New rules mooted for travel agencies

Last month, Misa Travel shut down abruptly, leaving customers with about $28,000 worth of unfulfilled packages. The proposed laws include stricter requirements concerning proof of financial sustainability.
Last month, Misa Travel shut down abruptly, leaving customers with about $28,000 worth of unfulfilled packages. The proposed laws include stricter requirements concerning proof of financial sustainability.ST PHOTO: FELINE LIM

Move to protect public by raising penalties and beefing up the investigative powers of authorities

To protect consumers from errant travel agencies, including those which close down abruptly, the Government is proposing a number of changes to regulations governing travel agents.

These include heavier penalties for those carrying out unlicensed activities, more investigative powers for authorities and stricter requirements concerning proof of financial sustainability. For example, a banker's guarantee will no longer be accepted when applying for a licence.

Senior Minister of State for Trade and Industry Sim Ann said in a statement yesterday: "The majority of our travel agents are professional and conduct their businesses responsibly. But as the travel industry transforms and consumer expectations evolve, we need to update the regulatory framework to safeguard the interests of consumers and also ensure that the business environment allows travel agents to innovate and grow."

There are a total of 1,200 licensed travel agents in Singapore. The Consumers Association of Singapore (Case) said it received 607 complaints against travel agents last year, making it the 10th most complained about industry.

Just last month, an established agency, Misa Travel, shut down abruptly. Customers were left with about $28,000 worth of unfulfilled packages.

Under the recommendations, new and existing licencees will no longer have the option to provide a banker’s guarantee in lieu of the $100,000 net worth requirement.

 
 
  • Proposals

    Some key proposed changes to create a pro-business environment include:

    •A new tiered licensing regime. Businesses that sell tours without "passenger-carrying conveyance", such as walking or bicycle tours, do not need a travel agent licence. Those offering tours with transport but without accommodation can apply for a licence with a lower paid-up capital requirement of $50,000, compared with $100,000 for a full licence.

    •Travel agencies would not have to purchase fidelity insurance as this does not provide direct recourse to consumers but is more for the agency's own protection.

    •Travel agencies will be allowed to provide pro-rated refunds in cases where some travel products have already been consumed.

    Plans to protect consumers and give regulators more power include:

    •A "show cause" period of 14 days, instead of 21 days. Travel agents issued with a notice of suspension or revocation have a shorter time to explain why they should be allowed to retain their licence.

    •The additional licensing condition (ALC), implemented in 2015, will become law. The ALC requires travel agencies to inform customers to consider buying insurance that covers travel agency insolvency and record their decisions.

    •The Singapore Tourism Board will gain more ainvestigative powers, such as to collect evidence from third parties, take photographs, and gather audio and video recording of those suspected of errant behaviour.

    •The maximum fine for unlicensed travel agent activities will be increased from $10,000 to $25,000.

    •Travel agents will no longer have the option to provide a banker's guarantee in place of meeting the $100,000 net worth requirement to obtain a licence.

    Revathi Valluvar and Lim Min Zhang

The Ministry of Trade and Industry (MTI), explained that a banker's guarantee does not provide assurance that the travel agent is financially sustainable, and does not provide any direct recourse in the event the agency goes bust.

MTI and Singapore Tourism Board (STB) are also proposing heavier penalties for those found guilty of carrying out unlicensed travel agent activities. They want the maximum fine per contravention to go up from $10,000 to $25,000.

Under the proposal, STB will also get more investigative powers, such as the authority to take photographs, audio and video recordings that may serve as evidence of wrongdoing.

To reduce the period that consumers are exposed to risk when dealing with potentially errant agents, the ministry is also planning to reduce the time that agencies are given to produce a defence if accused of wrongdoing from 21 days to 14 days.

It added that it may soon also become mandatory by law for travel agents to inform travellers about travel insurance options and keep a record of this.

Mr Ang Eu Khoon, 50, managing director of San's Tours and Car Rental, said: "It's good to have the industry standards spelt out explicitly so that there will be fewer unlicensed tour guides that damage the industry's reputation. This is especially important when other countries in the region have also started cleaning up their act."

Mr Michael Chiam, 56, senior lecturer on tourism at Ngee Ann Polytechnic, said: "It is a step in the right direction. The spirit of the changes to this Act is to uphold the norms in the industry, some of which are already being practised by the established players."

He said that touting and accepting payments via bank accounts, which are some of the other proposed legislation under the new Act, are both rare occurrences in the industry.

Executive director of Case Loy York Jiun, said that while it supports the move to strengthen consumer protection measures, more could be done.

"We would like to reiterate our call for travel agents to look into insuring their tour packages so that all consumers are covered."

The proposed amendments are a result of 17 discussion sessions with more than 180 participants from the travel industry, including the National Association of Travel Agents Singapore (Natas), and Case. The public consultation period, which started yesterday, will end on July 12. More information may be viewed at http://reach.gov.sg, and feedback sent to mti_feedback@mti.gov.sg.

 


More competition - and innovation - expected

Proposed regulatory changes to the travel industry may foster a more pro-business environment, but not all welcome them.

The Ministry of Trade and Industry is proposing a new restricted travel agent licence with a lower requirement of $50,000 in paid-up capital, for agents which sell local tours that include transport, but come without accommodation.

However, firms offering tours within Singapore without "passenger-carrying conveyance", such as those offering walking or cycling tours, will no longer need a travel agent licence.

Said Mr Ng Boon Kheng, who owns Singapore City Explorers, a small agency which runs walking and cycling tours: "If anyone can just set up a website and run a walking or cycling tour without a licence, then where's the accountability? It's just going to be easier for people to scam tourists."

He said he started off selling tour packages without a travel agent licence and was told by the Singapore Tourism Board (STB) that what he was doing so was akin to being a travel agent, for which he needed a licence.

He then applied for a tour agent licence 11/2 years ago, which required him to have proof that he had $100,000 in the bank.

"After all the effort that I have gone through, now it seems like it was all for nothing."

STB's travel agent licence webpage says a registered business must have a minimum paid-up capital of $100,000 and a net worth of the same amount but the fee to be paid to STB for the licence is $300.

But not all share such a pessimistic view.

Mr Clifford Neo, outbound chairman of the National Association of Travel Agents Singapore, said: "The proposed legislation will promote young entrepreneurs to come into the trade, which will bring in new travel ideas with the lower barriers of entry."

Senior lecturer in tourism at Ngee Ann Polytechnic Michael Chiam, 56, said the changes are not just a boon for tourists, but also for retirees and students here who might want to offer their own tours part time.

A representative at Dynasty Travel said that while the proposed changes may increase direct competition, it may also bring about opportunities and new innovations."We are willing to work with the new start-ups that may come about because of these amendments so that together we can provide more innovative services."

Correction note: This story has been edited for clarity.

A version of this article appeared in the print edition of The Straits Times on June 22, 2017, with the headline 'New rules mooted for travel agencies'. Print Edition | Subscribe