After the storm, who has your refund?

By | November 24th, 2012

The recent superstorm and series of nor’easters that slammed into the East Coast grounded tens of thousands of travelers, including Neil Weiss.

Fortunately, most travel companies waived their usual rules, offering those delayed by the storms a refund or a credit. But not all travel companies. Weiss, an editor for a trade magazine based in Cherry Hill, N.J., found an unlikely roadblock to his refund: his online travel agency.

After superstorm Sandy, Weiss had to cancel a business trip to Las Vegas that he’d booked through Expedia. US Airways agreed to waive its change fee and allowed him to reschedule his flight. His hotel, Treasure Island Hotel & Casino, did not. It wanted to charge him $200 for being a “no show,” according to Expedia.

But when Weiss contacted Treasure Island directly, he heard a different story. The hotel would be happy to cancel his reservation, he was told, but because he’d made the booking through Expedia, a refund would be up to the agency. And Expedia wouldn’t give him his money, citing its published refund policy, he says.

Weiss’s cancellation isn’t the only refund case I tried to mediate after the storms. These problems highlight one of the often unmentioned risks of booking through a travel agent: Even when an airline or hotel is willing to refund a purchase, you may still have to get past an agency’s own refund rules.

The Weiss case is interesting because after he canceled his trip, he received conflicting information from Expedia and Treasure Island. Expedia says that it advocated with the hotel on his behalf, trying to secure a refund of his first night’s stay. But it claimed that the hotel wouldn’t allow it.

In an unusual e-mail, a vice president at Treasure Island disputed Expedia’s account. “If Expedia suggested that they’d already paid us for your room and kept a cut, you either spoke to someone who does not have the correct information, or deliberately told you something that is not true,” he wrote. “Without getting into too many details, that is not — nor ever has been — the way our Expedia billing accounts are set up.

“In addition, if Expedia advised you that they will not refund your payment due to policies in place by our hotel, that is also untrue.”

Either way, Treasure Island promised to return Weiss’s money. After I contacted Expedia on Weiss’s behalf, the agency agreed to refund his hotel charges. A company spokeswoman said that Expedia was the merchant of record on his hotel booking, meaning that it had charged him, not Treasure Island.

A similar problem befell Jason Singer, who had booked a car rental through Hertz for his 30th high school reunion in Manhasset, N.Y. When Sandy struck, both American Airlines and La Quinta offered him immediate refunds. But Hotwire said that its refund policy meant that his car rental fee couldn’t be returned. Singer was on the verge of starting a “boycott Hotwire” campaign when he contacted me.

“A Hertz representative apologized profusely for Hotwire’s policies and for the fact that they could do nothing about it,” says Singer. “She added that not only would they have refunded me without question if I had made a prepaid reservation through them directly, but that they were receiving multiple calls with the same Hotwire issue.”

I asked Hotwire to review Singer’s case, and the company said that his request had been handled correctly on one level and incorrectly on another.

For one thing, Singer’s travel dates fell outside the window for which refunds were being offered. And he’d paid a special deep-discount rate that was subject to strict non-refundability rules. “You can see how standard practice would recommend against a refund in this case,” spokesman Garrett Whittemore told me. “It’s nearly impossible to reliably prove that any customer’s travel was meaningfully changed by this natural disaster.”

But Hotwire refunded Singer’s purchase anyway. Why? It turns out that the Hertz location was closed because of storm damage, so he wouldn’t have been able to pick up the car if he’d traveled. Hotwire was the merchant of record in the transaction.

These cases raise two key questions: Who takes your money when you’re buying a travel product? And how do you know where to go for a refund?

When you buy through a bricks-and-mortar travel agency and pay by credit card, charges are passed through to the airline, hotel or car rental agency and are governed by its merchant agreement, which is the contract between the company and the credit card.

“That means that when our clients see their credit card statements, they’ll see a charge for the specific supplier they’re using, rather than for the agency,” says Steve Loucks, a spokesman for Travel Leaders, a travel agency consortium in Plymouth, Minn.

Refunds on credit card purchases pass directly back to the consumer, so an agency wouldn’t be able to hold back the money because of its refund policy.

In other words, if you want to know who has your money, check your credit card statement. Unfortunately, you can’t always know who will charge you until you’ve been billed. But roughly 5 percent of travel purchasers can know, because they pay by cash, check or other non-credit-card method, according to Loucks. For them, the company taking the money is the company that will give them the refund.

Singer and Weiss probably would have gotten their refunds eventually without my involvement. Even if they hadn’t asked me to intervene, they could have filed a dispute with their credit card company. With right on their side, they would have won.

Should a travel agency always refund a purchase when it's holding the money?

