Chapter 3: Holiday clubs and their growth |
24. The OFT said that holiday clubs had been
a growing market between 2000 and 2005, with five or six major
players but dozens and dozens of marketing companies (Q 74).
25. Evidence to the Committee suggested that
many of these schemes have been misrepresented, with consumers
having been given an exaggerated picture of the availability of
accommodation and travel discounts, and that consumers could in
most cases have done better by shopping on the internet or through
travel agents (Q 4).
What is a "Holiday Club"?
|Holiday clubs, or long-term holiday products, as defined by the new directive, involve an advance payment by a consumer in return for the right to obtain discounts and other accommodation benefits, with or without travel or other services. They differ from timeshare in that the consumer does not pay for the right to occupy specific property: rather, the payment is in return for the promise of future services. Because they fall outside the scope of the 1994 Timeshare Directive, there is no right of withdrawal or cooling-off period for consumers.
26. As complaints about timeshare have fallen, so they have
risen about holiday clubs. According to the Commission, there
were 963 complaints to European Consumer Centres about these sectors
in the first half of 2006. Of these, 117 were about timeshare
and 846 concerned holiday clubs and resale.
27. The OFT referred to independent research undertaken for
it by a marketing company, which interviewed 11,500 people. It
"found that only 5% of consumers who had a problem in this
sector would report whether they had been ripped off". By
extrapolating the complaints data from those interviews, it estimated
that the holiday club sector attracted a detriment of over £1
billion and that 400,000 people had been affected by these practices.
The OFT put it at the top of its list of "scams" to
be investigated, above problems in sectors such as home maintenance,
furniture and personal computing (Q 72).
28. The OFT referred to the "vast gap between the promises
that the salesman makes about the product and what it actually
delivers. Examples would be that you can get cheap Club-class
flights to Australia for £150 and that seems like an extraordinarily
good deal to entice you in" (Q 78). Consumers might
be asked for up-front payments of £10,000, with the inducement
of the return of most of the money after a period of 50 months
or so. The Minister also told us that substantial sums of money
were involved "anything from £3,000 to £20,000
on occasion" (Q 97) and referred to the very high-pressure
sales techniques used and the hugely exaggerated discounts sometimes
offered (Q 98).
29. The OFT also referred to high-pressure sales techniques,
using venues which it was often difficult for consumers to leave
because of their location. "The problem is that the sales
staff are provided with very high financial incentives, maybe
£1,000 or £2,000, on that day to make that sale and,
therefore, it is very ripe for pressure tactics to be applied"
The Holiday Club "Web"
30. Mr Mike Haley, Head of Consumer Protection Enforcement
at the OFT, described to us the complex web of companies (p 43)
which may be involved in a holiday club operation (Q 78).
In essence, the chain begins with the Fly-Buy operator, follows
on to the marketer, possibly involving also a cash back operator,
leading next to the club operator and finally to a travel agent.
As the OFT summed it up, "All of that, we would say, a consumer
could normally get via the Internet or via Ceefax or just by going
into a travel agent, but the difference is that you have paid
£10,000 for the privilege of a direct line to a travel agent"
6 op.cit. p 30 Back