“We had to pay for our rooms again,” says Morgan, who lives in Auckland, New Zealand.
A few days earlier, Amoma announced that it had ceased operations. “Your booking will probably be canceled by our suppliers,” its website advised.
Travel companies on the verge of cessation transmit warning signals. They include offering prices below-market rates, asking for a bailout and ignoring their customers. Any of these could be a sign that your travel company is about to go out of business.
The World Travel & Tourism Council, a trade group based in London, said recently that the tourism industry is losing 1 million jobs a day because of the coronavirus pandemic. The group warns that the closure of hotels, cancellation of flights and suspension of cruise line operations are creating a “catastrophic domino effect” that will devastate the travel industry.
It isn’t a question of whether travel companies will go out of business, but which ones.
The recent deaths of Amoma, Thomas Cook and WOW Air can help travelers understand the signs.
Amoma’s demise was hard to predict. But there were rumblings in the trade press of problems within the industry that led to the site’s collapse. Perhaps the biggest sign of trouble was the attractive rates that it offered, including some below-market prices. I’ve reviewed all of the Amoma cases my consumer-advocacy organization received last year, and I found that they had one thing in common: too-good-to-be-true rates.
If you find an airline ticket, cruise fare or hotel rate that’s unbelievably low, it may be a red flag.
Thomas Cook’s death was different. Within a few days of Amoma’s failure, the U.K.-based travel group — operator of airlines, hotels and resorts — shut down abruptly after failing to secure a loan of 200 million pounds.
The warning signs were there, according to a recent report by S&P Global, but you had to follow the news carefully to know about Thomas Cook’s struggles. The indicators included frequent profit warnings, an unstable leadership team and lack of clarity about how the company made money. One or two such indicators wouldn’t necessarily mean a business was going under, but several of them together could be a red flag, according to Mark Hoppe, a managing director at Atradius, an insurance company.
For WOW Air, service failures foreshadowed the end. WOW had never been a customer favorite, which is to be expected of a discount air carrier. But just before going to the great big hangar in the sky a year ago, it sent a series of distress signals. Customers who called with questions were subjected to long hold times and then disconnected. Passengers who got through didn’t fare much better.
Sarah Parsons, a college administrator from Columbia, Mo., sought compensation for a delayed WOW Air flight from St. Louis to Iceland. But the airline dragged its feet for four months, and she sensed that the $4,065 owed her was at risk. “I’m afraid that with WOW’s financial difficulties, they will soon be declared insolvent,” Parsons told me two days before WOW went out of business. “I’m trying to get it resolved before then, if possible.”
Parsons never received her check.
But what about the travel industry’s coronavirus casualties?
Watch out for a “lack of organization” in a company and difficulty getting through to it, says Leslie Rosa, owner of La Dolce Vigna, a wine-and-culture tour operator in San Francisco. She knows, because as someone who offers small group tours to Italy, she’s dealing with some of the hardest-hit areas. Rosa says her business is fine and will survive coronavirus.
Her best advice? “Always buy travel insurance,” she says. “And do so in the beginning — from the moment you pay your deposit for a tour or buy a flight.”
If your travel company can’t answer a simple question amid the coronavirus chaos, you could have a problem, says Margie Jordan, a travel planner with Jordan Executive Travel Service in Jacksonville, Fla. “The inability to get booking numbers is a sign that the company is going out of business,” she says.
You can protect yourself from a business failure with a few simple strategies.
Don’t prepay. Hotels, for example, offer a modest discount in exchange for paying upfront for your stay. But if your travel agency or hotel goes out of business, you might lose your money. Instead, book a rate that allows you to pay closer to your departure date.
Use a credit card. If a business goes belly up, you can dispute the charge on your card and receive a full refund. Fortunately, Morgan, the Amoma customer, had used a credit card to pay for his hotel in Rome, so he could request a full refund from the card company.
Book with someone you know. Whether it’s a trusted travel agent or a company that you’ve done business with before, stick to what you know. A fly-by-night online travel agency might deliver a bargain — or it might disappear.
“I would be cautious,” says Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business. “Frankly, I would not book far ahead with all the travel uncertainties.”
Elliott is a consumer advocate, journalist and co-founder of the advocacy group Travelers United. Email him at email@example.com.
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