The document discusses the travel industry, including its structure, legislation, distribution channels, and key players. It provides definitions for important terms like travel packages, linked travel arrangements, tour operators, and travel retailers. It also summarizes Hungarian regulations for travel businesses, including requirements for establishing different types of companies, qualifications for employees, financial guarantees, and the registration process.

1. The travel industry
Structure and legislation
Types of travel operations and products/services offered to the
consumers.

2. The travel industry

3. Industry distinctions for the terms are far from clear,
since many travel companies perform any or all of the functions of each
other

4. How does the product reach the consumers ?
• Through distribution
• In general: it is the way how the product reaches the consumers

5. • The basic distribution scheme in
most industries:

6. • The basic distribution scheme
in tourism:
Suppliers
Accommodastion, transportation
service providers …
Tour Operators
Travel retailers
Tourists

7. The distribution in travel & tourism is special
and more complex
• It is fundamentally an exchange of information about the promise of
a service to be delivered in the future
• a flight, an accommodation, …
• an experience to enjoy,
• an expectation to fulfill…etc…

8. The players in the travel distribution
• Suppliers:
• Vendors who own and/or operate the products.
• These vendors’ aim is to sell as widely as possible.
• Their options are:
• to sell directly to the consumers online or in person (traditionally);
• to sell indirectly via intermediaries online in person.

9. • Intermediaries:
• Travel vendors who create the link between the suppliers and the consumers.
• Their main tasks are:
• to bring buyers and sellers in the field together;
• to reduce transaction costs and supply/ownership costs between buyers
and sellers instead of completely eliminating an intermediary (such as a
distributor).

10. • Customers/consumers:
• Leisure travellers:
• group or individual travellers.
• Business travellers:
• Regular/individual busines travellers.
• MICE travellers

11. Types of intermediaries
Tour Operators
Mass
operators
Specialist
operators
Travel retailers
Traditional
travel
agencies
On-line travel
agencies
Traders facilitating
linked travel
arrangements
Special types of
interediaries
Consolidators
GSAs
(General
Sales Agent)
Others…

12. Tour Operators
(their roles in the distribution)
• They purchase services from suppliers in andvance.
• Combine these services and sell or offer packages for sale, either directly or
through another trader.
• Because of volume buying they are able to discuss for discount:
• they pass cost savings to consumers.
• They ensure financial security to supplier.
• They satisfy wide variety of needs.

13. • Tour Operators might be (types of TOs)
• Mass market tour operators:
• arrange travel for the majority of holidaymakers travelling on inclusive tours;
• can sell holidays on lower price because they buy services in big volume (in bulk) from
the suppliers;
• produce holiday packages usually to well-known and highly developed resorts
• their packages are standardised and rigidly packaged;
• their packages are usually holiday packages that are consumed „an masse”;
• use their purchasing power.

14. • Tour Operators might be (types of TOs):
• Specialist tour operators:
• deal with niche products and markets;
• might focus on a particular activity, on travelling to a geographic area or on certain type
of holiday maker;
• prefer regular flights to charter flights;
• try to keep the groups small;
• do not (?) compete with price;
• market their products to individuals with different needs, incomes.

15. TheTravel Retailers
(their roles in the distribution)
• Sell or offer for sale travel services combined by an organiser and sign
contracts on behalf of the organiser
• They act as agent
• They maintain a delicate balance between serving the client and
promoting the interest of the principal he/she represents by
• Providing convenient location
• Acting as counselor
• Being sales representative

16. • Types of travel retailers by sales method:
• Traditional
• Online

17. Travel industry regulation
Direct (normative) regulation

18. • Travel Industry Regulation in the European Union
• DIRECTIVE (EU) 2015/2302 OF THE EUROPEAN PARLIAMENT AND OF THE
COUNCIL of 25 November 2015 on Package Travel and Linked Travel
Arrangements,
• Regulations in the travel industry in Hungary
• 2005 CLXIV Trade Act
• 213/1996. Gov. Decree on Tour Operation and Travel Retailing – amended by
the 473/2017
• 472/2017 Gov. Decree on Travel contract related to travel services, with
special attention on travel packages and linked travel arrangements.

19. Hungarian Trade Act (2005 CLXIV)

20. • Hungarian Trade Act (2005 CLXIV) (defines the type of activities and
businesses)
• Tour operation (in the EU Dir: organiser)
• means the business activities of a trader who combines and sells or offers travel services
(packages, linked travel arrangements – see 472/2017),
• either directly or
• through another trader or
• together with another trader, or
• the trader who transmits the traveller's data to another trader.
• Travel ‘retailing’
• means the business activities of a trader other than the organiser who sells or offers for sale
travel services combined by an organiser and signes contracts on behalf of the organiser
• Trading activities facilitating linked travel arrangement:
• are the activities of a trader who offers and sells travel services due to the 472/2017 Gov.
Decree and these activities result the sales of LTA.

