te le pho ne number o f the o rga nis e r's lo c al Co mpanies repre s e nta tive o r, failing tha t, o f a lo c al a ge nc y who s e a s s is ta nc e a

Submitting the info rmatio n tra ve ller in difficulty co uld reque s t. No n-labelling info rmatio n fo r

(sending it to the designated Whe re no s uc h repre s e nta tive s o r a ge nc y exis t, the travelle r m us t in any 15 1,0 15,0 3,00 72.000 216.000 3.240.000 0% 3.240.000 third parties

recipient) ca s e be pro vide d with a n em e rge ncy telepho ne number o r a ny o the r info rm atio n tha t will e na ble him to co ntra ct the o rganis er;

Submitting the info rmatio n In the ca s e o f jo urne ys o r s ta ys abro a d by m ino rs , info rm a tio n e nabling Co mpanies No n-labelling info rmatio n fo r

(sending it to the designated direc t co nta ct to be e s ta blis he d with the c hild o r the pe rs o n re s po ns ible 15 0,2 3,0 3,00 72.000 216.000 648.000 100% 0 third parties

recipient) at the child's pla c e o f s ta y;

T o t a l a dm inis t ra t iv e c o s t s ( €) 3 1.10 4 .0 0 0

T o t a l a dm inis t ra t iv e burde n 18 .4 6 8 .0 0 0 T o t a l bus ine s s a s us ua l 12 .6 3 6 .0 0 0

A v e ra ge c o s t pe r c o m pa ny 3 4 5 ,6 T o t a l pa c k a ge s - a ll t ra dit io na l

A v e c o s t pe r pa c k a ge 0 ,15 2 0 5 .0 0 0 .0 0 0 pa c k a ge s + a ll "s ingle - po int o f

A v e a dm in burde n 0 ,0 9 purc ha s e " dyna m ic pa c k a ge s

Annex 7

C OMPETITIVENESS AND I MPACTS ON THE T OURISM S ECTOR

Effective policy options for a possible revision of the Package Travel Directive 218 (PTD)

should ensure a high level of business competitiveness.

Assessing impacts on competitiveness requires particular attention within the Commission impact assessment process, as Article 173 (1) of the TFEU states that "The Union and the

Member States shall ensure that the conditions necessary for the competitiveness of the Union's industry exist".

When policy initiatives are likely to impact particular sectors of the economy, twelve

consecutive steps are necessary in order to assess competitiveness. 219

1. Specific analysis for sectoral competitiveness

Policy options 4, 5, 6 and 7 have the potential to affect the competitiveness of the tourism sector, for the following reasons (a summarising table is also proposed below). Option 1 is the baseline scenario, while options 2 (non binding guidelines) and 3 (a label/disclaimer) are not expected to significantly affect sectoral competitiveness.

Option 4: The repeal of the Directive might result in decrease of compliance costs for businesses by €10.5-12.5 per package, hence affecting the sector's capacity to produce the services at a lower cost, and potentially to offer them at a lower price. However, this effect would be largely mitigated as MS would have to independently decide if repealing or not their consumer law: repeals of all national pieces of legislation across the 27 MS is unlikely.

Furthermore, option 4 would not reduce the administrative burden associated to cross-border trade and the research of national provisions, € 2 per package, as MS would be free to legislate in this area. It is hence unclear to what extent such option might increase competitiveness, levelling up in some cases the playing field among businesses currently regulated under the PTD and businesses which operate outside the scope of the Directive.

Option 5: If "one-trader" packages were brought within the scope of the Directive, there would be an impact on the costs to provide travel services for those businesses that would be brought under the scope of the Directive and which today offer travel arrangements which in the Member States are currently not considered to be within its scope. See the report and

Annex 5 for more details. The result would likely be fairer competition between sellers of combinations of travel services sold as traditional packages or single-point of purchase travel arrangements.

