NEW YORK -- Youd
better make sure that slow boat to China youre booking isnt too
not-too-distant future, tour costs are expected to jump as a result
of the Chinese government ending the yuans peg to the U.S. dollar,
enabling it to fluctuate against other currencies.
In the short
term, tour operators are predicting that the move will not have a
significant impact on their business. But looking farther down the
road, prices for Americans traveling in China are almost certain to
expect to be insulated from the change through at least 2006,
thanks to contracts currently in effect.
One of the
advantages of having our own offices in China is that all of our
transactions are in U.S. dollars, so the revaluation has had no
impact on us, said Pamela Lassers, a spokeswoman for Abercrombie
& Kent. Our forward contracts are in U.S. dollars, so there
would be no impact until prices for 2007 are negotiated.
In many cases,
tour operators said they can offer a price advantage over what
consumers or wholesalers can get by dealing directly with Chinese
In terms of 2006, the yuan
has only appreciated by about 2% so far, Globus CEO Phillip Gordon
said. But there is some speculation from U.S.-based economists that
it should appreciate more. Thats where its important for passengers
to look at the advantage of an escorted product. Prices are fixed
and firm for 2006, and since the price is all-inclusive, it applies
to transportation, a tour director and services.
Sanghrajka, vice president of sales and marketing for Big Five
Tours, called the price impact nominal so far, but he expects that
to change. They [the Chinese government] moved it 2% just to make
everyone happy. But it wont be long before [the U.S.] government is
pushing them again. China is sitting on the worlds biggest trade
surplus. In the next six months, there will be more
To a large
extent, the effect of changes in the value of the yuan may depend
on the size of the operator. The greatest impact is likely to be
felt by lower-price operators that maintain small margins to keep
If you are
marketing China as a budget destination, if you are a price leader,
this could work to your detriment, said Sanghrajka.
Tours, which positions itself as the markets price and value
leader, said the move would affect its prices for 2006.
Well have to ask
ourselves, Whats going to happen next year? Will we have another
fluctuation? said Evan Chan, Ritzs director.
economy is so strong, Chan said, the value of the dollar will
probably come down again, from 8.1 yuan per dollar, where it is
now, to 7.9. Many observers expect it to get down to the value of
the Hong Kong dollar, which is pegged at 7.78 per U.S. dollar
But all in all,
Chan said he did not see currency fluctuations as a serious threat
to his operation.
Ritz Tours is
having the best year in its history, he said, and a price rise of a
few percentage points would probably not upset the
Say you raise
prices 10% across the board; thats $250 to $300, he said. Will the
public think thats a lot? We dont know exactly.
predicted that high demand for Chinese destinations would probably
have a more pronounced effect on the market than currency
fluctuation. What affects the price most is Chinas booming market,
he said. Everyone wants to get in there. Its not that the currency
fluctuation is inconsequential, but most of the change will be from
the land operators, hotels and airlines raising prices.
President Bob Drumm agreed that the greatest price pressures would
come not from currency fluctuations but from rising demand,
especially leading up to the Beijing Summer Olympics in 2008 and
from the rising cost of fuel.
reporter David Cogswell, send e-mail to [email protected].