More than £780 million of consumers’ cash is “locked up” in refund credit notes (RCN) issued after their package holidays were cancelled due to the coronavirus pandemic, according to new research.
A study commissioned by online travel firm On The Beach estimated that 851,000 people hold an RCN, with the average value standing at £918 per person.
A YouGov survey of 6,434 British consumers indicated that 43% of those who rebooked or accepted an RCN following a cancellation claim they were not offered the cash refunds they were legally entitled to.
RCNs – which can be put towards the cost of a future booking – are used by many travel firms as an alternative to cash refunds to reduce the impact of the virus crisis on their finances.
Those relating to package holiday bookings are financially protected in the event of the failure of the issuing company until the end of September 2022, whereas vouchers have no additional security.
The report, written by financial broadcaster and consumer expert Georgie Frost, recommended that cash payouts are made once an RCN has been held for a year, and customers holding RCNs from 2020 are notified of their rights and offered full cash refunds.
Simon Cooper, chief executive of On The Beach, which pledges to issue cash refunds within 14 days of a trip being cancelled, said the travel industry will “continue to be in trouble” unless consumer confidence is restored.
He added: “There are millions of people still holding these IOUs, in some cases over a year later with very limited opportunity to go on holiday.
“This is all because some travel companies actively avoided offering cash and used their customers’ money for future holidays as cash flow.
“No-one would expect to receive a loan for this long and pay no interest, so why should these companies continue to hold onto their customers’ money for future holidays?”