We live in difficult financial times, and despite the fall in volumes of business travel, regulators are looking for increased financial security from travel management companies. In mid July 2010, the latest statistics were revealed by the Office for National Statistics, indicating that UK business travel fell by 23%, whilst 19% fewer business trips were made by non-residents to the UK. Falling business travellers places additional pressure on TMC’s, and it is in this market that regulators consider whether financial security should be given.

In addition to IATA being able to demand a cash bond from any TMC which appears to be in financial difficulty, IATA is tightening the rules on bonds where an agent does not appear to have a sustainable business model. A travel agency in its first three years of trading has to provide a bond worth 16% of its projected turnover, which is lifted after three years subject to the TMC being profitable.

As if this financial belt tightening was not enough, it is now a requirement of ATOC, the Association of Train Operating Companies, for agents to provide ATOC with a bond guarantee. At the same time commission on rail bookings falls from 5% to 3% on 25th July 2010, but only to 4% for companies offering the bonding. By April 2011, commission on rail bookings will be flat at 3%, but all TMC’s must have bonding in place. ATOC bonding needs to be equal to the amounts of the two highest consecutive periods of rail sales under the TMC’s ATOC licence, and is reviewed on the basis of the last thirteen accounting periods. ATOC has the power to ask for an increase in the bond where there is an increase in the agent’s rail bookings. For new applications, the bond has to be equal to the two highest sales periods.

Also bubbling along in the background is the current consultation on revisions to the ATOL licensing structure under the regulation of the CAA. This is likely to be required for any sales of “flight plus” and therefore is also likely to cover most TMC’s with their business travel bookings.

For some TMC’s it is particularly difficult finding bonds in the current financial climate. The number of insurers in the market has fallen, and the risk has increased for bond obligors, resulting in a hardening of rates. This is extra commercial pressure for TMC’s whilst trading in a difficult marketplace.