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Alex J.
Alex J., Solicitor
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Legal requirements to operate an Online travel Agency

Customer Question

Dear Experts,
We're running a business outside of the UK operated by a company established within the EU, selling hotel vouchers. Our plan is to open an intenational site, and that would be operated by a UK Limited company. We would act as an online travel agency, integrating products from wholesalers so the end users can book hotel rooms directly via our website (no package deals). We would collect the money, and invoice the end customer, while we keep a deposit with our wholesaler so all bookings made are instantly acknowledged, and charged against the deposit.
Do we need to adhere to the Package Holiday or any other regulations that is in effect? Are we required to join a travel association, or have a bonding to provide financial protection while providing an acccomodation only online reservation system?
Appreciate your answer.
Regards
Matt.
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Alex J. : Hi. Thank you for your question and welcome. Are you essentially operating a travel agency?
JACUSTOMER-abhp6ng1- : Hi Alex,
JACUSTOMER-abhp6ng1- : Not really we have no offical license, as we're only selling vouchers that can be claimed at the hotel, but the reservation is made with the hotel directly. Running an online booking website would require us to become a principal and undisclosed agent, but afaik in the UK it's not a hard requirement to havea a license in that case. We have found many references to the Package Holiday regulation, but that seems to be applicable only if packages are sold, and we're also uncertain if the rules aer different among the traditional travel agents and an OTA.
Alex J. :

Hi, Thank you, ***** ***** you are selling vouchers, you are stilling acting as an agent (a sales agent) for the hotels. The other point is the fact that you are acting as a middle man and holding customer deposits, may mean that you have to register with the Financial Conduct Authority.

Alex J. :

Having looked at the rules I would be almost certain you would have to obtain a licence to act as an online agent.

Alex J. :

Can you tell me a bit more about how you will hold the customer deposits?

JACUSTOMER-abhp6ng1- : Hi Alex,
JACUSTOMER-abhp6ng1- : The customers are obliged to pay online (with credit/debit card) during the reservation. Once a successful payment is made, we confirm the reservation with our partner who deducts the proce of the booking from the deposit we hold with them, and if the balance is sufficient the reservation is confirmed and the customer receives a reservation number. Since the paymnet is handled by our payment partner (so we do not need to be pci compliant) they hold the deposit on a dedicated account for us(that we cannot access), and transfer it to our company account in 8 business days. Once we receive the funda, we will "top up" our deposit at the partner (if we eu. Out of balance, the reservations would be refused). Our partner makes sure that the hotels get paid in time, that is not our concern. So indeed we act as an agent, we would handle any claims, and also make a refund if a cancellation is made during the free cancellation period.
JACUSTOMER-abhp6ng1- : Applying for a license would mean that we have to join an association (like TTS, ABTA...etc)? Which authority controls this in the UK? I assume miscompliance can result in financial penalties, but wpuld be curious how this is verified?
Alex J. :

Hi, Thank you. The regulator here is ABTA. How long would you hold the deposits for? Also would you still refund the client if the hotel did not refund you?

JACUSTOMER-abhp6ng1- : We would transfer the funds to the partner deposit account once the free cancellation period is elapsed, so in case of cancellation we can refund the client staight away. Yes, we should refund them in any case and file a claim against the hotel via our partner.
Alex J. :

Hi, Thank you. So the deposit is actually being paid for a refundable service. I do not think that would require FCA authoristion. Having described this, this is essentially a travel agency, you are managing third party bookings. I would recommend you register yourself with ABTA.

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