While Vietnamese travel firms had said the devaluation of the Chinese yuan would not greatly affect their business, they could no longer remain calm as the dong was depreciated, too.
Tour agencies are worried that the new exchange rate will drive up the prices of their outbound packages, which are paid in U.S. dollars, after the State Bank of Vietnam (SBV)
devalued the Vietnamese currency by one percent against the U.S. dollar for the third time this year on Wednesday.
The SBV had depreciated the local currency by one percent each against the dollar in January and May.
Vietnam’s central bank also extended the trading band for interbank dollar/dong transactions to three percent following yesterday’s depreciation of the dong, after China devalued the yuan by 3.6 percent in total last week.
Viking Co., a Ho Chi Minh City-based travel firm, suffered VND10 million (US$446) in cost overrun for a contract to bring 20 tourists to Hong Kong for six days thanks to the weaker dong.
“We settled the price for the contract last week but has yet to clear payment, so we have to accept the loss,” company director Tran Xuan Hung told The Saigon Times Online on Wednesday.
“It is really hard to deal with such an unexpected change [in the foreign exchange rate].”
While the dong devaluation will not affect the paid contracts between Vietnamese travel firms and their foreign partners, tourists who wish to spend their holidays overseas will now have to pay more, Hung added.
But travel firms are still watching market developments and the current demand for traveling to determine the tour price adjustments, according to industry insiders.
“If we increase prices to offset the devalued dong, we will become less competitive,” Hung said.
The best possible solution, according to insiders, is to slightly hike prices and accept smaller profits to make sure their tour packages stay competitive.
The other side of the coin, however, is that international tourists will be able to visit Vietnam at lower costs, according to tour organizers.
“This can enable packages to Vietnam to be more competitive than those to other regional countries,” Vo Anh Tai, general director of state-owned travel firm Saigontourist, told The Saigon Times Online.
“However, if the neighboring countries also devalue their currencies, this competitiveness will no longer exist.”
China’s devaluation of the yuan immediately sent the Thai baht, the Singapore dollar, the Malaysian ringgit and the Philippine peso to multiyear lows, the Wall Street Journal reported on August 11.
It is thus uncertain for the weaker dong to benefit the inbound segment of Vietnamese travel firms, while it is obvious that it hurts their outbound market.
Local tour agencies have said the devalued yuan will only slightly affect their business as the extra costs Chinese holidaymakers will have to incur when traveling to Vietnam are inconsiderable.
“Our packages normally cost $200-300, so our [Chinese] customers will have to pay around a few dozen more yuan compared to the old prices,” Tu Quy Thanh, director of Travelink Co., told The Saigon Times Online.
“The fluctuation is not big, and thus will not affect the market much.”
China is Vietnam’s biggest source of tourists. Vietnam received 1.9 million visitors from its northern neighbor in 2014, and nearly 950,800 in the first seven months of this year, according to official statistics.
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