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News Analysis: Cruise West is Out of USTOA

September 13, 2010 By: Susan Young

Travel Industry Frustration Grows

In the latest development in the Cruise West situation, USTOA announced Saturday that “Effective September 11, Cruise West is no longer a USTOA member, and as such, no longer participates in the USTOA $1 Million Travelers Assistance Program.”

USTOA’s Chairman John Stachnik also said:  “Travel agents should be aware that purchases of Cruise West products made prior to Sept. 11, 2010 may be protected under the USTOA $1 Million Travelers Assistance Program. Client deposits and payments thereafter will not be covered by the USTOA program.”

USTOA's $1 Million Travelers Assistance Program requires each USTOA Active Member company to post $1 million in security in the form of a bond or letter of credit. According to a USTOA spokeswoman, Cruise West is no longer in USTOA because “they did not renew their bond.”

That security instrument is held by the USTOA Tour Depositors Trust, and used solely for reimbursing consumers for tour payments or deposits lost in the event of a USTOA active member’s bankruptcy, insolvency or cessation of business. On its website, USTOA advises Cruise West customers that information about filing claims will be posted there by mid-week.
USTOA typically says that in the case of the failure of a large tour operator, the $1 million may not be enough to cover all consumer losses. However, Cruise West is a small ship operator, so one might assume that with the much smaller number of guests involved, the fund would be sufficient.

Still, the firm’s cruises were pricier per passenger than the typical ocean cruise. Cruise West also failed to complete a lengthy World Cruise. And, many future bookings for 2011— as long as deposits or full payments were made prior to September 11— could ultimately qualify for coverage.

So, at present, it’s not known whether the $1 million will cover all claims.

Most importantly, the line hasn’t officially said it’s declared bankruptcy, is insolvent or has ceased operations, often a requirement for insurers and credit card companies to pay up.

Certainly, it has failed to perform in the case of Spirit of Oceanus’  World Cruise.

But what if the line – over the next few weeks -- is able to restructure, scale back and state that it’s going to operate some voyages next year? That could change the view by travel insurers and credit card companies about paying some claims. 

One thing is certain, though. Travel agents are increasingly frustrated and angry about Cruise West’s lack of communications with trade partners and the resultant lack of information for customers. “It gives a black eye to everyone when the travel industry, media, agents and vendors can’t give answers,” says Andy Pesky, senior vice president, Protravel International. “We as a travel agency feel very idiotic.”

Insurance firms know the feeling. “We are still trying to figure out exactly what the situation is with Cruise West sailings,” says Mark Cipolletti, vice president of communications USA, Access America. “News reports say that they have cancelled some sailings but still plan to offer others through October.”

“Until we can figure out exactly what their operational status is it will be difficult to know how to adjudicate claims,” he says. While stressing that consumers should contact their travel agent for the latest information about the line, Cipolletti also said, “Access America customers who feel they have a claim should file a claim. We will adjudicate these claims on a case-by-case basis, with the information that is known at the time.”

On Friday, Travel Agent also asked the Niche Cruise Marketing Alliance whether Cruise West had been in touch with that organization. Larry Dessler, NCMA’s executive director, responded: “As of today, NCMA has not been in contact with Cruise West. We are hopeful that Cruise West can complete its reorganization and announce its status as soon as possible."

Pesky noted that Cruise West participated in the Virtuoso conference just a few weeks ago to promote its product and solicit agent support. So now, he wonders what would possess the line— after it’s already laid off staff, stopped answering phones, terminated cruises and so on— to decide to leave travel industry partners and customers in limbo with a lack of communication.

The line took down its regular website last week, instead putting up the one official statement issued a week ago. That statement said the line is working to restructure, but urged agents and clients to file claims. No further statements have been issued since that initial press statement. 
“Claims [typically] aren’t valid until bankruptcy [or insolvency] is declared,” Pesky notes. “So, that’s very unfair.” And while the line said publicly a week ago that it will complete certain voyages through October, there is no indication of whether the line will operate beyond that point in time. Nor is there any indication of progress or the nature of any restructuring efforts.

Michelle Fee, CTC, CEO and co-founder, Cruise Planners, is thankful her group was not really affected by the Cruise West situation. “I guess we were one of the lucky ones,” she says. She says Cruise Planners encourages its agents to always sell third party insurance.

Dwain Wall, senior vice president and general manager, CruiseOne and Cruises Inc., says that when the organization has a concern about a supplier, it works to communicate that in an upfront way to franchise owners and agents. But “with a company like Cruise West – which is not a publicly trade company – it can be challenging to know the intimate details of their business,” acknowledges Wall.

Fortunately, “Cruise West was a relatively small supplier for us and consumers had purchased TravelGuard Travel Companion insurance on each of the Cruise West bookings we did have in place,” says Wall. “I think that speaks volumes about our agents and the dedication they have to protecting the best interests of their customers.”

If Cruise West does manage to restructure, will agents sell their products again? “For the new owners [if that happens], it’s a tough position to bounce back from, as I’m sure the travel industry is going to be leery making bookings in the future,” says Fee. “As agents we feel responsible to protect our customers and their travel investments.”

Even if Cruise West does restructure and continues to operate in the future, “I wouldn’t touch them with 10-foot pole,” Pesky emphasizes. “You predicate a business relationship on the way you act. I feel they’ve turned their back on [us]. They’re essentially saying, ‘we don’t care about the client.’ That’s not good faith.”

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