Travel book­ing de­posits: USA TODAY in­ves­ti­gates

Pan­demic ex­posed how in­dus­try op­er­ates like Ponzi scheme with your cash.

USA TODAY US Edition - - FRONT PAGE - Nick Pen­zen­stadler and Josh Sal­man

The Grand Pal­la­dium re­sort in Punta Cana, Do­mini­can Repub­lic, was a swank respite in March for Leigh Anne Belcher and her daugh­ter un­til they got a call to stop by the front desk about a billing ques­tion.

Their travel agency, swamped with coronaviru­s can­cel­la­tions, had abruptly closed its doors and dis­con­nected its phone lines – and re­fused to pay the ho­tel for the room even though Belcher had paid the agency in full for the trip.

On the spot, Belcher had to come up with thou­sands of dol­lars to pay the up­scale ho­tel, which threat­ened to call au­thor­i­ties and ad­vised the front-gate at­ten­dants to make sure no one es­caped with­out pay­ing. When she and her daugh­ter tried to head home to Lex­ing­ton, Kentucky, they had to shell out more money; their flight had been can­celed, and the air­line wouldn’t al­low them to change it since it, too, was booked by Florida’s

The coronaviru­s has ex­posed a se­cret un­der­belly of the travel business. Many travel agen­cies op­er­ate Ponzi-style schemes in which one trav­eler’s de­posit pays for a pre­vi­ous trav­eler’s tick­ets and ac­com­mo­da­tions, and so on.

Ev­ery­thing ran smoothly as long as book­ings con­tin­ued to roll in.

The pan­demic blurred the muddy line be­tween business ethics and fraud and has led to not just fried nerves but of­fi­cial com­plaints and le­gal ac­tion.

Through public records re­quests,

USA TODAY ob­tained con­sumer com­plaints re­lated to COVID-19 filed with at­tor­neys gen­er­als and other agen­cies in 20 states. Those doc­u­ments in­clude more than 5,300 trav­el­ers, from New Jersey to Texas and Wash­ing­ton state, who strug­gled to se­cure re­funds for trips in­ter­rupted by the coronaviru­s – among the most com­mon com­plaints lodged.

More than 24,000 more have com­plained to the Fed­eral Trade Com­mis­sion about travel-re­lated scams, re­port­ing more than $43.5 mil­lion in losses – far above any other cat­e­gory of coronaviru­s-re­lated fraud com­plaints on file with the FTC.

Some com­plaints ac­cuse agen­cies of ex­ag­ger­at­ing their own costs, not ac­tively seeking re­funds from providers such as air­lines and ho­tels – or even re­ceiv­ing re­funds that they did not pass on.

BookIt and two ed­u­ca­tional tour com­pa­nies – NAWAS and EF Tours – were among the most fre­quent tar­gets of con­sumer ire.

“How could it hap­pen that I paid for a va­ca­tion and the travel agent just de

“How was this my prob­lem?” Leigh Anne Belcher, Lex­ing­ton, Kentucky, res­i­dent who booked through

cided not to pay the ho­tel? How was this my prob­lem?” Belcher said. “I think I went through all the stages of grief in about an hour. It wasn’t un­til we were wheels-up in Santo Domingo that I felt like I could take a breath. And then, the anger set in.”

Belcher chan­neled some of that anger into man­ag­ing a Face­book group, Scammed by BookIt, for peo­ple seeking re­funds from the com­pany, which has grown to nearly 3,000 mem­bers. While the com­pany’s web­site and phone lines are still dead, the group shares tips on how to get credit card com­pa­nies to cover the charges.

Rep­re­sen­ta­tives from BookIt did not re­spond to re­quests for com­ment. In a writ­ten state­ment pro­vided to a Florida tele­vi­sion sta­tion in July, the com­pany’s in­terim chief fi­nan­cial of­fi­cer, Ryan Ten­nyson, said the com­pany had re­funded 70% of its cus­tomers.

Some cus­tomers ‘re­ally up a creek’

Travel agents, either on­line or tra­di­tional, of­ten bun­dle to­gether flights, ac­com­mo­da­tions and trans­porta­tion and make money either through com­mis­sions or bulk dis­counts – or both.

Cus­tomer de­posits are sup­posed to be passed on to ven­dors, ho­tels and tour op­er­a­tors to hold the reser­va­tions. In­creas­ingly, travel ex­perts say com­pa­nies have length­ened the time be­tween re­ceiv­ing and re­leas­ing those funds. The prac­tice can be buried in the fineprint terms of de­posit agree­ments. State laws of­fer lit­tle re­course.