Option 6: Impacts go in the same direction as option 5, where the main difference is the addition of "multi trader" travel arrangements within the scope of the Directive. See the report and Annex 5 for more details. Fairer competition would take place between sellers providing combinations of travel services be it as pre-arranged packages, as "One trader"-packages or

"multi-trader" travel arrangements. Thanks to the graduated approach, excessive costs related to "multi-trader" assisted travel arrangements are avoided,

Option 7: Impacts go in the same direction as option 6, but are more extreme since the full inclusion of "multi-trader" assisted travel arrangement would entail significant additional compliance costs due to the full extension of the scope for these travel arrangements.

Furthermore, mostly SMEs would be impacted by increased compliance costs.

Thus, option 7 is considered to add disproportionate costs by extending the scope to travel arrangements which are not directly competing with "packages". See the report and Annex 5 for more details.

Is a revision of the Package Travel Directive likely to have a significant impact on enterprise competitiveness in terms of:

Cost and price competitiveness PO4 PO5 PO6

Cost of inputs No No No

Cost of capital No No No

Cost of labour No No No

Other compliance costs Slightly Negative (only Negative (only for positive, for those those businesses

levelling the businesses which which would be playing field would be covered covered and are not

but only if all and are not currently covered), MS repeal currently more costly than their covered), but PO5, but levelling the

provisions levelling the playing field more playing field incisively

Cost of production or distribution No No No

Price of business outputs No Slightly negative, Slightly negative, but prices of possibly increasing travel prices of more travel

arrangements arrangements in brought under the respect to PO5, but

scope would prices of travel increase in the arrangements brought short term, while under the scope in the long term would increase in the more competition short term, while in may lead to price the long term more

reduction competition may lead to price reduction

Capacity to innovate

Capacity to produce and bring No No No R&D to the market

Capacity for product innovation No Positive, due to Positive, due to expected expected increased increased competition in the

competition in the internal market which internal market will drive innovation.

which will drive Compared to PO5, innovation. The innovation is

level playing field expected to increase would encourage in particular

businesses to concerning the innovate their "multi-trader" travel

business model to arrangement emerge. providers' business model

Capacity for process innovation No No No

Access to risk capital No No No

International competitiveness

Market shares (single market) Negative, Positive, Positive, increased consumers increased consumer confidence

will have less consumer will make consumers protection and confidence will purchase more safely will be less make consumers and maybe more confident in purchase more within the internal purchasing safely and maybe market. travel more within the Harmonisation of arrangements, internal market. provisions will also especially Harmonisation of bring more trade. cross-border provisions will Compared to PO5 this also bring more effect is stronger as trade involving more combined travel arrangements.

Market shares (external markets) Slightly Slightly positive Slightly positive – negative attracting customers from outside the EU for all covered

combined travel arrangements.

Revealed comparative advantages No No No

Policy option 7 is likely to have the similar impacts on enterprise competitiveness as option 6, but the main difference is the additional compliance costs related to this option. Consumer confidence is also expected to be increased, so is the levelling of the market playing field, but these positive effects will not outweigh the negative effects caused by the additional compliance costs. Thus, option 7 is considered to be impacting the competitiveness in a more negative manner than option 6.

2. Proportionality of the analysis

There are two main policy objectives for a revision of the Package Travel Directive: (a) improving the functioning of the internal market in the package travel sector and (b) achieving a high level of consumer protection in the package travel market.

It is clear that in order to achieve a high level of consumer protection in the package travel market, the competitiveness of this sector will be partly impacted. The negative impacts identified in the table above and originated by the compliance costs necessary in order to achieve policy objective (b) get compensated by achieving policy objective (a), which aims to make easier cross-border trade reducing non necessary administrative costs, such as the costs to re-print brochures (see report and annex 5).

A quantitative analysis of the impacts concerning compliance costs (negative impacts on enterprise competitiveness which are generated by a policy goal other than enterprise competitiveness, such as consumer protection) is thoroughly presented throughout the impact assessment and in particular in Annex 5. For the remaining identified impacts on competitiveness, such as price of outputs, increased innovation and market shares, a qualitative approach seems proportionate as impacts will clearly depend by the single characteristics of affected enterprises (e.g. the level of propensity to innovate of enterprises in the package travel market once competition would increase due to a better level playing field), which are difficult and disproportionate to quantify.

