The times are going when Ukrainians could say that the stupidity of some of their laws was made up for by the fact that they were totally ignored anyway. It is increasingly understood now that it is better to spend the time to enact good laws from the start rather than have constant problems with their interpretation later. The president himself had a hand in getting this one right as he rejected the first draft and sent it back for further review. The 37 articles regulate on a fairly broad spectrum. We will focus on the most reformatory ones.
Article 5 divides the tourism business into two categories: those that actually create the 'tourist product' (travel operators) and those that sell the product (travel agents). Article 17 states that a travel operator may also operate as a travel agent without the necessity of obtaining an incremental license. The aim here is to create a more 'level playing field' between operator and agent.
Article 15 states that both these entities must carry the liability towards their clients for the services they offer. The main difference here between an operator and an agent is in respect of the value of the liability guarantee required before obtaining an operational license. The travel operator's liability guarantee must be a minimum of 20,000 and for the travel agent, a minimum of 2,000.
With this legislation, tourists buying their travel packages from these newly registered travel operators of travel agents (the only ones now able to operate on the Ukrainian market) are guaranteed liability cover for their chosen suppliers failure to perform according to the criteria of the travel package bought. Travel agents must clearly state in their offer documentation the name of the travel operator whose package they are offering.
Those currently operating as agents now but which are in fact travel operators will need to re-register quickly and arrange the required minimum liability cover. The view is that this will lead to a fairly drastic consolidation in the tourism market as it is estimated that up to 90% will be unable to arrange cover for their minimum liability levels.
An Optimistic View
Ukrainian tourists therefore from 1st of January, 2004 will have legal recourse for compensation in the tour operator /agent fails to deliver the travel package offer bought. The belief is that this legislation will dramatically improve the quality standards of the tourism industry.
Anatoly Matvienko, First Vice Chairman of the State Tourist Administration says: This law has brought us closer to European tourism standards. Let me cite at least four points.
We no longer divide tourism into a multitude of categories each requiring a special license; now there are just two the, operator's and the agent's. For example restaurants, transport or hotels catering for tourism will no longer require a license.
The operator is held responsible for the quality of the tour package, while the agent is responsible only for the kind of information provided (whether or not truthful).
Should the operator go bankrupt, the customer has direct recourse to whichever institution has indemnified the operator. Under the previous law the tourist was a normal creditor third in line after the state and the employees.
From now on operators will be subject of more rigid requirements and their enforcement. Operators can also act as an agent, but perhaps outside the capital it will be less expensive to operate through independent agents. In time these agents will most likely operate as travel shops offering tour packages from several operators.
Mykola Zhlukto, Director General, SAM Co., one of Ukraine's largest tourist operators:
"The new law is a step forward in the development of a civilized tourism industry. Most importantly, it clearly defines the type of activities and the rules of this market. It seemed that everybody wanted to be an operator, even when simply selling a travel voucher whilst providing no services whatsoever, and carrying no risk. In the West, to be a travel agent is considered quite prestigious. Not so in Ukraine. But every operator depends on his agents, and vice versa. At present some 95% of the services provided by most operators are almost the same, so their success, depends on their agents' performance. A similar law was enacted in Russia several years ago. I can't comment on the suitability of the sums payable by the operator and the agent as financial guarantees - I mean two and twenty thousand euros. I think in time they may be adjusted, but we had to make start and I think this is a good one."
A Prudent View
Alina Levytska, Director, Fiesta Tour Co.:
"I think that dividing the companies into the operator and agent categories only by the amount of the liability guarantee is one of the new law's drawbacks. Other criteria should have been applied, especially as the law provides for different rights and obligations of the operator and the agent. Few companies will be able to receive an operator's license. Most will have to make do with an agent's license, but their number will decrease and they will have to improve their performance.
"The idea of a liability guarantee for the customer (Article 15) is good, as fraudulent practices cast a shadow across the whole of the tourism industry. Why not revise Articles 5 and 15, so as to make the amount of the liability bond dependent on a range of criteria, such as the company turnover, or even make it voluntary. Customers will certainly prefer to deal with the more powerful firms (provided, of course, the quality of the services and prices are the same)."
The Pessimistic View
Those opposing this law say that the larger operators, together with the bureaucrats, are clearing the way for themselves; that the immediate consequence will be the financial death of individual travel agents. A handful of survivors will be finished off later; the inexpensive tours now will quickly become more expensive, as the operator's margin is considerably higher that the agent's. Last but not least. They insist that the new law will not benefit foreign tourists to Ukraine.
One counter argument is that there are sure to be faults in any law on tourism in any democratic country. However, in Ukraine we have had several experiences of the negative impact of well intended legislation. Therefore the pessimistic should also be heard.
Oleg Anisimov, Chairman of the International Congress of Travel Agencies and Director of Anisimoff Consulting GmbH:
I believe that the date of the enactment of this law marked a day of mourning for the Ukrainian tourism business. This law will quickly throw 90% of the travel agencies on to their knees, and will therefore substantially decrease competition in the market. The impression is that the law was dictated by the tourism oligarchs who do not want fair and free competition. Our view is that smaller agencies got the business because of the quality of their individual client approach and service.
The idea is simple: redistribution of customer flows so as to lower the number of active travel agencies to a level where each can be dealt with and shoved out of the way by using administrative inspections' Or take that 20,000 liability guarantee. It's an insurmountable barrier for small and medium size travel agents. These companies are already obliged to have insurance liability cover for their clients - why do we need a new one.
Also in my opinion this is also a move to make it more difficult for foreign major operators to enter Ukrainian market. They will need to obtain their license from the state committee which could prove difficult if for example this committee owes 'favours' to the major Ukrainian operators.
The result of this will be that the market is controlled by five to ten of the existing major players in the market which by operating a cartel could keep prices up.
The Ukrainian 6/2003