Scott Keyes, who runs the web­site Scott’s Cheap Flights, said on­line travel agen­cies “make their money by mak­ing com­mis­sions of 20 or 30 per­cent for those ac­tiv­i­ties and car rentals. They save money by hav­ing less cus­tomer ser­vice, which can be a prob­lem if you’re caught in limbo like this.”

“If a cat­a­strophic event hap­pens like a world­wide pan­demic,” Keyes said, “they’re re­ally up a creek.”

Ex­perts noted that the prac­tice of stock­pil­ing cus­tomer de­posits, then holding onto them if things go wrong, is the business model for var­i­ous kinds of travel com­pa­nies – and most air­lines.

This month, on­line book­ing site Ex­pe­dia was sued by trav­el­ers who blame the com­pany for not more ag­gres­sively pur­su­ing re­funds. Af­ter con­sumer back­lash, air­line ex­ec­u­tives fol­lowed fed­eral pol­icy and be­gan is­su­ing cash re­funds in­stead of only of­fer­ing vouch­ers for travel.

Dis­count bro­kers that op­er­ate as mid­dle­men, which lack the fi­nan­cial back­ing of ma­jor com­pa­nies, play a par­tic­u­larly pre­car­i­ous role. Some, such as ed­u­ca­tional tour com­pa­nies, pay up­front fees for group reser­va­tions and say they strug­gle to get the money back them­selves.

Char­lottesvill­e, Vir­ginia-based WorldStrid­es, which of­fered ed­u­ca­tional travel and group tours, filed for Chap­ter 11 bank­ruptcy in July. The stu­dent travel com­pany said it was ne­go­ti­at­ing with len­ders to re­duce more than $750 mil­lion in debt.

“Th­ese agen­cies were op­er­at­ing on the edge of sol­vency,” said John Breyault of the Na­tional Con­sumer League, a non­profit ad­vo­cacy group. “Sud­denly when ev­ery­thing went to hell, ev­ery­one goes back to th­ese mid­dle­men, and they don’t have the money to cover re­funds.”

Jeff Gay­duk, pub­lisher of Leisure Group Travel mag­a­zine, said mid­dle­men and tour com­pa­nies alike are al­ways at the mercy of the end sup­pli­ers – the air­lines, ho­tels and so on – when it comes to is­su­ing re­funds.

“The in­dus­try was roar­ing and had a 10-year run where de­mand ex­ceeded sup­ply, and peo­ple got greedy,” Gay­duk said. “Now sud­denly a crow­bar has been stuck in the fly­wheel, and ev­ery­one is wrongly holding onto cus­tomer de­posits.”

Gay­duk said a travel in­dus­try col­league had pack­aged Kentucky Derby ex­pe­ri­ences be­fore of­fi­cials re­versed course and barred fans from the race Sept. 5. That tour op­er­a­tor can’t get back the $300,000 his com­pany spent on ticket de­posits, Gay­duk said, leav­ing him to face an­gry cus­tomers who want their money.

Cruise com­pa­nies have a slightly dif­fer­ent business model, typ­i­cally sell­ing trips up to 18 months in ad­vance, with perks such as drink pack­ages and free In­ter­net for those plunk­ing down early de­posits. Fi­nal pay­ments usu­ally are due 90 to 120 days in ad­vance of sail dates.

That cash flow helps keep ear­lier cruises afloat fi­nan­cially. In the pan­demic, mar­itime at­tor­ney Jim Walker, said the com­pa­nies con­tinue to sell cruises to fi­nance re­funds of other re­cently can­celed cruises – de­spite scant ev­i­dence most will sail in the near-term.

“Car­ni­val is es­sen­tially run­ning a quasi-Ponzi scheme,” Walker said. “It is col­lect­ing money for new cruises, which will prob­a­bly not take place, to be used to even­tu­ally re­fund fares which Car­ni­val owes to its cus­tomers for the past sev­eral months.”

Car­ni­val spokesman Roger Frizzell called that ac­cu­sa­tion “a ridicu­lous as­ser­tion that could not be fur­ther from the truth.”

In a fil­ing with the Se­cu­ri­ties Ex­change Com­mis­sion, Car­ni­val ex­ec­u­tives said about 45% of its cus­tomers opted for cruise cred­its in­stead of cash re­funds. At the end of Au­gust, the com­pany re­ported it held more than $2.4 bil­lion in cus­tomer de­posits.

