Travel agents have been thrown a $47.6 million lifeline by the Government with a scheme to help them recoup nearly $700m spent overseas by Kiwi holidaymakers.
Commerce and Consumer Affairs Minister Kris Faafoi says New Zealanders who have money locked up offshore because of cancelled travel plans as a result of Covid-19 will benefit from the new scheme to support the recovery of refunds and credits from overseas travels suppliers.
“We know the travel sector and their customers have taken a massive hit due to the disruption caused by Covid-19. The Government’s been working with the sector to find a way to help agents assist their customers to get back money that they are owed by travel suppliers,” he said.
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The Government would provide a consumer travel reimbursement scheme to help the return of credits to New Zealand consumers via travel agents.
The scheme will be funded to a maximum of $47.6 million.
Travel agencies will be paid:
• 7.5 per cent of the value of cash refunds and
• 5 per cent of the value of credits successfully secured on behalf of consumers.
If an agent recoups $10,000 in a refund on cancelled travel, the customer gets that money back and the agent will receive $750. If it’s a credit for the $10,000 cancelled travel, the customer gets the credit and the agent receives $500.
Since border restrictions were imposed hundreds of agents have lost their jobs and businesss have failed.
Kiwis last year spent between $7 billion and $9b on overseas travel, much of which went through agents who took a commission. This halted almost completely in March when global leisure travel ended.
The travel sector and the Ministry of Business, Innovation and Employment estimate ab out $690m of New Zealanders’ money is locked up because of travel cancelled by Covid-19.
“We want to get that money back for Kiwi customers and into the local economy as quickly as possible. The scheme we are announcing today will help those in the travel industry with financial support to facilitate the recovery of those funds,” Faafoi said.
“I know that travel agents and wholesalers have been working hard to recover refunds and credits owed to New Zealand consumers, but are under severe financial pressure, with many facing the prospect of insolvency.”
Many of the outstanding bookings that remain stalled were complex to put in place and are complicated to unwind.
”That’s where the expertise of the sector is crucial to help consumers get back money tied up in stranded bookings.’
“The travel reimbursement scheme will help increase the likelihood of consumers recovering refunds and credits owed to them. It will also give greater confidence to the travel industry by limiting further insolvencies.”
Faafoi said that the scheme would be established as soon as practicable, with details such as eligibility to be worked through over the coming weeks.
Agents had also been eligible for the wage subsidy scheme.
Before the pandemic they employed more than 5000 people throughout New Zealand.
Agents put aside traditional rivalries to lobby for Government support and the group doing the negotiating comprised: David Coombes (managing director of Flight Centre NZ), Mark O’Donnell (chief executive of House of Travel), Malcolm MacLeod (chief executive of First Travel Group) and Simon McKearney (executive general manager Helloworld) .
“This is good news for our industry. There’s still a long road ahead but we’re pleased to be getting some much needed support in what has been an incredibly difficult time for travel agencies in New Zealand,” they said.
“Our people have been working tirelessly over the past six months to repatriate funds from travel suppliers into the hands of Kiwis. This funding will allow us to recoup some of the costs involved in that lengthy process.
While borders remain closed, the industry faced a struggle but the support gives it some breathing room.
The group said ti was grateful to Faafoi and acknowledged the work of Kirk Hope (CEO Business NZ) and Rob Fyfe (Former CEO Air NZ & Business Advisor to Jacinda Ardern).
The Travel Industry Suppliers Group says the Government’s was vital to support the travel industry.
The group’s chair, Robyn Galloway, said travel industry suppliers, also known as wholesalers, work with travel retailers and individual customers to book international travel experiences such as guided tours, cruises, hosted small groups tours and bespoke holidays in over 150 countries.
Most of the companies in the industry are SMEs with a predominately female workforce.
”The Covid crisis and border closures has meant the industry has had to operate without revenue for six months so far, while working to get customers their refunds from overseas operators,” said Galloway.
“We make no bones of the fact the investment the Government is offering is a bare minimum. We acknowledge there are many calls on the public purse right now, but the good achieved by bringing travellers’ money home justifies government assistance.”