Travel agents providing outbound travel services departing from Hong Kong and inbound travel services for visitors coming to Hong Kong are regulated under the Travel Agents Ordinance. The aim of the ordinance is to minimise the occurrence of fraud and loss to travellers in the event of defaults by outbound travel agents, and to protect the interests of visitors by enhancing the service standards of inbound travel agents. The present regulatory system is made up of two components: a licensing system and a self-regulatory mechanism by the trade.

The licensing function is carried out by the Registrar of Travel Agents appointed under the ordinance. All travel agents providing outbound or inbound travel services must be licensed under the ordinance. This requirement provides the first line of protection for travellers and visitors against default and malpractice. Travel agents may also face suspension or revocation of their licences if they are found to be operating against the public interest. At year-end, the number of licensed travel agents totalled 1 403.

The self-regulatory function is performed by the Travel Industry Council of Hong Kong (TIC), an approved organisation under the ordinance. The ordinance requires travel agents to become, and remain, members of the TIC in order to obtain and hold a licence. The TIC sets and enforces codes of conduct and issues directives from time to time to regulate business operations. It also handles public complaints about the services of its members. Members who breach the Council's rules are subject to disciplinary action.

A Travel Industry Compensation Fund (TICF) has been set up under the ordinance to provide ex gratia compensation of up to 90 per cent of the loss of tour fares to outbound travellers in the event of a default by an outbound travel agent. The TICF derives its income from contributions from licensed travel agents in the form of a levy on outbound package tours and from investments and bank interest. At year-end, the TICF had a balance of about $396 million. No default on cessation of operation by travel agents was reported in 2004.

The TICF also provides emergency financial assistance in respect of outbound travellers injured or killed in accidents in the course of an activity arranged or organised by a Hong Kong travel agent. In 2004, 10 outbound tour group accidents (involving six fatality and 124 cases of injury) were reported. In respect of those cases, no application for financial assistance under the scheme was received during the year.

As a complement to the licensing of inbound travel agents which took effect on November 1, 2002, a training and certification system to ensure the service quality of serving tourist guides has been developed by the trade. This system requires serving tourist guides to attend specified training courses, pass an examination and obtain a Tourist Guide Pass before they may work as tourist guides. With effect from July 1, 2004, all travel agents are required to assign only those tourist guides possessing a valid Tourist Guide Pass to receive visitors to Hong Kong.