USA Today Report Calls Travel Businesses “Ponzi-Style Schemes;” ASTA Responds

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Last week, USA Today published a report claiming it had “exposed a secret underbelly of the travel business,” that being they operate as “Ponzi-style schemes” in order to pay current bookings. In the article, it highlighted three companies in particular: and two educational tour companies, Nawas Travel and EF Tours. These companies were among the three most named in complaints sent to the Federal Trade Commission regarding travel-related scams. Overall, there were 24,000 such complaints on file as it pertained to COVID-19.

The complaints often accused the companies of “exaggerating their own costs, not actively seeking refunds from providers such as airlines and hotels—or even receiving refunds that they did not pass on.” Based off this, the article made the accusation that “Many travel agencies operate Ponzi-style schemes in which one traveler's deposit pays for a previous traveler's tickets and accommodations, and so on.”

In response to the article, the American Society of Travel Advisors (ASTA) said: “To suggest that this is the business practice of all travel agencies is categorically false.”

For a travel agency to join ASTA, it must pledge to abiding by its 12-point code of ethics, “which prohibits business practices like the ones described in this article,” ASTA says, adding, “members found to have violated the code can be (and have been) expelled from the association. That being said, the number of legitimate consumer complaints against ASTA member agencies warranting the imposition of discipline is extremely low.”

Further, ASTA says, “Any traveler who works with an ASTA member and has a problem has the option to file an official complaint with the association – and our consumer affairs team will investigate the matter and work with the consumer and the member to achieve an amicable resolution. If the member company does not cooperate or it is discovered that it has engaged in dishonest or fraudulent conduct, ASTA will remove that member from the association.

“Unsurprisingly, the travel companies referenced in this article are not ASTA members.”

The full response continues: “As with any industry, a few bad apples are not reflective of the whole batch, and the actions taken by the agencies cited in the piece are anything but representative. Indeed, in the wake of the first wave of travel chaos caused by the pandemic, often we found travel advisors going above and beyond for their clients. You can see more here.

“The article goes on to suggest that there is a widespread ‘deposit shell game’ that is ‘part of modern travel.’ Then the authors continue to make sweeping statements that travel agencies hold on to deposits for long periods of time before releasing those funds to the suppliers.

“Again, this is a sweeping claim and by no means is this the standard of business practice for travel agencies. Many states hold agents to a ‘fiduciary’ standard—that is, they must put the clients’ interests ahead of their own and can be sued if they don’t. 

“Travel advisors of all kinds provide refunds in accordance with the travel vendors’ policies and government regulations. To suggest that travel advisors are making money off the backs of their customers who cancel trips is simply false. To the contrary—while new business and any revenue associated with it has essentially come to a halt thanks to COVID, the work hasn’t.

“At the same time, they are dealing with an unprecedented collapse of travel demand, travel advisors are working around the clock to accommodate clients whose plans have been disrupted or who, due to coronavirus concerns, are seeking refunds in connection with future trips. This is the situation most of our members find themselves in—working harder than ever before but essentially without pay.

“A travel advisor who does not pass the payment to their vendors in adequate time isn’t doing their business any favor. But again, this is hardly the way of business for all travel agencies—as this article suggests.”

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