Conquest bankruptcy leaves deficiency of nearly $20-million

 When Conquest Vacations shut its doors on April 15th, it was big news across Canada and beyond. The media furor focussed on mistreatment by Caribbean and Mexican hoteliers which demanded payments from Conquest travellers, and controversy raged over how the industry handled the failure.

The media spotlight soon shifted, however, and there was nary a peep when the company officially declared bankruptcy 2 days after closing, and engaged trustee and receiver Ira Smith Inc. The bankruptcy filing was forced through a court injunction obtained by Halifax based CanJet, which froze Conquest’s Canadian assets.

In a press release dated May 1st, trustee president Ira Smith offered his understanding of why Conquest failed. “The reasons for Conquest’s bankruptcy appear to have included slim (or negative) margins, the rising cost of processing travel related transactions, challenges associated with the flow of credit card payments and further challenges which arose when an unsecured creditor of the Company obtained a Mareva injunction in Nova Scotia on April 17th, without notice to the Company, freezing the Company’s Canadian assets.”

The First Meeting of Creditors will be held Thursday, May 14th at the Hilton Garden Inn Hotel in Vaughan, north of Toronto. Creditors attending the meeting will receive the Trustee’s Report on the bankruptcy administration and learn the likelihood of any recovery of funds.

That likelihood doesn’t appear very strong. Conquest left behind liabilities totalling over $21.5 million and assets of just over $2 million, leaving a deficiency of $19.5 million. Much of that money is owed to the Caribbean and Mexican hotels, some of whom raised the ire of the industry and Canadian travellers by charging Conquest guests who had already paid for their hotel stay in their package price.

CanJet’s claim is listed as $1.00, but apparently that amount is meant to act as a placeholder and does not reflect what they may receive through litigation. The Dreams group of resorts tops the list of hoteliers, owed a total of $1.3 million. The liability to a group of Barcelo hotels total $1.15 million, and Four Blau hotels in Cuba are into Conquest for over $600,000. Several individual hotels are owed over $500,000 each, including the Grand Riviera Princess All Suites Resort, the Great Parnassus Resort & Spa, Iberostar Paraiso and the Sandos Select Club Resort.

So it would seem the hotels had reason to feel desperate to recover funds. But turning on their best asset, consumers, was a costly mistake. The media backlash for that inexcusable behaviour will surely colour holiday planning in the future. What’s most unfortunate is that the focus of the criticism tended to place the blame on the country rather than the hotel companies themselves.

Hundreds of travel agencies are also among the creditors, owed commissions ranging from a few hundred to over $100,000. Although commission revenue is not protected even in provinces with industry compensation funds – Ontario, Quebec and British Columbia – travel agents did their best to help consumers return and rebook their holidays.It would have made for interesting news had they also decided to force consumers to pay their lost commission revenues.

Several media outlets where Conquest placed advertising were also affected, with the Toronto Star leading the way at nearly $230,000. Canwest and Rogers Media are also on the creditors’ list at over $100,000 each.