Tour-by-Bus Protection
Some vacations will soon become a little safer . . . financially speaking, that is.
Effective Jan. 1 the National Tour Assn., a trade organization of motor-coach tour packagers, will introduce a $1-million plan to protect consumers from loss in the event of bankruptcy by any of its 500 members. Customer deposits with each company will be covered by up to $100,000.
The $1 million that will be deposited in an escrow account to fund the new consumer-protection program has been accumulated from income, including annual dues, over several years.
The NTA fund is a pure consumer-protection device. None of it will go to suppliers--hotels, restaurants and the like--but only to customers.
In some cases the sum will be sufficient to cover all customer losses.
In the event that an NTA member fails with more than $100,000 of client deposits on the books, the fund money will be divided on a pro rata basis.
Response to a Need
The need to offer some kind of a consumer security blanket has seldom been greater. The Bus Regulatory Reform Act of 1982--deregulation--encouraged new entrants, unbridled competition, cutthroat pricing and bottom-line squeezing.
The number of companies offering intercity or tour-coach services doubled to about 4,000 in 1984. Since then about 1,000 have gone under.
Those who failed included a lot of the new firms. Undercapitalized, often mismanaged, they have been unable to maintain the pace.
Invariably, of course, they took with them into oblivion large sums of passenger money--from deposits and full payments for services not rendered.
But it wasn’t always, or only, the neophyte coach operators who departed the scene. In some instances the newcomers did enough damage in a short time to force older, stable companies to cease operations as well.
Industry Pattern
The industry pattern has been clear and easily traceable.
A new operator enters the field owning, or perhaps just leasing, a coach. The company’s overhead is lower than most of its older rivals who have developed sophisticated telephone systems, customer service desks, automated reservations networks and lines of distribution for their fancy brochures.
The new company may be offering almost the same tour components for a lot less.
The established packager knows that his or her programs are better and more reliable, but the cash-conscious public doesn’t necessarily know it. So the pressure on the older company to match its upstart competitor dollar for dollar becomes intense.
When you cut your prices, disaster is just around the corner. As a result, a lot of coach firms found themselves one step from disaster. Others involved in that kind of competition-generated squeeze play couldn’t right themselves in time, and closed their doors.
High Insurance Rates
One of the major reasons that motor-coach companies have to keep their profits up is the cost of liability and accident insurance for their vehicles. Rates have become astronomical in the last few years, partly as a result of the influx of inexperienced, less readily insurable operators who went into the business.
In the prevailing circumstances, it’s no wonder that bus-tour packagers are anxious to set their potential customers’ minds at ease. Hence, NTA’s protection fund.
Before you book a tour package, motor coach, international fly/drive, domestic rail, et al., ask if the packager belongs to a consumer-protection program or if, as a few do, it maintains its own independently funded security shield. It could make a difference.
That is what NTA is betting on . . . that people won’t patronize companies that can’t protect payments. The U.S. Tour Operators Assn. and American Society of Travel Agents have similar programs.
For more information about the new NTA protection fund or about the association, write for “A Consumer’s Guide to NTA Operator Companies,” P.O. Box 3071, Lexington, Ky. 40596.
