Stronger dollar hits outbound tourism operators

Travel companies offering tours are concerned that the rising dollar will eat into their profits this year or even cause losses.

Vietfoot Travel has been selling some of its outbound tour packages at breakeven prices in recent weeks as the greenback has been rising relentlessly against the dong.

"The laws require us to list our prices in VND, but we have to pay for accommodation and services in dollars, which means we have to bear the exchange rate difference," CEO Pham Duy Nghia told VnExpress International.

"If the USD continues to gain, we might have to increase our prices."

Nguyen Cong Hoan, CEO of Flamingo Redtours, said tour prices from Vietnam to the U.S. have risen by 3-5% in recent months.

"If the USD gains more than 3% from the time we sign a contract with customers, we will have to renegotiate the price, otherwise we will lose money on that tour."

The dollar-dong exchange rate at Vietcombank surged to a new peak of VND24,040 Tuesday after the greenback appreciated by 4.9% this year.

The dollar has been hovering around a two-decade high as the U.S. Federal Reserve keeps hiking interest rates to control inflation and geopolitical tensions like the Russia-Ukraine crisis show no signs of ending.

The strong dollar is however an advantage for American tourists such as Bobby Webber from California State.

"I love it. I get more value for my dollar. Whenever I go out to eat it just costs me less," the 66-year-old, who is staying in District 1, Ho Chi Minh City, said.

Though he does not intend to shop more, he plans to come back to Vietnam if the USD continues to strengthen.

Nghia said foreign customers used to pay $120 for a five-star boat trip, but now only need to pay $100.

The strengthening dollar benefits inbound customers but not his company, he said.

But tourism insiders are not expecting a surge in inbound tourism anytime soon as inflation roils the world economy.

"We have not seen a jump in tourism demand from Europe and the U.S. as people there are tightening spending and cutting down on leisure activities," Hoan said.

The number of foreign tourists coming to Vietnam remains modest compared to pre-pandemic levels and is far short of this year’s target, head of the Vietnam National Administration of Tourism, Nguyen Trung Khanh, said.

Only 1.87 million foreign tourists arrived in the first nine months, down 85% from 2019.

Inflation is also affecting outbound travel with Vietnamese preferring domestic to international tours, he added.

For those who do plan to travel abroad, the 4.9% gain in the USD is not a big challenge as Nghia said: "My customers do not worry too much about the rate. If they want to go, they will go."

The geopolitical tension is a bigger concern for the tourism industry, and until the Russia-Ukraine tension ends, Russian tourists would not be coming to Vietnam, a big loss, he added.