Package holiday cost to rise due to levy for firms that go bust
The cost of package holidays is likely to increase as a result of plans to provide greater protection to consumers in the event of the collapse of travel firms.
A report for the Commission for Aviation Regulation (CAR) has warned that recommended measures to boost funds available to compensate holidaymakers when travel agents and tour operators become insolvent will lead to higher prices.
"We expect that costs imposed on travel organisers from each scheme, irrespective of how it is presented to customers, will, by and large, be passed on to their customers," the report said.
It predicted the proposed changes could result in some customers switching from package holidays to buying different components of a holiday separately.
CAR has recommended a doubling of the existing bond paid by travel firms as well as the reintroduction of an annual levy to boost reserves of the Travellers' Protection Fund (TPF).
When travel firms become insolvent, holidaymakers can claim a refund for the cost of trips not taken or for repatriation costs in the event the collapse occurs while they are abroad on a scheme overseen by CAR.
Bonds paid when travel firms are first licensed are designed to cover such costs while the TPF was established in 1982 to make up any shortfall not funded by the bonds.
The annual levy to finance the TPF was discontinued in 1987 as it was determined the fund had adequate cash reserves.
In recent years, the TPF has become depleted following the collapse of a number of operators, with CAR paying out over €5m.
Since its introduction, the scheme has paid out €15m to approximately 11,000 claimants.
Only 62pc of claims were covered by bonds. The balance in the TPF currently stands at around €1.3m.