According to a study by Which?, at least £1bn has not been refunded by holiday companies to UK customers due to the pandemic with the poll suggesting the average cancelled holiday costs £1,784. By withholding refunds, companies risk destroying the trust of customers.

The pandemic has put a huge financial strain on consumers and UK tourism. According to GlobalData’s Week 9 Covid-19 Recovery Consumer Survey (7-11 October), 89% of British respondents are ‘extremely’ or ‘quite’ concerned about the economic situation within the UK, while 52% are ‘extremely’ or ‘quite’ concerned about their own personal financial situation.

These statistics highlight the need for holiday companies to refund customers in a timely manner to prevent potential financial hardship. Failure to do so could completely erode any remaining confidence that consumers have in the industry, prolonging the lengthy recovery process that many companies in the UK tourism sector are now facing.

The short-term benefit of withholding refunds is clear

The urge for travel companies to hold on to cash will be overwhelming. The tourism industry has gone through an unprecedented period, which is only going to get more challenging in the coming months.

Holding on to cash will enable companies to survive the immediate threat posed by a loss in demand. However, companies need to take into consideration the long-term repercussions.

If a company is singled-out as not meeting its financial obligation to customers, it will be devastating for its image. Even when there is a resurgence in traveller numbers, customers will be particularly wary of companies that have withheld refunds.

This will make attracting customers especially difficult and could even threaten the long-term survival of a company. According to GlobalData’s Week 9 Covid-19 Recovery Consumer Survey, 57% of British respondents said how familiar / trustworthy / risk-free the product / service feels ‘always’ or ‘often’ influences their product choice. This figure has grown by 5% from the Week 1 survey and will likely continue to rise the longer the pandemic goes on for.

As the economy and customers’ pockets continue to feel the brunt of the pandemic, consumers will understandably become more frugal with their spending.

This reinforces the need for holiday companies to focus their efforts on winning the confidence of customers to ensure they can survive in the long term. However, the temptation to withhold money in the short term could prove too much for many companies, leading to a break-down in consumer trust.

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