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Czech Republic: Crashing Travel Agencies Make Holidays Risky

Prague, 27 August 1997 (RFE/RL) -- The rapid collapse of Czech travel agencies this summer has stranded thousands of Czech tourists abroad and brought new calls for Prague to regulate the country's free-wheeling travel industry.

So, far there is no end in sight to the chain of travel agency closures which already has claimed nine large and small companies. Those crashes -- all during the last seven weeks -- stranded some 5,000 holiday makers abroad and robbed another 30,000 reservation-holding vacationers of the chance even to leave home.

Last week brought the most spectacular crash yet, that of the Prog Travel Agency which annually took tens of thousands of Czech and Polish tourists to Mediterranean resorts. The company went out of business with no public notice while 1,500 of its customers were abroad in Turkey and Tunisia. The difficulties faced by the holdiay makers in returning home again filled Czech papers for days.

Most of the Prog tourists, who already had paid hundreds of dollars for their package tours, suddenly found the agency's collapse left them sitting in unpaid hotel rooms and holding worthless return ticket vouchers. Few had the money to pay for their vacation a second time but the hotel owners were not always understanding. As one group of stranded tourists fled their hotel on the Turkish coast for the nearest airport, the hotel owner called the police to hold them hostage against their room bills. Only the intervention of the Czech consulate in Istanbul released them.

Prog's hundreds of disappointed holidaymakers finally made it back home after the Czech national airline, CSA, organized charter flights to repatriate them at reduced ticket prices. But their stories have badly frightened Czechs still waiting to go on their own holiday tours. Heightening their fears are predictions by industry professionals that many more travel agencies will follow in Prog's footsteps.

Matej Chab of Ideal Tour, an agency organizing bus tours to dozens of European destinations, told journalists recently that every agency in the Czech Republic now runs the risk of collapse and nobody can predict which will be next.

Analysts say that the reason for the chain-reaction of failures lies in the industry's own phenomenal growth since the collapse of Communism in 1989. The early 90's saw ever more Czechs traveling west for the first time and ever more travel agencies to help them. The number of agencies in the country today is reported at well over one thousand.

But according to Roman Linek, deputy head of the Czech Ministry for Regional Development, the Czechs' initially ravenous appetite for travel has begun to abate as traveling has become commonplace and as the national currency has recently readjusted at a lower rate to harder currncies. Linek says that, with the number of customers shrinking, the agencies are waging fierce price wars which have reduced trips to the lowest thresholds of profitability. As some agencies have lost money they have tried to survive on ever-thinner credit, paying last years bills from this years earnings.

Industry experts say that today the country's travel market is not large enough to support more than a third of the companies. They predict the crashes will continue until the market finds its equilibrium. But they blame the government for the severity of the current crashes, which have left most customers without hope of reimbursement from their bankrupt travel agents.

Oldrich Freidinger of the Association of Travel Agencies of the Czech Republic told RFE/RL that travel agencies in the Czech Republic are largely unregulated.

"To open an agency, you only need to be of legal age and to not have an arrest record," he said.

Unlike in most western countries, would-be travel agents are not required to set aside bonded money in a bank account or take out insurance to guarantee customer refunds in the event of bankruptcy.

Freidinger says such easy entry-requirements have lured many people into opening travel agencies who do not have the business experience to operate them successfully. His association has for years been lobbying the government to tighten the requirements.

The president of Freidinger's association, Michal Seva, told the Czech Republic's most-read daily, "Mlada Fronta Dnes," last week that "for four years, I've been warning that regulation is needed or otherwise there would be total chaos, and now here it is."

Reading those words, tens of thousands of Czech citizens still uneasily waiting to take their vacations this year can only agree.