21. 213/1996 Gov. Decree
on Tour Operation and Travel
Retailing

22. Scope of the 213/1996 Decree
• This Decree applies to everybody who
• deals with tour operation,
• travel retailing and
• facilitates linked travel arrangements
• in the territory of Hungary.
• BUT it does not apply to:
• packages and linked travel arrangements covering a period of less than 24 hours
unless overnight accommodation is included;
• packages and linked travel arrangements offered/sold occasionally and on a not-
for-profit basis;
• packages and linked travel arrangements purchased for business travel purposes.

23. Product definitions in the 213/1996. Decree
• The product created/offered/sold determines who is who due to the regulation:
(what is sold or offered to the travellers)
• The type of the product sold/offered determines:
• the role of the travel enterprises in the actual transaction (status in the sales)
• the legal requirements of setting up and running a business in the travel
industry;
• the liabilities of the players in the transactions;
• the legal aspects of the producer ‚s and seller’s and buyer’s relationships

24. • Types of the products in the travel industry

25. MUST KNOW!
BASIC PHENOMENA from the regulation!!!!
• Travel package
• Linked Travel Arrangement (LTA)
• Click through packages

26. Travel package:
• Includes two or more different types of travel services for the same trip/holiday
• can be booked under a single contract with one supplier;
• cqn be booked under separate contracts with different suppliers.
• The following conditions must be met for calling the product travel package:
• The travel services are bought at a single point of sale (shop, call centre or website) where
the customer himself, or the organiser selects the services before agreeing to pay i.e. before
he/she concludes the first contract.
• The services are sold at an inclusive price.
• The services were advertised/sold as a "package" or under a similar term.
• A combination of a travel service can only be classed as package travel if the additional
service accounts for 25% or more of the overall value of the trip, or is an essential feature of
the trip.

27. • What kind of services can never be considered as travel service?
• accommodation for residential purposes;
• financial services (insurance);
• services which are intrinsically part of another travel service (transfers, luggage transport,
meal privided as part of accommodation access to the hotel facilities, overnight on
transportation facilities).

28. • Linked travel arrangements (LTAs):
• are the travel services that are bought from different traders in separate
contracts but are linked.
• Linked means: when one trader facilitates the booking of the subsequent service(s), and they are
purchased for the purpose of the same trip or holiday.
• LTA only apply if the combination of travel services does not constitute a
package and a supplier facilitates the:
• booking on the basis of a single visit or contact with his/her point of sale, e.g. during one visit to a
travel agent,
or
• second booking, which is made in a targeted manner (célzott mód) and the conclusion of a
contract for the second travel service from another supplier is made within 24 hours of the
confirmation of the booking of the first travel service

29. • Click-through packages
• Online booked packages:
• made by a customer at different points of sale - are also classed as 'packages', as long as
the first service provider transmits the customer's name, email address and payment
details to the second provider and the second contract is concluded within 24 hours of
the first contract.

30. Typical examples
• A customer typically buys a flight on an airline website and is then
directed to buy accommodation on a partner or linked website.
• These holidays are regulated either as a package or an LTA.
• It will be a package when the customer’s name, payment details and email address are
shared between the two websites, and the customer books the second service within 24
hours of the first.
• It will be an LTA when the customer purchases the second service within 24 hours in
response to targeted marketing by web link or email without their name, payment
details and email address being transferred.

31. Conditions of establishing a business in the travel
industry determined by the 213/1996. Decree
• The travel establishments are businesses, so the same kind of law,
regulations, decrees apply to them like to other businesses:
• health and hygiene related ones;
• labour and employment related ones;
• financial and tax related ones;
• accountancy related ones.
• But additionally there are industry specific requirements that must be
taken into account.