“We have an ex­tremely loyal cus­tomer base,” Frizzell said, “who is anx­iously ready to cruise again with our brands, when ready.”

Scut­tled trips cause grief

Once ev­ery 10 years, the vil­lagers of Ober­am­mer­gau, Ger­many, per­form a Pas­sion play de­pict­ing the cru­ci­fix­ion of Je­sus Christ. It’s part of a cen­turies-old pact with God to pro­tect the town from the bubonic plague.

In 2020, a dif­fer­ent pan­demic forced the pro­duc­tion to be post­poned – and thou­sands of re­li­gious trav­el­ers from Wis­con­sin to Florida were out thou­sands of dol­lars. NAWAS, the tour com­pany part­ner­ing with their churches, would not re­lease all of their money.

Many cus­tomers were par­tic­u­larly up­set be­cause trusted lead­ers at their churches and schools had re­cruited them for the trips.

More than 400 con­sumers com­plained about NAWAS to the at­tor­ney gen­eral in Con­necti­cut, where the Chris­tian tour op­er­a­tor is based. The com­pany works through churches to re­cruit cus­tomers for pil­grim­ages to the Holy Land and Europe.

When COVID-19 forced the play to pause un­til 2022, th­ese trav­el­ers – many el­derly and on fixed in­comes – wanted re­funds. They were stunned when the com­pany ini­tially re­fused.

USA TODAY in­ter­viewed sev­eral of those who filed for­mal com­plaints, who agreed to speak only if they could re­main anony­mous be­cause they set­tled with the com­pany and signed nondis­clo­sure agree­ments.

Cus­tomers told USA TODAY they had spent up to $10,000 on their can­celed trips and NAWAS sought to with­hold $1,150 per per­son or to keep their de­posits as cred­its for travel through 2022. Some se­nior cit­i­zens said they were not sure they would live that long.

NAWAS jus­ti­fied keep­ing their money through a tech­ni­cal­ity, they said, main­tain­ing that they had vi­o­lated the orig­i­nal terms of their con­tracts by can­cel­ing the trip them­selves. Cus­tomers ar­gued that can­celed flights and world­wide shut­downs made it im­pos­si­ble to go on va­ca­tion as planned, even if they had been will­ing to forgo the per­for­mance.

“They said we can­celed the trip,” said Mary Man­ning of Rock­away, New Jersey. “My ar­gu­ment was the whole world was shut down.”

In rel­a­tively good health at 69, Man­ning opted to roll all of the money over for a fu­ture trip to see the Pas­sion play, but she said she would pre­fer a full re­fund of her $4,000 in de­posits.

Jeff Ment, an at­tor­ney who rep­re­sents NAWAS, said un­like cruises or air­lines, the tour op­er­a­tor could not pro­vide full re­funds be­cause com­pa­nies fur­ther down the sup­ply chain al­ready had been paid. NAWAS, he said, did not have the cash on hand. He cited gov­ern­ment red tape in Ger­many and Italy that made it more dif­fi­cult to re­cover re­funds from over­seas sup­pli­ers. Ment said NAWAS ended up giv­ing cus­tomers re­funds they “usu­ally weren’t en­ti­tled to.”

All told, the com­pany resched­uled, re­booked or par­tially re­funded about 16,000 cus­tomers, Ment said.

“There are no win­ners in this; NAWAS is not a win­ner for los­ing its en­tire year,” he said. “NAWAS did the best it could un­der ex­tremely dif­fi­cult cir­cum­stances.”

Al­though it costs tour com­pa­nies money to co­or­di­nate and re­serve trips, that didn’t jus­tify the amount of funds NAWAS wanted to with­hold, Con­necti­cut At­tor­ney Gen­eral Wil­liam Tong told USA TODAY.

“Peo­ple were not get­ting their money back, and we were very con­cerned they were not be­ing treated well,” Tong said. “We are talk­ing about a lot of se­niors and peo­ple on fixed in­comes, and this is a big ex­pense for them.”

The com­pany reached an agree­ment with the at­tor­ney gen­eral to re­fund all but $500 per per­son, an amount ne­go­ti­ated based on an anal­y­sis of con­sumer de­posits and business costs.

There was one catch: Con­sumers had to con­tact NAWAS be­fore Aug. 20 to ob­tain a re­fund. Some, who told USA TODAY they were un­aware of the set­tle­ments, missed the dead­line. Af­ter re­porters ques­tioned the state and com­pany about the sit­u­a­tion, they re­ceived their re­funds.

