Higher domestic airfares a setback for travel agents

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Travel agencies already struggling in difficult economic conditions will be hit hard by the latest hike in domestic airfares, industry insiders say.

The agencies face both losses on tours already booked and cancellations of bookings because of higher tour prices. In fact, the airfare hike makes foreign tours more attractive to local customers, they say.

Early this month Vietnam Airlines said it would increase fares on domestic flights by up to 20 percent from December 15 onwards.

One-way flights from Hanoi to Ho Chi Minh City may cost as much as VND2.69 million (US$128), excluding taxes and surcharges, compared to the current cap of VND2.22 million.

The price for flights from Hanoi to Phu Quoc Island, the longest domestic route, will be capped at VND3.2 million, up from the current price ceiling of VND2.7 million.

This is the second time Vietnam Airlines has increased its air ticket prices this year. In April, it had raised prices by 23 percent.

Vu Quyet Thang, director of Hoang Viet Travel, said that the decision was too sudden and the hike not insignificant, causing trouble for travel agents who have been advertising their tours for three to five months.

"I don't know what to do about these airfare hikes," he said, worrying that many customers, who have had tours booked for months, will not be willing to pay more.

Thang said some customers have cancelled their trips. Many other services such as restaurants, hotels and road transportation have also seen price hikes, pushing up tour costs, he said.

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An executive at another company in Hanoi said certain domestic tour packages, had increased their prices by 10 percent over last year, even before the airfare hike.

Nguyen Minh Man of Vietravel said the firm will not increase prices of tours starting before the Lunar New Year festival, which falls late January, as air tickets for them were booked around five months ago.

However, it will have to adjust the prices of trips organized afterward. "Now, we are considering a price hike, but it would not be as high as that of air tickets," he said.

Thang of Hoang Viet Travel said travel agents must accept smaller profit margins in order to attract customers, given the context of economic recession.

Under current prices, tours from Hanoi to Ho Chi Minh City and central cities like Da Nang and Nha Trang will cost even more than those to nearby countries like Thailand, Singapore and Malaysia.

Nguyen Hoang Lan, a secondary school teacher from Hanoi, said she booked a trip for her family to Singapore this Lunar New Year instead of her initial plan to visit Nha Trang. A four-day trip to Singapore costs $600 a person, the same price as a tour to the central region.

Prices for domestic tours are expected to rise sharply, as airfares account for 50 percent of the input costs, said Nguyen Cong Hoan, vice director of travel agent Hanoi Red Tours.

He said the increases will result in fewer tourists and affect a series of tourism-related industries such as transportation, restaurants and hotels.

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