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TICO Confirms Compensation Fund Rate Increase Effective May 1
February 22, 2013
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After reviewing feedback from stakeholders on proposed increases to Compensation Fund rates, the Board of Directors of the Travel Industry Council of Ontario has decided to proceed with a fee increase from 5 cents to 15 cents per $1,000 of sales effective May 1, 2013.

The proposal to raise rates was introduced at TICO’s 15th AGM in September, 2012. In November, TICO asked for feedback from its over 1,600 registrant entities. In a statement on its decision, TICO summarized the feedback from the 32 responses they received:

“The majority of respondents were opposed to the fee increase, with the main objections summarized as follows:
1. Travel agencies are operating on tight margins and cannot afford an increase in TICO rates;
2. The amount of the rate increase is too high; and
3. TICO should be cutting costs and/or charging consumers a fee rather than increasing fees to registrants.”

To give some context, Fund levies in 1997 were $1.20 per $1,000 of sales. Fees were reduced several times over the ensuing years, with the stated goal of maintaining the Fund at a level that would handle potential liabilities, but not grow too large.

In 2010, TICO first proposed raising fees again in 2011, but says it has been able to hold off longer than expected.

“The current rate increase is actually occurring two years later than projected in 2006,” the TICO statement reads. “The decline in the Fund balance was much slower than predicted due in part to TICO’s oversight which resulted in reduced claims and to higher returns on money invested in the Fund. In the near future, it is clear that TICO may not be able to realize those same investment returns.”

Going forward, TICO is suggesting a laddered approach to setting Fund rates, based on the actual Fund balance at the end of its fiscal year. TICO says this flexibility would allow it to set rates lower than projected should the Fund balance be higher than expected.

Open Jaw asked a number of TICO registrants for their reaction to the rate increase.

“Although I’ve always supported TICO in its mission to protect the consumer and provide them with peace of mind when making their travel arrangements, I feel that a 300% hike will be a challenge for most retailers to absorb,” said Christine James, Vice President, Canada for Vacation.com.

“I understand that this is the 1st increase in over 7 years but had registrants been given been given a warning 6 months ago, they could have factored this increase into their budget projections and be in a better position to compensate for any shortfalls.”

Kerry Sharpe, Director of Corporate Communications for the Thomas Cook Group, offered that major player’s reaction to the TICO move. “We were consulted about this increase and recognize the need for the fund to be at an optimum level, and therefore support TICO in their decision.”

Alex Handa, President of the Handa Travel Group, which offers both wholesale and retail brands, says he believes TICO registrants “are being asked to foot the bill for a larger fund than is needed.”

Handa says his company fully supports consumer protection, but “it should be at a national level and it should be paid for by the passenger who is benefiting from the protection.”

Jeff Element, President, Travel Corporation Canada, is an industry representative on the TICO board. But speaking from the perspective of a contributor to the Fund, he says the fee hike is less than expected and later than expected.

“These rates are just a cost of doing business and if they help us keep a strong industry so be it. If we keep a strong industry we can continue to earn a living in the greatest business there is, the “Travel Business.”

Parkinson, Bruce. (2013). TICO Confirms Compensation Fund Rate Increase Effective May 1. Toronto, Ontario: Open Jaw.

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