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TTI2013
ETOA
• Founded to represent thoseoperators who sell Europe in long-haul markets
– Principals
– B2B Wholesalers
– OTAs
&
– Suppliers
The challenging environment # 1
• Internet is an intermediary
– Makes sales
– Incurs costs
– Constant battle to minimise costs andmaintain margin
The challenging environment # 2
• Internet continues to be governed bylaws designed for off-line sales
– Evolved to work outside theserestrictions
TOMSDrafted in 1977
• VAT levied on– Agency Commissions
– Sales costs
– Reservation costs
– Product development
– Sourcing and Purchasing
– Marketing costs
– Brochure production
– Web distribution
– In country promotion
– Sales agencies
– Advertising
– Customer relations
• And– Profit
TOMS distorts domestic market
• Grants tax-free status to non-EUholidays
• Incentivises air-inclusive holidays
TOMS devastates tourismexports
• Imposes a savage differential tax oninbound tourism
– Equivalent of Corporation Tax of 300%
– Or a 12% price differential
• Not payable outside EU
UK Tourism Spend
£-
£5,000
£10,000
£15,000
£20,000
£25,000
£30,000
£35,000
£40,0001977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Millio
n
Outbound spend
Inbound spend
Source: VB
Source: VB, adjusted for inflation.
195819601962 196419661968 197019721974 197619781980 198219841986 198819901992 199419961998 200020022004 20062008 20102012-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
£M
illio
n
UK Balance ofTrade in Tourism 1958 - 2012
TOMS Introduced
Cumulative Deficit
£550 billion
Taxation shapes demand
• Determines supply
– Shapes demand
• Weakened lager
• Three-wheeled cars
• British Sherry
ECJ ruling pending
• AG has indicated that TOMS should beextended to all packages, including B2B
– Possible extension to online packaging
– Significant benefit to placing “package creation”offshore
Where are you?
• Part of European Travel Economy
– Determined and shaped by Package TravelDirective
• Devised in 1980s
• Answered problems from 1970s
PTD blocks internationalbusiness
• Consumers seek “national” financialprotection marques
– Provide repatriation to their own country
• Europe has a siloed travel industry
– Small markets
– Not used to dealing internationally
PTD blocks innovationPTD blocks innovation
•• Adding features, packaging servicesAdding features, packaging services
–– Natural way of adding valueNatural way of adding value
•• Hotels offering tickets or sporting packagesHotels offering tickets or sporting packages
•• Attractions offering accommodationAttractions offering accommodation
•• Restaurants with transportRestaurants with transport
•• Activity with prohibitive entryActivity with prohibitive entryrequirementsrequirements
PTD Reform
• Extend compliance requirements to “click-throughs” and online packagers
– Bonds, repatriation insurance & admission oflegal liability
• Imposes restrictions imposed on amoribund sector on a flourishing one
• Adds multiple costs on consumer
• Renders off shore sales even moreattractive
PTD Reform #2
• Imposes restrictions imposed on amoribund sector on a flourishing one
• Adds multiple costs on consumer
• Off-shore sales will continue
– even more attractive
– Consumer a deregulated world and a regulatedEU.
Competition
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Prohibition on Anti-competitiveAgreements #1
Chapter I Competition Act 1998 and/orArticle 101 Treaty on the Functioning ofthe EU
Agreements which have as their object oreffect the prevention, restriction ordistortion of competition
Prohibition onAnti-competitive Agreements
#2 Not just written agreements:
– Informal discussions
– Concerted practices – practical cooperationbrought about by information exchange
Classic example: price-fixing cartel,collective boycott of a trading partner,market sharing agreement
OFT
• Has investigative powers
• Can levy fines of “no more than 10% ofworldwide turnover”
• Can judge both parties equally culpable
OFT June 2011
• Best Rate Guarantees
– Resale price maintenance
– Methods used to enforce price conformity
UK – outcome unknown
• Germany – HRS issued with a charge sheetin July 2013
• Switzerland – Competition authorityinvestigating OTAs
• France – July 2013 Hotel Union files withCompetition Authority a complaint againstOTAs
• US – class action against OTAs filed inNorthern California
Europe
• Inconceivable that EU will not get involved
Regulatory environment
• Threatening or Cheering
– Depending largely where you are based
• Transparency & Speed of onlineenvironment
– Accentuates existing difficulties and rendersfuture regulation obsolete even before itreaches the statute books