3. Affected sectors

Impact on the sectors directly affected by the policy initiative

All considered policy options have direct competitiveness impacts only on the package travel market, i.e. on businesses which are involved in the sale of pre-arranged and/or combined travel arrangements, or their single components (independent travel arrangements).

Indirect impacts on sectors outside the supply chain

The travel market other than the package travel market may be indirectly affected. If consumer protection for combined travel arrangements is reinforced (PO 5, 6 and 7) , the ratio of consumers going on holiday with a package / consumers going on holiday with independent arrangements is likely to increase. This would negatively impact the direct purchasing of independent travel arrangements of a holiday, even though the extent of this effect is not known.

Indirect impacts on sectors in the supply chain of the affected sectors

See the effect on sectors outside the supply chain, as holiday with independent arrangements can also be components of packages. If packages acquire more popularity when consumer protection is reinforced, then the negative impact for this industry which is mentioned in the paragraph above would be mitigated, as providers of packages' components would be able to sell their products more often to packages' organisers than to the final consumers.

4. SME competitiveness

As SMEs are the overwhelming majority of all businesses in Europe (99% according to last data from Eurostat, 2009), achieving a high level of consumer protection in the package travel field would be impossible without keeping them within the scope of the revision of the

Directive. There are 86,000 tour operators and travel agencies in the European Union. 220 On average, they have 7 employees each 221 .

Micro-enterprises (businesses with less than 10 employees) account approximately for 79,000 businesses, i.e. the 92% of the total. As they are the overwhelming majority of all tour operators and agencies, it does not seem justified to exclude them from the scope of the policy options. In excluding them, under policy option 5 the policy goal of achieving a high level of consumer protection would most likely fail.

Under policy option 6 and 7, all relevant travel service providers operating on the Internet selling travel arrangements falling within the scope of the PTD would have to oblige to its requirements (see Annex 5). Following the assumptions described in Annex 5, Section 6.1.1.1, this would directly impact between 5,000 and 25,000 hotels, up to 1,600 car rentals, up to 180 airlines and between 1,400 and 7,000 businesses operating in the transport sector other than airlines and car rentals, out of the total number of enterprises outlined in the main report, Section 1.3. Most of these businesses, excluding airlines, are SMEs/micro businesses

(99%/73% for hotels, 99%/94% car rentals, 99%/90% other transport services) 222 . For this

reason, the goals which option 6 aims to reach would be very much deterred if such businesses are excluded from the scope.

Furthermore, the compliance costs which would provide more burden for businesses are estimated per package. As a smaller business would most likely sell fewer packages than a larger one, it would face compliance costs proportionate to its overall turnover. In the consultation process, UEAPME, the European association of craft, small and medium-sized enterprises, did not ask or provide particular reasoning for SMEs to be exempted from the

Directive. 223

PO6 with its "graduated approach" also provides for a lighter regime that would be particularly beneficial for those SMEs and micro enterprises who are currently selling combined travel arrangements, but do not want to compete on the package travel market as such. These companies would be able to adapt their business activities for a relatively low cost by simply clarifying to consumers that they do not offer packages display a disclaimer on their websites stating that "This is not a travel package".

A possible sub-option which could be part of both option 5, 6 and 7 would be exempting micro and small firms which organise packages within their country of origin. However, this would be detrimental to competition, even among small businesses and could also be detrimental to consumers. Businesses organising packages within and out of their country of origin would have to comply with the Directive, thus being at competitive disadvantage with the ones which only organise domestically. This would also be a disincentive to start organising packages across border. For consumers, the protection would then depend on the size of the company, a factor which is not always known to the consumer. Thus, such a rule can create an unclear situation regarding whether the rules apply, leading to legal uncertainty. If nevertheless consumers are aware that they would get lower protection from SMEs, such a rule could turn out to be a disincentive to purchase from these businesses, which is a scenario that should be avoided. Furthermore, seen from the consumer perspective, the need for protection, and especially insolvency protection, can be the same both for domestic travels and travels abroad. For instance, in Italy, a package travel to the Italian Alps can contain the same risks and have as high price as a package travel across the border to the French Alps (this also applies to those Member States which have outer territories, e.g. U.K citizens going on package holidays to Gibraltar/Falklands islands or French citizens travelling to Ile de la Reunion). For more details by policy option, please refer to the main text of the impact assessment or to Annex 5.

