To enhance consumer protection and strengthen the regulatory framework, the Government has drawn up a list of proposed amendments to the rules governing travel agencies.

These include heavier penalties for those carrying out unlicensed activities, more investigative powers for the authorities and stricter requirements concerning proof of financial sustainability.

A tiered licensing regime has also been proposed to relax requirements for those offering day tours here. This aims to foster more innovation and vibrancy by lowering the barriers to entry for local travel agents who wish to offer such services. Travel agencies offering fuller services such as transport and accommodation, however, will face stricter scrutiny as malpractices and sudden closures can leave customers bereft of thousands of dollars in unfulfilled packages.

The Consumers Association of Singapore received 607 complaints against travel agents last year, making it the 10th most-complained-about industry. There are now about 1,200 licensed travel agents here, and those that ceased operations hit a high of 127 last year, according to Singapore Tourism Board figures. To give assurance of financial sustainability, 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.

Industry players and observers say that the proposals are welcome to preserve professionalism and Singapore's reputation overseas. But more could be done to protect consumers. Chan Brothers Travel suggested increasing the paid-up capital to at least $1 million, and audits to ascertain the financial health of agencies before licences are renewed.

Tighter regulations, coupled with increasing competition from online intermediaries, will weed out weaker players, but the sudden closure last month of Misa Travel shows that even established agencies can leave customers in the lurch. Thus, making into law the requirement for travel agents to inform customers about insurance that covers insolvency may prove the best measure to help them be aware of the need to safeguard their prepayments.

Correction note: This story has been edited for clarity.