Pandemic has exposed 'murky areas' of travel's money chain
The boss of luxury operator Caribtours believes the Covid-19 pandemic has brought out the best in most businesses but has also exposed “murky areas” where “practices aren’t as clean as they should be”.
Managing director Paul Cleary said he believed issues around payment terms and the money chain in bookings had to be addressed, urging more businesses to “do the right thing”.
His comments come weeks after Caribbean hoteliers hit out at operators which changed payment terms, leaving hotels unpaid for holidays taken prior to the coronavirus crisis.
Both Cleary and the boss of competitor Lusso, James Weaver, agreed change was necessary. Both businesses pre-pay suppliers on bookings, while some operators work on credit terms.
Cleary said he believed the “wheels started to come off when people stopped doing the right thing”.
“This crisis has brought out the best in most of us, but it's also exposed those murky areas where practices aren’t as clean as they should be,” he said.
“We collect money from our clients and we separate that money. It’s client money – we don’t play with it, we don’t invest it, we don’t spend it on anything. It is client money and we use it to pay our airlines and our suppliers.
“We pre-pay hotels. When we have a bill that is owed, we pay it. When someone owes us money, we demand payment. It’s very simple and we’ve insisted on this throughout the whole process.
“And that’s where the wheels started to come off, especially in the Caribbean, where there were some very large operators just not paying small hotels. It was starving these hotels across the Caribbean at a time when they needed the money most and some of these matters are still not resolved.”
Cleary added: “I’m a firm believer that things have to change. Hotels have to stand up to bullies and say 'no, that isn’t how it’s going to be'. Pay your bills; it’s a very obvious thing to say. We pay; we don’t pay early, but we pay.
"And when [refund requests] came, we refunded too. It isn’t cheap, but that’s how you’re meant to run a business. Where the wheels started to come off was when people stopped doing the right thing.”
Lusso boss Weaver said his company also pre-paid suppliers and operated a trust model. He said the crisis meant he was chasing an “enormous figure” from suppliers to pass back to agents whose clients wanted refunds.
He called out large tour operators which operated on credit with hotels but weren’t refunding clients.
Weaver said: “If they're all on credit, they should have had the money to give back to the client straight away, but actually what's happening is that they weren't even paying the hotel bill. So some of the biggest challenges have been in certain cases retrieving that money from key partners where they've said, 'I’m desperate to give you the money back but people haven't paid their bills pre-Covid, and they're not going to because we've had letters to say they're extending credit terms'. It's happened all over.”
Mark Duguid, managing director of Carrier, said his company did operate on credit but had paid its bills and “not withheld any payments”.
He said Carrier had worked on credit with suppliers for decades but some were now seeking to impose prepayment because they’d “been stung”.
“We need to remember the customer is always at the heart of this and I’m not sure the customer necessarily cares or demands visibility of where their money is in the supply chain or when it gets used,” he said.
“They need to trust in the brand that they’ve placed their money with and trust that should things go wrong, they will get their money back.”