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  • Carver Clark Farrow

    It’s probably technically legal for a travel company to keep the money but its certainly unethical on all accounts for them to keep ALL of the money. If the travel provider is willing to offer a refund, then the travel company has made what the law refers to as a windfall. I’d be content, not happy, but content for the travel company to keep its share of the proceeds.

    For example, if you book a room for $100, and the travel provider paid $80, the travel provider would have made a $20 profit. The travel provider could keep $20 as it would have received the benefit of the bargain.

    But for the travel company to keep the full $100.00 is simply unethical under any and all circumstances. And that’s why I would never, ever, book anything except directly with the travel provider or with a travel agency that is NOT acting as a reseller, consolidator, or whatever.

    Perhaps TonyA or Bodega can fill us in on the details of how these transactions are handled.

  • TonyA_says

    Chris Elliott. Please differentiate between a (classic) Travel AGENT and a MERCHANT.
    An Agent is usually not free to price or change rules. An agent simply acts like (or on behalf of) the principal. So they charge the same as the principal, and if the pricipal allows cancellations and refunds then you will get it.

    MERCHANTS act on their own. They buy a hotel room or travel item at a wholesale (discounted net) price and then they reprice it at their convenience. They become the merchant on record and all you get is a VOUCHER that you are the one who will be the guest staying at the hotel. The hotel does not charge you since they charged the merchant. The merchant is free to make his own cancellation and refund rules since your money is with the merchant and not with the hotel.
    WARNING: Expedia has a new product where you can pay at the hotel but still is a MERCHANT agreement.

    The main problem is consumers do not know between a sale made under an AGENCY VS. MERCHANT agreement. They think they are always dealing with the hotel as the principal. This can easily be solved if the FTC, or States requires a disclosure for anyone selling a travel product to DISCLOSE the whether he is representing the source as an agent and therefore the source has the the power to determine rates and the rules, or he is acting as a merchant and is himself determining the rates and rules.

  • Daisiemae

    Why do people use these web sites like Hotwire when they are so well known to cause problems like this? I always book directly with the hotel and car rental company. I want to know exactly who I am dealing with and exactly what the pricing and policies are and exactly who is obligated to fix it when something goes wrong.

    The one thing I find incredible is that people will book a hotel without knowing which one it is first. No supposed low price would ever entice me to do that.

  • Carver Clark Farrow

    If I came to your office and wanted a reservation at the Marriott, how do I know whether the sale is made under the agency or merchant agreement. Do I need to ask certain questions?

  • Linda

    In January, 2011, I had a flight on US Airways and hotel & rental car booked through Hotwire. A huge snowstorm struck the Philadelphia area and I was not able to get to Florida. US Airways refunded, not credited, my non-refundable fare. When I contacted Hotwire to notify them I would be cancelling my hotel & car, they offered, to my amazement, a complete refund.

  • TonyA_says

    You ask exactly that — are you (the vendor) selling me a room under an agency agreement (where the hotel sets ALL the rates and rules as the principal) and you are only an agent and will follow ALL the hotel booking and cancellation policies -OR- are you selling me a room as a MERCHANT and you determine the rates and rules and require me to deal with you directly for any cancellation and changes.

    Usually most PREPAID reservations are likely MERCHANT agreements. Usually any rate sold lower by a vendor than the hotel for the same room means the vendor has become a MERCHANT and has set its own rate (and rules).

    Carver, selling hotel rooms is more confusing now since the GDS already have begun to sell rooms from WHOLESALERS, too. Even travel agents have to read what they are selling.

  • TonyA_says

    For AIRLINE TICKETS, I have never heard of a travel agency or consolidator SET ITS OWN RULES. The ticket rules are set by the airlines, period. In fact, the airlines have the sole determination whether your ticket can and will be refunded and whether fees will be waived. An agency or consolidator can always charge you a service fee (separate and above what you will pay the airline) or it can eat some of your loss. But airline accounting is mostly always one way – in favor of the airline, itself since they hold your money already.

    Unlike hotel rooms, there is no such thing (as far as I know) as an Airline Ticket Merchant. A consolidator is nothing but a specialized travel agency that has a BULK or NET fare agreement with the airline. Allow me to explain this further.

    The typical fare of an airline is called a PUBLISHED Fare. It is called published because the airline publishes the fare for everyone (who has access) to see. All appointed (and ARC registered in the USA) travel agencies can sell a Published Fare. However, they do not necessarily earn a commission. To earn a commission, the agency must have a commission contract with the airline. The agency is free to charge a separate service fee but it must be clear that this additional fee is NOT PART OF THE FARE. When you buy a Published fare ticket you will see a complete breakdown of the fare construction at the end of your eticket receipt.

