Recently much has been written about the Black Swan Theory – the rare case that the one percent – or one-hundredth of one percent – event could occur. When we review the past two years, however – the financial market meltdown, a volcano’s ability to disrupt air travel in Europe, or the oil spill in the Gulf of Mexico – we see that decision makers routinely ignore the chance that a truly terrible event could occur because the chance of its occurrence is so small.
We’ve been in service to universities for more than 30 years. In that time we’ve been asked tough questions by our clients: questions that contemplate catastrophic events specific to international travel. Just as your best students inspire you to be a better teacher or administrator – our clients have asked us the tough questions and in the process inspired us to become a better company. We’ve answered a few of these questions here for your review.
Net Worth Minimums
We’re routinely asked to certify, following GAAP standards, a minimum net worth of at least 5-10 times the value of the travel program. Travel is one of the few purchase decisions a university makes in advance of receiving the actual product. This year we had a case of a program departing to Chile on the day of the Concepción earthquake. By Friday the school and students received 100% supplier refunds. An undercapitalized company would not have had the ability to make this type of refund so immediately, particularly if they were based in Chile and in need of funds to shore up their own operations. Now, more than ever, we understand why our clients seek this representation in selecting their vendor.
This summer, thousands of travelers were left stranded in destinations across the globe when three British travel companies collapsed in one month. Frequent bankruptcies throughout the travel industry are why many of our client schools require we maintain significant levels of consumer protection. Our membership in the USTOA Travelers Assistance Program means that our travelers are protected through $1 million reserved to reimburse our customers in the unlikely case of WorldStrides’ bankruptcy or insolvency. Moreover, our recent accreditation by AdvancEd provides additional peace of mind to our clients following the accrediting organization’s thorough review of all aspects of our educational offerings, financial strategies and business plans.
Registration with all Sellers of Travel Laws
Given today’s highly mobile university population we’re asked to certify our registration with all state sellers of travel laws. This ensures that a university can offer its programs to all students, no matter their state of residence, while remaining in compliance with the law.
Compliance with Industry Regulations
The outcome of a tragic Black Swan event has prompted nearly all of our universities to ask for representation of compliance with industry regulations. Just last year a Utah case was settled following a fatal accident where a university hired a travel company that did not employ registered and licensed drivers. The university was sued for negligence by the families and a significant award was paid. While the tragic accident may have been unavoidable, the outcome for the university could have been very different had they made determining compliance with industry regulations an aspect of selecting their travel provider.
Insurance Matching the Value of the Degree
Increasingly universities ask us to help determine the minimum liability insurance required for their travelers. For graduate degree programs such as an MBA or JD advertising an earnings lift as a part of the value proposition to prospective students we know it is imperative to calculate the present value of the future earnings of a coach full of their students when setting a minimum insurance level. Through consultation with our client schools, we’ve determined the adequate amount for our programs serving professional degree students to be $26 million. Given a recent court ruling citing that university general liability policies don’t necessarily translate to a hired travel vendor universities are revising their antiquated $1-3million liability policy minimum for travel vendors.
Ability to Manage the Unexpected
Black Swan events are, by definition, ones we rarely contemplate. Last September when our university clients returned to campus to prepare their global education opportunities, we know that our track record managing the unexpected enabled them to focus on the learning outcomes while we remained vigilant in our preparation for the unexpected.
This year an undergraduate program was scheduled to travel to Bangkok in May. As the riots intensified our operations team worked diligently with the program leader, airlines, suppliers and visa specialists to devise a plan to minimize the financial exposure and general risk to the university while enabling the program to continue to another destination within Asia.
In early May, an EMBA program traveling to Dublin, London & Paris for their residency was diverted due to the ash clouds. Within hours, a suitable hotel was located and alternative cultural and business study events arranged to allow the program to continue with little disruption. Our operations team took a solution oriented attitude in guaranteeing the success of the program.
British Airway Strike
In March, an MBA program scheduled to travel to Zambia was caught in the British Airways strike. Taking a 360 degree view our team analyzed several alternative flight options and the associated visa implications for the non-US citizens. The approach implemented considered every aspect of the travel decision, beyond simply the airline booking, resulted in the program being able to successfully continue, in spite of the strike.
Our goal is that every program is executed according to plan. Our position in the industry enables us to put the buying power of many universities to work for each individual school so that when the unexpected happens we’re ready to make changes in the best long-term interest of our client schools.