Vietnam travel companies fear about Exchanging rate fluctuations

Published: 16:13 Friday - November 18, 2011

With 14 consecutive exchange rate adjustments within one month, travel firms fear that they may lose travelers because they cannot keep the tour fees stable.

Vietnam travel companies fear about Exchanging rate fluctuations

With 14 consecutive exchange rate adjustments within one month, Vietnam travel companies fear that they may lose travelers because they cannot keep the tour fees stable.

Since the beginning of October, the State Bank of Vietnam has adjusted the dong/dollar exchange rate 14 times, making the Vietnam dong depreciate by 160 dong per dollar. If comparing with September 7, when the Governor of the State Bank of Vietnam stated that it will not devalue the dong by more than one percent by the end of the year, the interbank exchange rate has increased by 0.78 percent.

As for travel firms, the 0.78 percent depreciation is really a worrying figure.

The main characteristic of outbound tours is that travel firms charge Vietnam dong. Therefore, travel firms say they have suffered big losses due to the depreciation of the dong. The firms collect dong from travelers, but they have to pay for expenses in dollars, from airfares to the expenses on accommodation, traveling and insurance.

As such, though the tour fees remain unchanged if calculating in dollars, the actual sums of dong travel firms have to pay for services have increased. As a result, Vietnam travel agencies incur loss from the tours booked in advanced a long time ago. Meanwhile, though travel firms can adjust the tour fees in order to avoid losses caused by the exchange rate fluctuations, they cannot do that because travelers won’t accept higher tour fees.

The exchange rate adjustments have brought losses not only to outbound tours, but to inbound tours as well, because in many cases, foreign travelers also make transactions in dong. In Vietnam, there are very few transactions carried out in dollars in Vietnam, because the Vietnamese laws do not allow posting prices in foreign currencies.

Therefore, travel firms have to anticipate the situation to apply reasonable measures to avoid loss. They set up the tour fees based on the dollar prices which they expect to see at the moments of transactions in the future. This method allows them to avoid regular changes of the tour fees.

However, the method causes inconvenience in transactions. Chris Nguyen, Director of a travel firm said that travel firms have to reconsider the contracts signed a long time ago, because of the changes of the dollar prices. Meanwhile, any adjustments in the tour fees would make travelers unsatisfactory. They just think that travelers deliberately raise the tour fees to make higher profits, while they do not think that it is all because of the exchange rate fluctuations.

Luu Duc Ke, Director of Hanoitourist, also said that only domestic tours do not suffer much from the exchange rate adjustments, but said that they also suffer indirect negative impacts.

Ke said that the continue dollar price increases have prompted service providers to raise service fees. Meanwhile, the consumer price index CPI increases since the beginning of the year has also made the service fees more expensive. Since people have to tighten their belt in the context of high inflation, they tend to cut the budget for traveling. All these factors have led to the sharp fall of the travelers who book domestic tours.

It is now a growing tendency that domestic travelers design tours themselves to save money. This has led to the sharp falls in the revenue of travel firms. They fear that the situation still cannot be improved in 2012, since there have been no positive signs of the recovery of the world’s economy.

Duong Mai Lan from Vietravel said that though no official figure has been found, but it is clear that the losses incurred by the travel firm due to the exchange rate fluctuations is not small. However, the firm still tries to maintain the tour fees at the most reasonable levels.