32. Setting up and running a travel
related establishment

33. • Travel related businesses must be registered due to the Trade Act
• at Budapest Főváros Kormányhivatala (BFKH) – Government Office of Capital
Budapest

34. Good to know!
• Legal types of companies in Hungary:
• Limited Liability Company – Kft
• Shareholders bear limited liability according to the amount invested in the capital of the company
• (Joint Stock) Company – Rt
• Public (Nyrt) - the shares are listed to the public on the Stock Exchange
• Private (Zrt) – the shares are not listed on the Stock Exchange
• Partnership - Bt
• General partnership
• all its members are jointly liable for the obligations of this business form
• Limited partnership
• allows only for some members to be fully liable, while others can have limited liability (according to the amount
contributed to the capital, in cash or in kind).
• Sole proprietorship (sole trader) – egyéni vállalkozó
• a natural person who has legal capacity but no legal personality and has registered his or her business
• the individual has full liability for the actions and obligations of the sole trader
• Branch or a representative office

35. • Pre-conditions of the registration - application (detailed in the Trade Act)
• Human resource requirements
• min. one person with special qualification and practical experience and with at least one
language exam (C1) must be employed for at least 20 hours per week.
• acceptable qualifications are listed in the 213/1996. 5.§
• practical working experience as tour operator or travel retailer (the lengths is determined by
the qualification – but min 3 years)
• conditions related to the senior officers, senior employees and the person responsible
for the services
• they must have clean criminal record;
• they have not been or are not prohibited from the occupation related to travel businesses;
• they were not the owner(s), member(s), senior officer(s) or senior eployee(s) of a travel
business which was prohibited from travel business at the previous five years.
• Financial requirements:
• The business must have an approppriate financial guarantee set in the 213/1996 Decree

36. • Necessary data of the application (detailed in the Trade Act
• The data of the business:
• name, address, Trade Registration Number, phone- and faxnumber (e-mail address in
case of e-commerce)
• The name of one qualified person in charge,
• his/her responsibilities, documents proving the qualification and the experience -
„Person responsible for the services”
• Other personal data:
• Name, address, position of the leader(s) and the expiration date of their position
• List of activities

37. • Attachments of the application:
• 4 statements must be forwarded with the application:
• the availability of financial guarantee/security and the first year’s planned revenue;
• the fact that the enterpreneur/business does not have public dues;
• the planned revenue of the first year of operation;
• the type of the activities;
(The travel company must not be registered if:has debt (> 60 days).

38. • Financial guarantees also must be provided by travel establishments:
• insolvency insurance
• pecuniary security/bond/financial guarantee

39. Insolvency insurance
• Organisers must have it if their packages include transportation;
• the grantee (kedvezményezett) of this insurance is the traveller;
• this insurance will cover the cost of repatriation and the cost of necessary
overstay at the destination.

40. Pecuniary security/bond/financial guarantee
• To refund the dawn payments/ participation fee to the travellers
when the organiser gets bankruptied.
• Can be: Cash kept on a separated bank account, bank guarantee („letter of
guarantee”), contract with an insurance company or a combination of them
• Who must dispose of financial/pecuniary security ?
• Traders creating and operating packages (Tour Operators)
• Outbound
• Domestic
• Traders facilititing LTA

41. • The amount of the financial guarantee/pecuniary security depends on the
activities of the organisers:
• Outbound tour operation :
• 12 % of the annual turnover of package sales, but a minimum of HUF 5 million
or a minimum of HUF 7 Million if the packages include transportation
• 20 % of the annual turnover of those package sales but a minimum of 50 Million HUF
if charter flight is operated or guaranteed contract is signed with supplier(s)
(in case of signed guaranteed contract(s) this amount is needed if the financial obligation of
these contracts exceeds 25 % of the of the annual turnover of package sales)
• Domestic tour operation:
• 3 % of the annual turnover of the domestic package sales, but a minimum of
HUF500.000

42. • Traders facilitating linked travel arrangements:
• 10 % of the of the annual turnover of the sales of LTAs, but a minimum of 5
Million HUF
• In case of combined activities:
• In case of different outbound activities the highest amount should be
provided as pecuniary security.
• In case of outbound and domestic: both activities must be taken into
consideration separately
The organisers must have a list of the dawn and final
payments have been collected from consumers.

43. • Calculation of the financial guarantee/pecuniary security:
• In the 1st year of operation it is based on the planned annual turnover (up
to31 December of the year of reference).
• In the following years it is based of the annual turnover reported on the
balance sheet of the previous year by.
• Regular reports
• Until 31 October (planned of the annual turnover )
• Until 31 May (real of the annual turnover )

44. Example on guaranteed contacts’ pecuniary
security
• Annual turnover of package sales HUF 35.000.000
• Case 1. Guaranteed contracts values:
• Contract 1 HUF 10.000.000
• Contract 2 HUF 2.000.000
• Financial obligations (total value of gar.c.) HUF 12.000.000 (34,2 %)
• Pecuniary security:
• yes as 34,2% > 25%
• how much? 50.000.000
as 12.000.000*0,2= 2,400.000 < 50.000.000

45. • Case 2. Guaranteed contract value:
• Contract value HUF 5.000.000 (14,3 %)