Five-fig­ure stu­dent trips

EF Ed­u­ca­tional Tours has part­nered with school dis­tricts across the na­tion to or­ga­nize group tours. When the virus took hold, the com­pany at­tempted to deny full re­funds to par­ents – un­til at­tor­neys gen­eral got in­volved.

Lona La­mar and her part­ner had planned to head to Spain in June as chap­er­ones for her son’s class trip. She spent more than $12,000 on the trip, booked through her son’s high school in Mis­souri.

At first, the com­pany of­fered a voucher for fu­ture travel, La­mar said, which she thought made lit­tle sense for a school trip. The com­pany then agreed to re­fund some of her de­posit but wanted to keep about $1,000 per trav­eler – $3,000 in all in her case.

La­mar filed a com­plaint with the at­tor­ney gen­eral in Mis­souri in April. Be­cause the tour com­pany was based out of Cam­bridge, the Mas­sachusetts at­tor­ney gen­eral ne­go­ti­ated a set­tle­ment in May that se­cured more than $1.4 mil­lion in par­tial re­funds for nearly 4,200 con­sumers in the state.

EF Tours agreed to roll out those poli­cies for all cus­tomers, in­clud­ing La­mar. The com­pany kept $565 per per­son. That leaves La­mar’s trio still out more than $1,500 for a trip they never took.

“I thought it was very preda­to­rial of the com­pany, con­sid­er­ing it was a pan­demic,” she said. “From a par­ent’s stand­point, you put your trust in them. It’s just re­ally dis­ap­point­ing.”

Com­pany spokesman Adam Bick­el­man said poli­cies evolved as the ex­tent of the pan­demic be­came clearer. He pointed to global staff over­head and sup­plier costs to ex­plain why the com­pany could not of­fer full cash re­funds.

Bick­el­man noted that the cus­tomer dis­putes mostly re­lated to EF Ed­u­ca­tional Tours. The do­mes­tic divi­sion, EF Ex­plore Amer­ica, of­fered dif­fer­ent cash re­fund op­tions be­cause those pro­grams cost less than the over­seas ex­cur­sions.

The ma­jor­ity of 2020 tour groups opted to ac­cept vouch­ers for travel re­deemable for an­other trip through Sept. 30, 2022, Bick­el­man said.

“The health and safety of our trav­el­ers and staff have been our top pri­or­ity for more than 55 years,” he said. “Our sin­gu­lar fo­cus dur­ing this time has been to pro­vide our cus­tomers with the best and most flex­i­ble re­book­ing and re­fund op­tions.”

By the time Carol Petrini reached out to EF Tours in late March to ex­plore her op­tions, trips around the world were be­ing can­celed, coun­tries were ban­ning vis­i­tors and cruise ships were get­ting stuck at sea. She had been pay­ing for her tour to France through an in­stall­ment plan, then up to $3,000 in all.

The com­pany wanted to with­hold $1,000 for the can­cel­la­tion, Petrini said. Af­ter the set­tle­ment with the at­tor­ney gen­eral in Mas­sachusetts, she got all but about $500 back. She ques­tions the com­pany’s jus­ti­fi­ca­tion for keep­ing any of her money.

The com­pany “just kept say­ing over and over that they had al­ready ex­pended money on th­ese trips,” Petrini said, “but there was no ev­i­dence that there were reser­va­tions for the air­lines or ho­tels or any­thing.”

In­ves­ti­ga­tions, law­suits

BookIt was at­trac­tive to blue-col­lar trav­el­ers who could slowly fund their dream va­ca­tions through a “pay de­lay” sys­tem. Their angst and anger is pal­pa­ble on the Face­book group started by Leigh Anne Belcher and in of­fi­cial con­sumer com­plaints.

“I feel so stupid even book­ing with them. I don’t care about my trip get­ting can­celed. I just want my money back,” one mem­ber of the Face­book group wrote about his month­s­long bat­tle with his bank, USAA, to re­fund his can­celed $3,000 trip to Mon­tego Bay, Ja­maica.

“From what I un­der­stand, the BookIt business model was to not pay the re­sorts or air­lines un­til the last mo­ment of the ac­tual trip begin­ning, even though I paid in full nearly four months in ad­vance,” a Wis­con­sin cus­tomer com­plained to the state’s at­tor­ney gen­eral.

“Amer­i­can Air­lines says I should be talk­ing with the travel agency I booked with, not Amer­i­can,” Dou­glas Cal­lies wrote to Wis­con­sin’s at­tor­ney gen­eral about his can­celed trip to Can­cun, Mex­ico. “(BookIt) never used the money for the stated pur­pose, but merely pock­eted it to (their) per­sonal ad­van­tage.”

