Why layered financial protection is a must-have for travel providers
The global travel industry has a high-risk reputation. Unpredictable disruptions, insolvencies and chargebacks are just a few reasons insurers (and travel providers themselves) perceive offering travel services as risky business.
After the chaos of the pandemic years, many travel providers turned to a financial framework that has existed since the ancient Romans: trust accounts. However, they are just one piece of the complex financial protection puzzle travel providers must navigate. We explore how layered financial protection may be better suited for many travel providers.
Travel trust accounts: why are they growing in popularity?
More travel businesses are using trust accounts to protect their customers' funds. Trust accounts maintain the separation between customer funds and travel companies’ operational finances, shielding the customer’s money from any financial instability the company may face. This gives customers the peace of mind that they will get their money back should the travel company become insolvent between purchase and delivery.
Travel trust accounts were relatively rare before 2019. That changed after the collapse of Thomas Cook when interest in trust accounts grew considerably. The company’s collapse revealed the vulnerability of customer funds as thousands of customers were left stranded and out of pocket. It also revealed cracks in the ATOL scheme that were impossible to ignore, as it was simply not designed to handle the collapse of a leading travel company.
Ultimately, trust in the travel industry was badly eroded post-pandemic. Travel companies turned to trust accounts to demonstrate their commitment to financial protection and rebuild customer confidence. However, trust accounts aren’t the only option available to travel providers. Today, tour operators, coach holiday providers, cruise lines, hoteliers and other travel providers can use hybrid trust accounts to better manage cash flow and protect customer funds against their insolvency.
Hybrid trust accounts
Hybrid trust accounts, which combine features of traditional trust accounts and insurance, are less common than standard trust accounts. They appeal to travel companies because they offer financial protection that safeguards travellers' funds while allowing providers to meet certain operational costs, such as paying suppliers.
What are the benefits of a hybrid trust account?
While the benefits of hybrid travel trust accounts vary by provider, they generally offer the following benefits:
Greater protection of customer funds gives customers peace of mind that their payment is safeguarded until the travel services they purchased are fulfilled.
Compliance with relevant travel industry regulations, such as the UK Package Travel Regulations (PTR) and the EU Package Travel Directive (PTD).
For hybrid trust accounts that offer early supplier payments, travel providers can enjoy smoother cash flow.
Builds trust by demonstrating a travel business’s commitment to safeguarding customer funds and paying suppliers on time.
Trust My Travel: Layered financial protection built for the travel industry
Trust My Travel was founded in 2012 to protect travel payments for the sake of the entire travel value chain. Today, travel providers find it challenging to access financial protection due to the industry’s ‘high-risk’ label. When they do find suitable financial protection options that meet their needs, they are met with high insurance premiums. We knew this had to change.
As travel industry insiders, we know that the industry can’t be built on trust alone—that’s why we created a layered protection solution to safeguard the travel value chain against failure. Our layered protection solution combines a trust account with financial failure insurance (FFI), safeguarding transfers from the trust account to settle with end suppliers (and receive settlement) before travel has taken place. Plus, there’s no bond required.
We help you handle the complex stuff so you can get back to what brought you to the travel industry in the first place: providing unforgettable travel experiences to your customers.
Eager to learn more about our layered protection solution? Discover how our pay-as-you-process travel payment solution simplifies payment processing and financial protection, or contact the Trust My Travel team to discuss your needs.
