TICO CEO Richard Smart unpacks proposal for future funding; consumer pay model a no-go

The Travel Industry Council of Ontario (TICO) dropped a major announcement on Thursday (Oct. 5), releasing its proposal for a future funding model.

That same day, TICO CEO Richard Smart sat down with a small group of trade journalists to discuss what the proposal means for agents, the reasoning behind the suggested changes and how agents can finally have their say in the process.

One of the most impactful proposals in TICO’s plan is the elimination of non-contributing end-supplier coverage, such as for airlines and cruise lines, from the Compensation Fund (subject to government consideration and decision-making).

“Airlines and cruise lines are not part of TICO’s jurisdiction,” said Smart. “We're looking to address what's been a long-standing issue where you've got two entities that don't pay into the Fund.”

READ MORE: TICO releases proposal for funding model, registrants can expect “modest adjustment” to total fees

Smart stressed that while this proposed change does represent a reduction in consumer protection, the Compensation Fund is not the only way consumers are protected when they book with a TICO registered travel agent.

“TICO is more than just the Compensation Fund,” said Smart. “A consumer should still feel confident that they're dealing with a regulated marketplace where there's a suite of consumer protections and compensation products.”

Smart also noted that since TICO’s inception in 1997, only 14 per cent of Compensation Fund claims have been related to end-supplier coverage.

“We think in today's travel environment, there's good justification for this,” said Smart. “It really comes down to fairness and equity for the registrants.”

New fee structure

Smart described the new proposed fee model as “more akin to how income taxes are calculated.”

TICO estimates that 35 percent of registrants will see a decrease in their total fees – including both renewal fees and Compensation Fund contributions – while fewer than one percent of registrants can expect an increase in their annual fees by more than $10,000.

Additionally, Smart said 90 per cent of registrants will now pay a flat renewal fee of $750, which he hopes will simplify the process for many agents.

READ MORE: Province orders changes to TICO’s Board composition; ACTA not surprised

TICO’s proposal also includes the introduction of late filing fees.

“One of the challenges that we have as a regulator around keeping our administrative costs down is having to constantly follow-up with registrants who haven’t met their filing deadlines,” said Smart.

The late filing fees are designed to encourage registrants to pay on time, thereby reducing TICO’s administrative burden.

“I can’t think of a vendor that doesn’t have late filing fees these days, so that’s what we’ve done,” added Smart.

READ MORE: ACTA, CATO protest lack of transparency in TICO review

TICO estimates the proposed fee structure changes will result in a 3.6 per cent increase in aggregate fees collected from all registrants, which will be sufficient to close TICO’s current funding gap.

“We're asking for a little bit more from larger registrants but at the smaller end, which is the fabric of Canadian business, we're trying to reduce the variety of the fees that smaller registrants are paying,” said Smart.

No-go on a legislated consumer pay model

Many in the industry, such as ACTA and CATO, have called for TICO to consider a legislated consumer pay model, similar to the one in place in Quebec.

“I think we were fairly clear when we embarked on this funding review that we were doing a comprehensive funding review of regulatory services, including the Compensation Fund,” said Smart. “We didn’t say we were going to look at any particular model like Quebec and try to replicate it.”

READ MORE: ACTA and CATO pull their appointees from TICO board

Smart said TICO believes there would be significant regulatory costs to potentially implementing Quebec’s consumer payment model.

“It’s a policy decision and TICO doesn’t set policy. The Ontario government sets policy and sets the mandate of TICO,” he added.

Smart said he has previously advised organizations like CATO (Canadian Association of Tour Operators) to take a thorough proposal on how a legislated consumer pay model could be implemented in Ontario to the government if they want to see a policy change.

“We believe we've got a regulatory system that’s not overly burdensome, but we're also looking for ways to enhance it while also trying to keep costs down and balanced for registrants,” said Smart.

“It’s different from Quebec but I don’t think it’s as easy as saying one is better than the other.” 

A chance to weigh in 

Between now and November 10, TICO is conducting a consultation process on the proposals with registrants and stakeholders through surveys as well as both in-person and virtual focus groups.

More information about the proposal and the opportunities to provide feedback can be found on TICO’s website.

For months, organizations like CATO and ACTA (the Association of Canadian Travel Agencies and Travel Advisors) have been calling for more transparency around the proposal.

READ MORE: TICO review incomplete, sharing info would be “premature,” says Smart

Smart emphasized that TICO was mandated to submit the proposal to the government before beginning this consultation process.

The industry now has its long-awaited opportunity to weigh in.

“We're gonna take all the feedback and if everybody comes back and says, ‘This is a waste of time and doesn't solve anything,’ then we're going to decide what to do with that feedback,” said Smart.

“We’ve always demonstrated that we’re willing to listen and open to feedback.”

What's next?

As announced on Thursday, TICO has five key proposals. They include:

1. Decreasing Compensation Fund payments to $0.05/$1,000 from $0.25/$1,000 of Ontario Gross Sales.

2. Removing non-contributing end-supplier coverage (airlines and cruise lines) from the Compensation Fund, subject to government consideration and decision-making.

3. Doubling the maximum Compensation Fund payment per person to $10,000 from $5,000 for consumers, subject to government consideration and decision-making.

4. Recalibrating registrant renewal fees, with modernized and more equitable fee bands.

5. Instituting new late filing fees to encourage timely submission of required documentation and ensure efficient processing.

Proposals one, four and five have an anticipated implementation date of April 1, 2024, while proposals two and three are subject to government consideration and decision-making.

“I can't speak on behalf of the government but they understand the urgency of this. I feel they're willing to move quickly on it,” said Smart, speaking to the potential timeline for proposals two and three.

Smart also shared that TICO plans to do more fee reviews in the coming years with the goal of eventually moving to a risk-based approach to pricing.

“Our phase two over the next two to three years is to move to a risk-based approach – kind of like car insurance – but we’re not there yet,” said Smart. “We think we’ve come up with a fair approach but the consultations will confirm that or not.”

Smart said the feedback will be compiled into a document that will be shared with TICO’s board of directors and then the ministry, which he estimates will take place before the end of the year. 

“We’re committed to sharing the good, the bad and the ugly – hopefully more good than bad,” said Smart.

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