When independent cruise excursion seller ShoreTrips went under owing customers nearly $5 million in refunds for canceled trips, it raised questions anew about oversight -- or the lack thereof -- of the countless private companies advisors trust to take care of their customers.
ShoreTrips founder Barry Karp blamed the failure of his company, which was sold free and clear of any responsibility for those debts, on the pandemic. But it was an issue top of mind for advisors even before Covid-19 with the high-profile failures in 2019 of JG Worldwide and Cox & Kings.
In response to such concerns, a startup aims to build confidence in the travel-selling chain with an independent, third-party system for verifying the financial health of destination management companies (DMCs) and tour operators.
Called Trusted FIT Services, the company is the brainchild of Marnie Brown, a 25-year industry veteran who most recently developed the DMC partners collection for Travel Leaders Group, now Internova.
Brown said she has long seen a need for some kind of system to help agents move beyond what are often simply trust-based relationships with suppliers. But the idea really took hold after the pandemic hit last March, she said, when she began speaking with Rob Keen and Jeremy Clement, who in 2015 left careers in the financial sector to launch the tours and experiences company Project Expedition. The three subsequently co-founded Trusted FIT.
"The more we talked about it, the more we realized this is really what the industry needs," Brown said. "And we kept building it out."
The company finalized its purchase of the failed cruise excursions seller, saying it will revive the pandemic-shuttered operations under the same name and with "support" from its founders, Barry and Julie Karp.
The verification system, Brown said, is modeled after those used widely across the financial services and healthcare sectors to confidentially but independently review company bank statements, cash flow, balance sheets, credit lines, liquid assets and more to then analyze their financial health.
"We use financial ratios, which we can't give to anybody because that could allow someone to game the system," she said. "We analyze that information, and they have to meet a certain score to be able to be verified."
Suppliers pay $500 a year to undergo the review, which Brown said "was developed in consultation with some of the top financial experts and credit analysts in the country."
"While we can't guarantee that a supplier will not go under, we can say that we have put the supplier through a rigorous financial analysis designed to determine if a company might be at risk of financial insolvency," she said.
Some consortia and large agencies monitor and ask for financial information from partners, and a few states require companies to hold customer money in trust or escrow accounts until travel takes place and supplier payments are due.
Trusted FIT Services, Brown said, is designed to help fill that gap as a "consortia-neutral" service with no other ties to the suppliers.
"We are a third party," Brown said. "We are not taking a percent of any sale."
The company has not yet publicly launched. And Brown said early clients have been boutique DMCs in other countries.
Haisley Smith, vice president of marketing and development for Brownell Travel, said she hasn't yet had a chance to fully vet Trusted FIT Services' business model but that it's being talked about in the agent community.
She added, "Not only is there a great need for suppliers to be vetted, these verification companies need to be even more stringently verified before advisors hang their hats on their recommendations."