5. Effect on cost and price competitiveness

Policy option 4 would cut compliance costs in the package travel sector only provided that individual MS repeal their existing national provisions. This is however deemed unlikely to happen in practice. Policy options 5, 6 and 7 would increase compliance costs for the combined travel arrangements (respectively "one-trader" packages and "multi trader" travel arrangements), and by consequence businesses, which would be brought within the scope. The change in compliance cost is foremost connected to the inclusion of "multi-trader" travel arrangements, since, in respect of "one-trader" packages, it is mostly a matter of clarifying the existing scope of the Directive, see Annex 3 point 1.1.

The main report, Annex 5 and Annex 6 provide further details on compliance costs and their calculations. It has to be noted that the extra compliance costs would remove the disadvantages which create an uneven playfield in the market, asking businesses selling customised travel arrangements to comply with the same provisions as businesses selling traditional packages.

None of these policy options have impacts on prices and cost of intermediate consumption or on cost of capital, labour or energy.

The policy options may have an effect on consumer's choice and prices. In particular, prices on certain products currently not covered by the Directive and which now will be covered may rise, up to € 7.5 – 9.5 per package (i.e. the compliance costs without the costs linkedassisted to the brochures and to cross-border trade, about 1% of the price of an average

package according to the Consumer Detriment Study 224 ), if businesses decide to pass on the

cost to consumers with a 1:1 ratio. This depends from the level of competition in the market and the elasticity of the demand to prices, which are unknown. In any case this is likely to be less than 2% of the total price of the package and broadly comparable with the cost of obtaining commercial travel insurance and, as such, unlikely to be detrimental to consumers. In a competitive market, price increases on the end product are normally minimised to the possible extent. As the playing field would be levelled, increased competition may also bring lower prices to consumers.

The policy options may have just a very limited impact on the possible restructuring of enterprises' operations, and mainly concerning the provision of the new required information to consumers (e.g. reorganising the duties of the staff).

6. Effect on capacity to innovate

Improved competition in a market would lead to lower prices and/or more innovation. Businesses, asked to compete more fiercely, may decide to innovate their services in order to stay in the market.

This is expected to happen especially among the providers of combined travel arrangements, which may desire to improve their business models in order to capture more consumers. This would have, at the end of the day, a positive effect for the sectorial economy as a whole.

7. Effect on sector's international competitiveness

With respect to non-EU competitors, the policy options are not expected to have any negative impact as effect. Potential price increases for certain travel products are not expected to trigger a change in the behaviour of European consumers concerning the choice to buy a package travel from a tour operator outside Europe. It is true that the rise of the Internet allows consumers to buy packages everywhere, but the expected innovation driven by policy options 5 and 6 would likely push businesses selling customised travel arrangements to think about new business models, which may be more attractive for consumers than what it is sold overseas.

Consumers from outside Europe may have an interest to purchase their holidays from a European business, as packages will grant high consumer protection. This may bring a positive effect also on international trade.

Steps 8-12 in the Operational Guidance ask for, if assessed as proportionate, quantification of

all impacts described in the previous steps. In this Annex are presented some data, especially concerning SMEs, while in the main text and mostly in Annex 5 and 6 all calculations on

compliance and administrative costs, as well as other impacts are provided. Referring to the

table at the beginning of this Annex, for most of the impacts concerning sectorial

competitiveness a qualitative analysis has been considered sufficient and proportionate.

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