Many of you may have noticed the increasing frequency with which trust accounts – and Protected Trust Services in particular – are being spoken of as a safe haven for many travel firms. The number of travel businesses joining PTS and embracing the trust account model has risen rapidly, and the reasons for their migration vary from business to business. We’ve invited our financial director, Tom Clay, to share his insights on the seismic shift towards embracing the trust account model, and how PTS is leading the charge in the travel industry.

Embracing Trust Accounts is the Key to the Travel Industry’s Recovery

For many years, the travel industry has had a bad habit of using consumers’ money to finance working capital needs before providing the services for which they have been paid. This has never seemed to me to be reasonable or fair. Most services are paid for in arrears and most professions require a separation of the clients’ money from one’s own. For travel businesses, using a trust account is a straightforward way to correct this dynamic. Trust accounts are simple, easily understandable, and encourage stronger and better capitalised travel companies. The recent rapid increase in growth of trust accounts in travel, also demonstrates a wider appreciation of the benefits to a wide range of stakeholders: –

  • Card acquirers see trust accounts as a means of ensuring that consumer funds are ring-fenced and the holiday is fully paid for before any profit is received by the holiday organiser.
  • Suppliers know that funds are available to pay them. Cash flow is crucial to all businesses, but suppliers are more likely to accept more generous payment terms if they know consumer money is in trust. Put simply, the trust ensures that the cash is there!
  • Most importantly, consumers take great comfort from trust accounts. The pandemic has highlighted consumer concern about the lack of refunds from travel companies. This will multiply tenfold if we see the level of insolvencies in travel that many are predicting. To be able to demonstrate to consumers that their money is held securely and ring-fenced in a trust account is a great comfort to them.

The Benefits of a PTS Trust Account

At Protected Trust Services, we believe that it is important that all consumer funds in trust should be reconciled on a daily basis – not just to the travel company – but down to individual booking. This ensures that no consumer can subsidise the holiday of any other. This is a basic requirement which we believe should be required in law, as is the requirement now to have independent trustees. We also strongly disagree with treating licensable and non-licensable transactions differently in trust. The same protections should be available to all consumers buying holidays.

But whilst there could be improvements in some trust providers, it is still the case that ring-fencing consumer funds is the safest way to protect the consumer.  It is also the most flexible, with the level of consumer funds in trust naturally rising and falling with changes in turnover. This does not occur with insurance or bonding, making trust accounts a far safer solution for all involved.

This has been especially important during the current pandemic, and it has been clear that refunds to consumers and travel businesses have been a problem. Airlines have not been refunding as they should under EU261, and hotels and other suppliers have sought to retain cash. This has caused knock-on issues for many travel agents and tour operators, including those who have used trust accounts, though to a much lesser degree. However, I am certain that those using an independent trust are in a far stronger position than most. Travel companies who adopt the trust model have made a huge number of refunds, and where consumers have been happy to move travel dates, they have money in trust to allow them to deliver the holidays they have sold.

Rebuilding Trust Within the Travel Industry

For travel companies who have not adopted the trust account model, my great worry is that a lot of consumer funds have been utilised for working capital needs. Consequently, the money is no longer there to meet Refund Credit Notes, and thus the obligation to fulfil RCNs will tip many travel businesses into insolvency.

Furthermore, the impact of travel companies using consumer funds for simple cashflow purposes has long since had – and will continue to have – huge negative impacts on the industry as a whole. We are already seeing insurance companies, merchant suppliers, and many reputable suppliers, changing both their terms and conditions and their credit assessment, to mitigate their risk when dealing with the travel industry.

Fundamentally, it isn’t just the consumers who need to trust the travel industry. Our business partners, stakeholders, suppliers and trade colleagues also need to be able to trust the travel industry. To this end, a daily reconciled trust account allows complete financial “track and trace”. The ability to know precisely where monies are at any given time will only work to enhance trust. Trust – in every application of the word – is imperative for the UK travel industry to recover from COVID19 and for the industry’s entire future.

To find out how we can assist your travel business with a trust account solution, please visit our trust account solution page. Alternatively, if you would like to speak to a member of our helpful team, please call us on 0207 190 9988, or send an email to We look forward to hearing from you!

This article was included in Travel Weekly – Embracing Trust Accounts Is The Industry’s Route To Recovery.

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