Industry consultant Andy Cooper considers whether recent developments mean the end of the dynamic packaging era

I read with interest Steve Endacott’s recent viewthat HM Revenue and Customs may have Flight-Plus providers in their sights as a target for Toms VAT.

When this is coupled with other recent developments, I begin to wonder whether we are seeing the death throes of dynamic packaging by travel agents and, indeed, whether it is sensible for agents to reconsider whether they should be creating packages themselves.

There is no doubt that over the past 10 years, dynamic packaging (or whatever you choose to call it) has grown and thrived in the marketplace. From a travel agent perspective, it made sense to reduce reliance on traditional tour operators.

Commissions were being cut, some operators were looking to exercise greater control over their distribution, and the increased capacity in the market from no frills carriers presented a great opportunity to offer a wider choice to consumers and potentially a better financial return to the agent.

For customers, dynamic packaging provided more flexibility on routes and durations, as well as sometimes offering better value for money. Part of the reason for lower prices has been, quite simply, that many of the costs of regulation and compliance were simply not incurred.

The biggest one, VAT on the margin, has been largely avoided and most dynamic packages have historically been sold on the basis that the retailer is selling the components as an agent, and is therefore not responsible for the delivery of the service.

The introduction of Flight-Plus Atols introduced an additional regulatory cost, albeit a relatively small one of £2.50 per passenger.

Click to read full article: Travel Weekly