Far&Wide Bankruptcy Rocks Industry

Lisa Jennings and R. Scott Macintosh Far&Wide Travel Corp.’s bankruptcy filing marked the largest failure of a tour operator in recent history and sent economic effects rippling across the tourism industry. Many questions remained unanswered immediately after the Wednesday filing, which left agents,

By: Lisa Jennings and R. Scott Macintosh

Far&Wide Travel Corp.’s bankruptcy filing marked the largest failure of a tour operator in recent history and sent economic effects rippling across the tourism industry.

Many questions remained unanswered immediately after the Wednesday filing, which left agents, competing tour operators, travelers and others in the industry scrambling and some industry watchers predicting more such failures ahead.

Company officials were unavailable for comment, and the bankruptcy filing listing assets and liabilities was not immediately available.

But an official with the California Travel Consumer Restitution Corp. expressed concern that claims from the filing could jeopardize the consumer-protection travel fund. And the U.S. Tour Operators Association said Far&Wide's $1 million bond with the association will not go far in covering the claims.

In a statement, Far&Wide said a “liquidity crunch” forced it to seek protection from creditors by filing for bankruptcy in the Southern District of Florida.

Company officials blamed a drastic downturn in international travel in the wake of Sept. 11, the Iraqi war, the general economic slowdown and the SARS epidemic earlier this year.

Far&Wide said at least eight of its brands could be re-acquired by their previous owners, including Swain Australia Tours, Pacific Bestours, High Country Passage, Adventure Center, Regina, Journeys Unlimited, Lion World and IST Cultural Tours.

Launched in 1999, Far&Wide began acquiring outbound tour operators and destination management companies around the world with the goal of creating an integrated global travel network.

By 2000, Far&Wide had accumulated 20 companies and recorded revenues of $350 million. This year the company projected revenue would have been $175 million, the company said in a statement.

On Wednesday, the executive office of the U.S. Tour Operators Association in New York City fielded dozens of calls from concerned suppliers, agents and tourist offices.

Among the calls, the association helped stranded travelers, including about 20 Far&Wide clients in Ireland who found their hotel refused to honor their booking through the tour company.

The association expected to add extra phone lines and temporary staff to help deal with claims from the filing.

The move by Far&Wide is “indicative of the state of the industry,” said Bob Whitley, president of the association.

But Whitley said he doesn’t believe the Far&Wide filing is a precursor to more such problems in the tour operator industry.

“There are excellent companies that are stable financially,” he said. “The vast majority of the industry won’t be facing that kind of problem.”

Others, however, disagreed, saying the tour industry will likely see more bankruptcies, despite a recent upturn in travel.

“I think it’s a very, very tough time for tour operators,” said Bill Carroll, visiting assistant professor at Cornell University’s School for Hotel Administration.

In addition to the aftereffects of terrorism, war and SARS, tour operators are facing pressure from the growth of packaged tour sales by online intermediaries that are able to better reach a mass market.

Richard Copland, president of the American Society of Travel Agents, called Far&Wide's bankruptcy a “black eye” for the tour operator industry. “I would think confidence in USTOA will come into question,” he said.

The tour operators association said it is encouraging agents to contact their Far&Wide clients immediately and urge them to file a claim over any charges with their credit card company.

Far&Wide noted in its statement Wednesday that business was not expected to be interrupted among the brands that it is seeking court approval to spin off.

Swain Australia Tours, for example, reverted back to the company’s founder, Ian Swain, who said Wednesday that no tours had been canceled and agent commissions would be honored.

Swain declined to release details of the agreement with Far&Wide, but said he was happy to be running his own company again.

“This move is really a return to our independent roots at an ideal time,” said Swain, whose company now also includes Pacific Bestours, Downunder Direct, United Vacations Pacific and Swain's India, Africa and Tahiti tour divisions.

The fate of Far&Wide’s other brands was unclear.

San Francisco travel attorney Alexander Anolik said he knew a bankruptcy was imminent and had been working the past week to secure buyers for some of the subsidiaries.

Anolik said he has three potential buyers, and possibly a fourth, interested in buying four to seven of the subsidiaries.

In California where 18 of the Far&Wide subsidiaries are listed as sellers of travel under state law Antoine Georges, president of the state’s travel fund, said he is concerned.

California law requires the state to keep a trust fund to compensate consumers in the state who have lost money to sellers of travel. There is $2.6 million in fund.

The state does not limit the number of claims that can be made on a company and individual claims can be made for up to $15,000.

“The TCRC could theoretically be wiped off the map with claims,” Georges said. “But it’s too early to tell.”

Meanwhile, competitors and agents scrambled to deal with Far&Wide travelers.

Tauck World Discovery and Brendan Worldwide Vacations in Chatsworth, Calif., were among those that said they would honor deposits made to Far&Wide by travelers who decide to change their travel plans.

Agent Connie Ebright in Glendale, Calif., who specializes in Africa, said she had several clients including a honeymooning couple who had paid in cash booked on tours with Far&Wide brand African Travel, which was expected to revert to former owner David Herbert.

Ebright said Herbert had assured her that her tours would go on as planned and the company was still taking new bookings after the filing.

Candice Sunagawa, a leisure manager for Meridian World Travel in Redwood City, said the bankruptcy filing came as a surprise.

After Wednesday's announcement, she was trying to track down clients who had left on a 17-day European tour.

“We're not sure how the details are being handled at this point," she said. "You don't see this a lot these days. Most of it is consolidation or mergers or ac-quisitions. I think it's fair to say that I am very surprised."