An­drea Koos, a spokes­woman for Amer­i­can Air­lines, con­firmed that the com­pany is­sued re­funds to but halted them once it re­ceived a no­tice from a travel billing clearing house that the agency had shut down.

Florida’s at­tor­ney gen­eral says more than 800 peo­ple lodged com­plaints about BookIt, which is based in Panama City Beach. The U.S. At­tor­ney’s Of­fice, Fed­eral Bureau of In­ves­ti­ga­tion and po­lice depart­ment, which fielded hun­dreds of com­plaints from con­sumers and ven­dors, col­lect cases in an on­line por­tal to po­ten­tially pur­sue fraud charges.

“I’m not in the travel business, but I just as­sume when I pay for my va­ca­tion, it’s paid for when I make my pur­chase,” Panama City po­lice Lt. J.R. Tala­man­tez said. “We’re try­ing to wrap our head around this business con­cept and whether it falls into fraud. It’s a sad and un­for­tu­nate sit­u­a­tion.”

Mas­sachusetts At­tor­ney Gen­eral Maura Healey filed a civil suit against BookIt in June, al­leg­ing un­fair and de­cep­tive business prac­tices. BookIt has not re­sponded to the com­plaint.

Wis­con­sin’s Mikayla Sch­midt and her fiancé Jor­dan Stiefel should have been on their hon­ey­moon in Punta Cana this month, all planned through BookIt.

They were pay­ing for the $4,100 trip in in­stall­ments, and their last pay­ment was due in March. They no­ticed the last pay­ment had not been deb­ited from their bank ac­count. “We had it on a pay de­lay sched­ule and … we went to check, and the web­site said ev­ery­thing was can­celed,” Sch­midt said.

Sch­midt and her fi­ance joined Belcher’s Face­book group and filed com­plaints with state agen­cies. They dis­puted the ear­lier pay­ments with their bank but are short about $900, Sch­midt said. When the cou­ple got mar­ried, they in­stead hon­ey­mooned in Cal­i­for­nia.

Doc­u­ments pro­vided by cus­tomers to USA TODAY show BookIt con­tacted part­ner ho­tels in March to say it wouldn’t make pay­ments for guests, even as some of them ar­rived. It warned cus­tomers then that they’d prob­a­bly end up pay­ing twice and told them to fight it out with their credit card com­pa­nies.

“The re­sort may be ask­ing to col­lect the money for your stay di­rectly from you at this time, de­spite that you have paid in full di­rectly with us,” a letter from reads. “To get re­im­burse­ment, you need to work with your bank di­rectly.”

A front page of the web­site in­structs cus­tomers to con­tact credit agen­cies for re­funds. Belcher said she de­vel­oped a guide for dis­put­ing charges di­rectly with credit agen­cies, but mem­bers of the Face­book group who booked with debit cards or funds through their credit unions have had more trou­ble.

In a state­ment to WMBB-TV in Panama City Beach, Ten­nyson – the BookIt ex­ec­u­tive – said the com­pany con­tin­ues to op­er­ate and its 35 re­main­ing staff mem­bers, down from 300, were work­ing to re­fund cus­tomers.

Fed­eral records show the com­pany took a $1 mil­lion to $2 mil­lion Pay­roll Pro­tec­tion Pro­gram loan through the Small Business Ad­min­is­tra­tion, claim­ing to have saved 168 jobs.

Ten­nyson’s state­ment said BookIt “hopes to re­sume its ac­tiv­i­ties as a full ser­vice travel agency once some sem­blance of or­der re­turns to the in­ter­na­tional travel in­dus­try.”

“They said we can­celed the trip.” Mary Man­ning, Rock­away, New Jersey, res­i­dent who filed a for­mal com­plaint on NAWAS


Travel has got­ten more com­pli­cated and costly for some peo­ple strug­gling to get re­funds af­ter their va­ca­tion ex­cur­sions were can­celed dur­ing the pan­demic. USA TODAY in­ter­viewed sev­eral of those who filed for­mal com­plaints.


This is the beach at the Grand Pal­la­dium in Punta Cana, Do­mini­can Repub­lic.


Mikayla Sch­midt and Jor­dan Stiefel say their dream hon­ey­moon to the Do­mini­can Repub­lic was scut­tled by coronaviru­s and they couldn’t get a re­fund from Af­ter their wed­ding Sept. 6, they hon­ey­mooned in Cal­i­for­nia in­stead.

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