When I set up our Trust Account last year it was with some trepidation as fundamentally it meant that we could only trade with the money that we invested into the business. It was going to be tough in that we could not use client’s monies to pay for anything except the flight element of the package. The money we invested into the business would have to pay for all my overheads as I would not be allowed to use client’s money to pay for our salaries, rent or indeed any business cost.
The Trust Account effectively keeps our clients monies until they return from their holidays. The trustees of the Trust Account will not release these monies to us until they have seen proof of the client’s payment and booking invoice and ATOL certificate. It’s hard for us as a tour operator but it does mean that the client’s money and the hotelier’s money is absolutely safe and it also means that we as a tour operator can’t go bust.
The model that Exclusive Escapes used was totally redundant in that everything they sold was 100% committed. This meant that every flight seat and hotel or villa bed had to be paid for even if it went empty. Exclusive Escapes have a number of ‘bad’ years trading (despite what their accounts say) and it meant that they were getting their clients to pay in full a year in advance to pay for the current years and even the previous year’s bills. It meant that many Turkish hoteliers and villa owners were paid a pittance this year (if at all) and figures I saw showed outstanding bills of over £4.6 million!
As I have said in a previous post, if any tour operator asks you to pay in full for a holiday months in advance then don’t as it will often mean that they are using your money to pay for outstanding bills that they have incurred in previous years. Paying this year’s bills with next year’s money is still rife within our industry and should be banned with effective legislation.