Low Cost Holidays - Questions Needing Answers

The collapse of Low Cost Holidays will go beyond the distress caused to holidaymakers, employees and certain businesses here in Majorca. The collapse leaves behind it a series of questions, the first one of which is: where is Paul Evans?

The founder of Low Cost has not been heard of since last Friday's announcement. Locally, there has been comment, none of it complimentary, about how he didn't face up to any of the stakeholders affected by the collapse. Here is someone who has been feted by the travel industry. A holiday guru no less. Perhaps the greatest lesson to be learned is to never trust someone portrayed as a guru or wishing to be portrayed as a guru.

But plenty of trust was placed in him, or at least in his businesses. The trust extended to the fact that in terms of consumer protection here was a business built on sandy foundations - Majorcan sand, Spanish sand. Why did Low Cost make the move to Majorca? One reason would have been the lower cost of protection. When it moved away from the UK, Low Cost would have been into Atol alone for some 2.5 million pounds. There were savings to be made by switching to a jurisdiction that is less rigorous in regulation and in governance requirements, such as accounts.

Moving the operation made a good deal of business sense, though. The ever-increasing costs associated with regulation in the UK was one reason, as probably also was how IVA (VAT) is accounted for and allocated in the sale of packages: there were savings to be made with this as well.

The trust ran so deep that the move, and so the loss of Atol and Abta coverage, had only initial marginal impact on sales. If the consumer senses a deal, he or she will snap it up, protection logos or no protection logos. Moreover, travellers had been promised benefits in terms of financial and consumer protection from the move. The 1.24 million bond that the Balearic government is sitting on is presumably the sum of these benefits.

Biel Barceló, the tourism minister, has attacked the fact that sales were still being made shortly before trading ceased. While some have drawn conclusions that are unsubstantiated, any revenue being brought in may have been to try and buy time by paying off whatever liabilities could be paid off.

There has to be an investigation of Low Cost. The questions are of what and by whom; questions made more complicated by the fact that the administrators are UK-based. There are also questions to be asked of the Balearic government and of national government regarding regulatory controls. The Balearic government's handling of the affair has been embarrassing, made more so by an announcement from the consumer affairs branch suggesting that hotels shouldn't be demanding payments from holidaymakers, which is what has been happening. So, do those tourists who have paid now have to file further claims to get their money back?

And there is more embarrassment for the government. The names at the ministries and at the presidency have changed since 2013, but the sentiments would still be the same as they were when former tourism minister Carlos Delgado and the then president Bauzá were proud to speak of the investment that was to be made in jobs and technology. Barceló, Negueruela, Armengol - none would have said any different. But they may now be minded to be more cautious when welcoming businesses bearing gifts of innovative and employment-rich gold. The combination of technological innovation and tourism is a government dream. It shouldn't be shackled by burdensome regulation but it should come with some understanding by those who are in effect the regulator. Did the government then or does the government now fully understand the nature of the business?

On top of this was the fact that the rapidly changing business model didn't guarantee loyalty to Majorca. In September last year, with redundancies in the offing, Low Cost explained that there was to be greater concentration on its operation in Krakow, a university town with, as was said, graduate students seeking a career in tourism. Unlike Palma, therefore.

There is another question to be asked of the government. As it has emerged that the industry locally had its suspicions about Low Cost's situation, as it is known that some hotel chains had stopped dealing with Low Cost, as pretty much anyone will say that blaming things on Brexit is a smokescreen, was the government aware of any difficulties? It's hard to believe that it wasn't.