    Another kind of fare out there is called a BULK Fare. A bulk fare is a NON-published fare. Bulk fares are privately negotiated between the agency (also called a consolidator) and the airline. Bulk fares are sold by the airline of a NET price basis to the consolidator and the consolidator (to make money) adds a markup that becomes part of the fare. In other words, instead of making a percentage commission, the consolidator determines how much markup (or money to make) on the bulk fare. Hence, when you buy a bulk fare ticket, the fare construction line (seen at end of the eticket) only says BULK plus the taxes and the total paid. A bulk fare has its own rules. They might or might not be better or worse compared to a published fare. So you must know this before you buy.

    Finally the third kind of fare is a NET fare. This is common amongst ASIAN airlines. A NET fare is a DISCOUNTED PUBLISHED FARE. The airline makes a deal with the agency (or consolidator) and gives it a nice discount. To account for the discount, the agency MUST indicate the correct code on the TOUR CODE BOX of the ticket. The agency MAY sell this fare lower than the published fare. In other words, the agency can share with you some of its discount. Since NET fares are still based on a PUBLISHED fare, its rules are those of the PUBLISHED fare they are based on. Only the price and discount are “different”. If you buy a discounted NET fare, the fare construction line at the end of your eticket receipt will show the PUBLISHED FARE plus a line indicating how much more additional collection is due. You can ignore the addition collection information because that is the amount of discount you got from the agent and the agent will simply account for that. Remember, as far as the airline is concerned, you bought a PUBLISHED FARE ticket.

    Airlines might demand that they process your refund or changes VIA or THROUGH THE AGENCY you used to buy a ticket. If that happens then you are stuck with the agency’s ADDITIONAL SERVICE FEES. This is where the UNSCRUPULOUS AGENCIES screw you. Some ONLINE agencies charge up to $250-300 Service Fees. Since there is no law regulating the amount of agency service fees, then you are screwed. A decent brick and mortar will only charge about $50 service fee for its time to make a change. You need to know what your travel agent will charge in fees before you use one. But remember they are DOING WORK FOR YOU.

  • emanon256

    I’ve aid it hundreds of times and Ill say it again, book directly or use a real agent. These travel vending websites are horrible.

  • Carver Clark Farrow

    How is a travel agent likely to react if I ask such a pointed question? It almost seems like an accusation. I don’t use travel agents, but If I were to, I would want a harmonious and respectful relation.

  • TonyA_says

    I am in NYC and people are more direct and legalistic here so I do not mind them asking questions. But, they must also expect to get a brutally frank answer from me.
    Honesty is the best policy. I simply give my clients all options. They usually appreciate getting an education :-)

  • Carver Clark Farrow

    So here in the crunchy sunny California where people aren’t as “direct and legalistic”, could I use whether I have to pay upfront or not as a sufficient yardstick for cars and hotel. To be more specific, a prepaid rate may be either agency or merchant, but if I’m paying the provider directly, e.g. I pay the hotel at check in, it’s an agency agreement?

  • Sweet!

  • Thanks for this, Tony. A real education! (In a previous life aka my 20s, I really wanted to be a travel agent and send people on wild, once-in-a-lifetime trips! Now I’m more bent on taking those trips myself…)

  • bodega3

    My agency is owned by a tour company, so we can sell rack rates, discounted rates,our contracted rates and other tour company’s rates. The price I quote will also include the type of rate, the restrictions and cancellation penalities. Most agents I know will provide you with the same information since we are not order takers like online companies are and care about what you book. Lowest isn’t always the best and we walk you through your options for those ‘in case’ situations.
    If price is all you care about then if you take a more restricted rate, you need to consider the chance of not getting a refund even in a weather related situation. Pretty simple IMHO.

  • Nikki

    Good question. I’d think that if the hotel stay was booked by a TA, chances are it’s at a rate that’s owed a commission (by the hotel). Whether or not it’s actually an agency agreement though, I’m waiting for Tony to get back on that… There’s too many fine lines and loophole-legalities waiting to happen on some of these kind of things.

  • Cybrsk8r

    I’d be really interested in the case where the location was closed due to storm damage, how the refund came about. Did Hotwire volunteer that the location was closed, or did the customer find out thru some other channel and then press Hotwire for the refund?

  • TonyA_says

    If you pay at hotel then most likely it is an agency booking if you did not book directly with hotel. But remember my warning since Expedia introduced a pay at hotel MERCHANT booking. I am not sure exactly how that works since it is new.

  • TonyA_says

    Nikki it is more confusing than this. If I simply go to the Travelport GDS hotel site (as an agent), it offers many different ways to book the same hotel room. Each offers a different commission amount. Unless the hotel offers a standard 10% commission (NOTED AS AGENT COMMISSION 10.00 PERCENT) I can almost assume it is offered through a MERCHANT arrangement. There is one exception – offers agents to sell their stuff as post-pay (pay at hotel). I do not like prepaid hotel arrangements. They can be really messy.

