TORONTO — If the Ontario travel industry’s Compensation Fund continues to be depleted at the current rate, it will not be able to sustain itself in 10-15 years, says a new Deloitte report.

The report, which was commissioned by TICO’s CEO Richard Smart to determine appropriate Fund levels, found that the current model coupled with the size of losses is resulting in a year-over-year loss. The Fund is financed by the Ontario travel industry and administered by TICO.

“This study contains a detailed description of methodology, analysis and observations. The findings of this report were integral to the recommendations made by TICO during the comprehensive review of the Travel Industry Act, 2002 and Ontario Regulation 26/05,” said Smart.

The purpose of the Fund is to protect consumers who purchase travel services from Ontario-registered retailers in the event that travel services cannot be provided due to financial failure or insolvency of a Registrant. Approximately 75% of the Fund’s yearly revenues come from contributions made by Registrants by way of registration and renewal fees.

In contrast, the Quebec Travel Compensation fund uses a consumer-pay model that charges consumers $1 per $1,000 of sales. TICO has proposed a similar model that would begin at $1 per $1,000 of sales, and then once the target fund level is reached, fees would then be adjusted and approved by TICO’s Board of directors to a level that would ensure the Fund is maintained and not grown to excess.

Deloitte has backed this proposal, saying that the funding and replenishment needed to achieve a target fund size of $50 million should be financed through a Consumer Protection Fee (CPF). If a CPF is not implemented, there will likely be a gap in coverage for consumers and it would take longer to reach the target fund level.

Other key findings in the report include:

CATO

TICO submitted a request to wholesale Registrants that are members of the Canadian Association of Tour Operators (CATO) to complete a Deloitte study survey. In addition to responses from a Consumer Research Survey, Deloitte found that consumers are likely to accept an increased fee of $1 per $1,000 in sales for expanded coverage, and that over 90% of bookings are made by credit card. Plus, on average, consumers have taken 2.6 pleasure trips in 12 months.

Two risks were identified has having a potential ‘high’ impact on the health of the travel industry: acts of terrorism and exchange rates.