Deposits: a win-win for travel industry
It might be common practice to refuse refunds on cancelled bookings, but that doesn’t make it right – or legal.
YOU unpack once, while your hotel travels from city to city, or island to island. You’ll never get bored, or lonely, and every morning you wake up in a new place. It’s easy to understand the romantic allure of cruising and why it’s the fastest growth sector in global tourism.
But before you book that cruise, consider whether you would mind forfeiting your deposit if you need to cancel.
Harry Beifus had no reason to believe affordability of the cruise would become an issue when in January this year he and his partner booked a trip through Imagine Cruising, sailing on the MSC Sinfonia from Venice to Durban in October, and paid the deposit of R29 000.
Their circumstances changed though in May, when his partner was retrenched.
So, 105 days before departure, he tried to cancel the trip. Considering their understandable situation and the extensive notice period, they asked for their deposit to be refunded, minus administration fees; or for another similar cruise to be banked for a future date.
Their response? Replace his partner or cancel and lose the deposit.
“It’s totally unacceptable as we are both over 70 and I have no wish to share with a stranger,” Beifus said.
“All our appeals fell on deaf years and no exceptions were considered for us by this company. They will make a handsome profit in reselling our trip and not returning our deposits, or offering us a further cruise. We hereby request and challenge Imagine Cruising to step up and show some compassion for their older and loyal clients.”
Given the high-handed response from the local office, I’d hoped for more sensible feedback from the UK headoffice when Peter Shanks, Imagine Cruising’s development head, contacted me.
“We were very sorry Mr Beifus had to cancel his planned holiday and sympathetic to the causes. At the time of booking and prior to confirmation we carefully explain our booking terms and conditions to customers. They cover ‘loss of deposit’ where we explain in the event of a cancellation the deposit paid is retained by Imagine Cruising,” Shanks said. “We have now been trading in South Africa since 2012 and we have always been careful, through working with our locally based expert lawyers, to make sure that we abide by all relevant consumer legislation – and our terms and conditions are fully compliant.
“It is common practice amongst tour operators and airlines around the world to retain the deposit in the event of a cancellation.
“Section 17 of the (Consumer Protection) Act gives very clear guidance in the event of cancellation and allows for ‘a reasonable charge for cancellation of the order or reservation.”
Shanks said that, before cancellation, they tried to assist Beifus to find an “alternative holiday”.
Beifus wasn’t offered a return of his deposit, minus reasonable penalties, as per the act though – he was told to forfeit all his money, or share with a stranger, which are hardly palatable options.
“By the time Mr Beifus cancelled the holiday, we had committed to a number of elements of his holiday. Imagine Cruising act as a tour operator and we book the flights, hotels and cruise with individual airlines, hotels and cruise lines.
“Therefore should a customer cancel, we use the deposit paid to try and cover those sunk costs. I do note Mr Beifus’s point that, at some point post the cancellation, MSC may – or may not – re-sell that cabin. That is only something MSC can do – we do not control any capacity and once a cabin is cancelled by us it is returned to the cruise line.
“Whilst sympathetic to Mr Beifus we did not feel we should take a loss as a result of his cancellation,” Shanks said.
A tour operator who didn’t want to be named told me deposits are generally 100% non-refundable for most tourism products. “Sometimes we push our luck in extreme circumstances, and the property/ tourism product will understand if the deposit was paid very long in advance, or if we have a good relationship with them.”
As a precaution, she advised taking out travel insurance, which covers trip cancellation.
“For Americans, insurance is very much more part of their vacation purchasing mentality. South Africans probably are more aware of insurance against theft or car crashes.”
So I contacted MSC Cruises SA, which was very sympathetic to Beifus’s cause.
However, their spokesperson Ingrid Roding said the booking had been made with Imagine, so they needed to resolve the complaint.
“MSC notes that there is a R3 000 nonrefundable deposit on this departure, which would have been clearly stated in all correspondence on booking.
“The additional R26 000, paid directly to Imagine Cruising, was for hotel accommodation and air tickets, and therefore has no relevance to MSC Cruises.
“As MSC cruises, however, we have advised Imagine Cruising that we have no issue with carrying the booking forward to another cruise date and await their response. We look forward to resolving the matter.”
CPA specialist Trudie Broekmann says it’s not the first complaint she’s heard about Imagine Cruising’s cancellation policy. She believes they’re in violation of the law.
“Deposits paid to a service provider for services to be rendered in five weeks’ time or longer, remain the property of the consumer.
The CPA makes it clear that there can be no such thing as a non-refundable deposit and interest on the deposit also belongs to the consumer.
“Section 17 of the CPA makes it clear a consumer can cancel a booking at any stage. The act allows the supplier to ask for a deposit, and to impose a ‘reasonable charge for cancellation’.
“In this case the consumer has given exceptionally long notice of cancellation and there should be no reason that Imagine Cruising, acting diligently, could not find an alternative consumer to take up the bookings.
“While the industry practice in the cruise liner industry is to retain a large proportion of the deposit even if a consumer cancels long in advance (a practice which is not justifiable under the CPA), Imagine Cruising is a tour operator or travel agency. Their refusal to return the deposit and interest has the effect of negating the consumer’s right to cancel, and is consequently illegal.
“The CPA overrules any deposit or refund policy of the supplier or any of their suppliers – it’s illegal (in terms of section 51) to contract with a consumer on terms which deprive a consumer of a right in the CPA or avoid a supplier’s obligation under the CPA (such as to safeguard their deposit and return it to the consumer on cancellation).”
A previous client of Broekmann’s also had a run-in with Imagine Cruising. When she tried cancelling, they retained her deposit and told Broekmann “the industry does not allow service providers to re-sell a cancelled booking”. So Broekmann checked. “I was informed the cruise was fully booked when it sailed, despite her cancellation, so the booking must have been resold. In that case, Imagine Cruising claimed a cancellation fee of 70% when 50% was due according to their terms.”
She believes Beifus should report Imagine Cruising to the Consumer Goods and Services Ombudsman, who provide a free service.
Imagine Cruising seems to have had a change of heart, later contacting me to say they’d be happy to negotiate. Shanks said: “That was the approach we took from the outset, but working with Mr Beifus we were unable to find an alternative holiday that suited him. If he gets in touch with us, we will of course do what we can to find the right holiday.”