    More info for

  • TonyA_says

    When someone buys from you, they will know what they are buying because YOU TAKE THE TIME & CARE TO TELL THEM. You can also provide expert advise because you also know their air and tour arrangements.

    The problem is when people buy online, they become their own travel agents and expect the vending machines to be flexible and accommodating to them when they make changes.

  • TonyA_says

    Carver, the SOP is travel agents RETURN COMMISSIONS when the passenger cancels. Travel agents can cover their expenses by charging a separate service fee (which they can disclose as non-refundable).

  • TonyA_says

    I read that right now rental cars are very hard to find in the NYC area.
    They might be thankful for any cancellation since they can easily resell that car.

  • Carver Clark Farrow

    My question is, when the travel agent is acting as a merchant, are there any commissions. It appears as if the OPs agent was trying to keep both the cost and the profit.

  • TonyA_says

    When the travel agency is a merchant (i.e. Expedia) they will pay the hotel (property) a NET price. The merchant makes money by marking up their selling price (above the NET cost).

    The question is who keeps the PREPAYMENT? Does the merchant keep it? Well, the answer depends on the MERCHANT-HOTEL agreement.

    As you can see, the MERCHANT’s cost when the customer cancels is a maximum of one night at the NET rate IF THE MERCHANT CANNOT CANCEL ON TIME. So for the first night, the MERCHANT still makes its markup. For the subsequent nights it confiscates the prepayment, the MERCHANT keeps everything.

    Priceline (Travelweb):
    Cancellations. Merchant Rate reservations are subject to cancellation penalties and are non-transferable/non-changeable. Hotel shall not change dates or cancel any Merchant Rate reservation unless directed otherwise by Travelweb. Requests by Merchant Customers to change or cancel a Merchant Rate reservation shall be directed to Travelweb or the website through which such Merchant Rate reservation was booked. Individual reservation cancellations must be received a minimum of twenty-four (24) hours prior to the arrival date in order to avoid cancellation penalty. Cancellations received within 24 hours prior to 12:00 pm local hotel time on day of arrival are subject to the first night’s room and tax charge, which shall be charged to the Travelweb credit card on which the reservation was billed. In the event that a Merchant Rate reservation is cancelled due to extraordinary circumstances defined by Travelweb (such as family death or natural disaster), Travelweb may elect to refund the Merchant Customer in full and Hotel shall not be entitled to payment for such Merchant Rate reservation. Hotel shall ensure that its cancellation policies applicable to Travelweb (including time periods and fees) shall be at least as favorable to Merchant Customers as its cancellation policies which are applicable to any Competitive Site. Hotel shall not charge any penalty for system errors.

    Cancellation And No-Show: Unless otherwise specified by Property, a Company may cancel any reservation made for a Traveler at any time prior to 12:00AM (midnight of the Property’s local time zone) of the day that is 1 day before the date of arrival without any charge by Property. If (i) a Company cancels any reservation after that deadline, or the reservation is a no-show reservation, and (ii) the reservation is not subject to the conditions described in Section 5.i, then the reservation is cancelled in its entirety and, unless otherwise specified by Property, Property shall only invoice the applicable Company a cancellation charge equal to the Rate plus applicable taxes for one night for such reservation.

  • TonyA_says

    James, it is a good thing you became a school teacher :)

  • Ali Jackson

    I imagine that most people booking via Priceline, Hotwire, and similar sites are leisure travellers who know very little about the risks involved. It’s easy for us to say, “they never should have booked with an online travel site”. But, it’s hard to fault an infrequent traveller for wanting to use a single site to book air, hotel, and possibly car rental.

    Also, consider the following: Both Orbitz and Hotwire are Better Business Bureau accredited with A+ ratings. Unfortunately, unless you understand the way the travel industry works, there’s no way to know that online booking sites can so easily ruin your vacation is anything out-of-the-ordinary happens.

  • Still trying to figure out how to get travel discounts, though…

  • Cybrsk8r

    True, but I’m sure they’d rather keep your money AND re-sell the car.

  • Lindabator

    Couldn’t answer the poll – its not ALWAYS a case of black or white – there are legitimate reasons to keep a fee, and there are times when a refund is due regardless of the rules. PLUS – there is a huge difference between a brick and mortar agent and an online site.

  • Lindabator

    Simple – you would be informed of who the vendor was by us – either the hotel directly, or as part of a package booking (Such as Delta Vacations), in which all terms & conditions would be given to you to help you make an informed decision.

  • Lindabator

    I always ENCOURAGE my clients to ask questions – and yes, in a lot of cases, we use vendors with far better pricing, but make you very aware should the cancellation penalties be different than a standard booking (say a 72 hour cancel versus standard 24).

  • Lindabator

    California Travel Sellers law covers the fact that ALL pertinent facts must be clearly discussed with the client – so fire away! :)