MADRID–Spain’s government has weighed in on the side of Spanish hoteliers who are engaged in a squabble with Thomas Cook Group PLC after the British tour operator announced it was unilaterally, and retroactively, discounting 5% of fees it pays to Spanish hotels.
“This is an unjust measure against the sector,” Spanish Tourism Secretary General Joan Mesquida said about the decision by Thomas Cook, which this year has contracted to bring more than 1.4 million Britons to Spain, its biggest destination.
The U.K. and Ireland are the company’s biggest markets, according to another media outlet.
The issue began earlier this month when the tour operator announced it was cutting its fees, and the reductions covered the busy months of August and September when Spanish hoteliers make between 60 and 70% of their yearly income.
The company explained that the cuts were necessary to cover its losses from the Icelandic volcano eruption this past spring when many of its clients cancelled their vacations and Thomas Cook charter planes were flying almost empty.
The volcano and disruption of European air travel cost Thomas Cook €94.8 million (US$129 million), according to an interim management statement from the company.
The Spanish Confederation of Hotels and Tourist Accommodations, which represents 14,000 establishments, cried foul, saying it was “indignant” that Thomas Cook was breaking its contracts by unilaterally imposing the fee cut.
“CEHAT condemns the infringement of the rules of international competition and understands that this is a clear abuse of the tour operator’s dominant position” in the European vacation market, a CEHAT statement said.
At a meeting called by the Spanish hoteliers to try and convince Thomas Cook executives to rescind the fee reductions, the tour operators were reminded that Spanish hotels had shown flexibility during the crisis caused by the volcano.
Also, they said the move harmed the good relationship between clients and providers and set a serious precedent which could be used in the future against Spanish hotels. But Thomas Cook refused to be swayed and the talks failed to find common ground.
“CEHAT hopes that Thomas Cook will reconsider the decision and reestablish as soon as possible the magnificent relations which existed until now between the tour operator and the Spanish hotel sector,” the association said.
In his comments on the row, Mesquida said that the government would continue its attempts to persuade Thomas Cook and CEHAT to reach an agreement on the fee cuts.
UPDATE: At a press conference Thursday, CEHAT president Joan Molas said he had personally met with senior Thomas Cook executives to ask them to rescind the discount and that negotiations on the issue were continuing. But he warned that the hoteliers' patience was wearing thin.
"We are waiting for their answer, but if Thomas Cook goes does not back down we will recommend that that our members seek legal action," he said. Other sources at CEHAT have spoken of taking the dispute to the European Union.
Requests for comment from Thomas Cook were unanswered.
The fee cuts come as the Spanish hotel industry is still digging its way out of several years of dismal earnings caused by the economic crisis and the strength of the euro against the British pound.
Room rate reductions and a weakening of the pound helped boost occupancy during the summer and foreign tourist numbers rose by 4% in July and August compared to the same period in 2009, according to government statistics.
It was the biggest jump in foreign arrivals for those two months since 2005. Overnight hotel stays in July and August were up by 8% over a year ago, the National Statistics Institute reported.