The new regulations, which will be subject to a six-week consultation, come after the rise of travel websites led to a significant gap in consumer protections.
Last year 42 per cent of people going abroad booked their holidays on websites such as Booking.com or Expedia. Holidaymakers who book online do not enjoy the same consumer protections as people who book at travel agents.
The consultation document says: “Technical innovation and in particular the growth of the internet and mobile technologies, have opened up new ways of buying and selling holidays. This has provided increased choice and flexibility in the travel market, allowing consumers to mix and match components of a holiday to suit their particular needs.
“However it has also created a gap in protection as these new methods of packaging holidays are outside the scope of the current Regulations.”
The consumer group Which? has called on Government to act so that consumers can have “peace of mind”.
It said: “Holidaymakers should be able to book their trips without worrying about whether they will be protected if their travel agent, airline, or hotel goes bust.”