Impact on tour price
On March 1, Circular 34/2023 of the Ministry of Transport supplementing a number of articles of Circular 17/2019 adjusting the increase in airfare ceilings officially took effect. Increasing the airfare ceiling at the right time of the historical crisis is considered a "lifeline" for airlines to offset costs due to the fact that the more flights they fly, the more they struggle to bear losses before. However, tourism businesses are sitting on fire because the increase in airfare prices right before the peak tourist season of April 30 - May 1 and the upcoming summer can have a huge impact on the tourism industry.
Airfares are set to increase from March 1, 2024, causing concern among tourism businesses. In the photo: Passengers boarding a plane at Noi Bai Airport, Hanoi on March 2.
Citing the fact that in 2023, airfares have increased tour prices and reduced the choice of domestic destinations, causing a series of tourist capitals to suddenly become deserted, such as Phu Quoc (Kien Giang), Ha Long (Quang Ninh), etc., Mr. Pham Anh Vu, Communications Director of Viet Tourism Company, recalled that in previous summer tourist seasons (excluding the pandemic), travel businesses would have to proactively book transportation services, hotels, etc. in advance due to concerns about not being able to meet tourist demand.
However, in the summer of 2023, these jobs are unusually easy. Finding services with businesses is worryingly easy. According to the sales department of Viet Travel Company, many tourists are interested, but after comparing with tourist destinations in neighboring countries such as Thailand, Singapore, etc., they decide not to go to Phu Quoc.
During the low season such as September and October 2023, when airfares cool down, airlines open more ticket prices, but most of them are only for evening flights and only a few customers can book, almost impossible for group tourists. As a result, in 2023, the number of customers booking domestic tours at Du Lich Viet was inferior to that of international customers with a ratio of 40/60.
"Airfare is always an input service that greatly determines tour prices. The sharp decrease in domestic tourism demand is largely due to the impact of increased airfares. Travel agencies are currently organizing domestic tourists from at least 3 main destinations such as Ho Chi Minh City, Hanoi, Da Nang to visit Ha Long, Dien Bien, Sa Pa, Can Tho, Con Dao, Phu Quoc... which is convenient thanks to international airports and many airlines and routes. It can be said that aviation is the backbone of domestic tourism products and any fluctuations in airfares will directly affect the tourism industry," said Mr. Pham Anh Vu.
Representative of an airline
Mr. Dennis Nguyen, General Director of Maxbooking Hotel Management Company, is also worried that the increase in airfare ceiling from March 1st may affect the domestic and inbound tourism market. Although Maxbooking is working with its partners to promote promotional activities for travel agencies and OTA channels to stimulate demand during the low season, airfare still accounts for a large budget in the total tour price, so routes where most customers choose to fly will be affected.
Big challenge for destinations
Although Mr. Le Hong Ha, General Director of Vietnam Airlines, expected the airfare in 2024 to be the same as in 2023 and there would be no major changes, in reality, without waiting for the price ceiling to be increased, the continuous fluctuations in the aviation market in recent times have invisibly established an extremely high airfare level.
Typically, as soon as Bamboo Airways announced the early termination of the lease contract for 3 Embraer E190 aircraft - the type of aircraft used to operate flights from Hanoi and Ho Chi Minh City to Con Dao, Hue and from Hanoi to Dong Hoi, many tourists had to regretfully give up their early year travel itineraries.
Looking for a flight from Hanoi to Con Dao after the Lunar New Year, Mr. An Thuyen (Son Tay Town, Hanoi) was startled when Bamboo Airways' direct flight tickets from Hanoi to Con Dao on all days in March had "crisis" high prices. Only a few days had flexible economy tickets priced at 4.2 million VND/way, most days had only business class tickets available, priced at nearly 8 million VND/way. "I chose back and forth, the cheapest round-trip ticket was 12 million VND/person, 4 people spent 50 million VND on airfare, how could I bear it. I also looked at tickets to Phu Quoc from April 30 to May 1. Vietnam Airlines was nearly 9 million VND round-trip. I canceled the deal. If the ticket price doesn't go down from now until then, I'll find another place closer and drive myself to save money," said Mr. An Thuyen.
2024 is forecast to continue to be a challenging year for Phu Quoc tourism, which has invested thousands of billions of VND in new entertainment complexes.
Similarly, Mr. Nguyen Dinh (residing in Thu Duc City, Ho Chi Minh City) also had to struggle to find a flight ticket from Ho Chi Minh City to Hai Phong on February 29 for more than 4 million VND. He planned to return to Ho Chi Minh City the next day (March 1) but there were no more flights available. There was only one flight by Vietnam Airlines at 6:25 a.m. all day, but the regular ticket range was closed, and business class tickets were more than 5.5 million VND/way. It was not until March 5 that there were more flights from Hai Phong to Ho Chi Minh City by Vietjet and Bamboo Airways with all flights priced at less than 3.4 million VND/way.
Mr. Cao Tri Dung, Chairman of the Da Nang Tourism Association, assessed that the massive cuts and reductions by airlines on most niche and individual routes have created a huge challenge for the domestic tourism market this year. Tourism is not an essential need, so if customers do not travel this year, they can wait for ticket prices to drop and then travel next year. Therefore, it is immediately clear that the domestic tourism market by air will be difficult. Airlines are fully aware of the impact, but due to market supply and demand, reduced flights, high prices but still full of passengers, it is impossible to ask them to reduce ticket prices. Therefore, travel companies are also having to proactively change direction, prioritizing nearby markets, traveling by large vehicles, by train or by personal means. At the same time, focusing on the number of Vietnamese tourists traveling abroad. This is a group of customers that this year is likely to remain, and may even increase.
Tourism can change direction, but according to Mr. Cao Tri Dung, the "suffering" ones are the destinations and accommodation systems that have invested heavily in new tourism products in the past, especially Phu Quoc. Destinations that can be accessed by personal vehicles, public transport, tourist cars, and trains are still able to maintain. For example, Tay Ninh has recently seen a sudden increase in tourism. Da Nang is also having many strong policies to attract local visitors and visitors from neighboring markets. However, Phu Quoc is an island, the main means of transportation are by plane and waterway, so it will be extremely difficult. Currently, Phu Quoc airport only has domestic flights from Hanoi, Ho Chi Minh City and Hai Phong. Airlines have temporarily stopped operating flights from Da Nang, Can Tho, Nha Trang (Khanh Hoa). With new entertainment complexes worth thousands of billions of VND, Phu Quoc will have to use international visitors to make up for it, but international visitors this year will not be able to explode immediately.
"Both businesses and destinations have begun to think of ways to turn things around to maintain the source of visitors. However, aviation is still the basic market, so the domestic market target this year of the tourism industry is quite difficult, depending largely on the progress of airlines in bringing aircraft back into operation. Aviation and tourism are two wings of the plane. If one wing is out of alignment, it will immediately falter," said Mr. Cao Tri Dung.
Is the price ceiling mechanism still appropriate?
According to tourism expert Nguyen Van Thanh (former Vice President of Nha Trang Tourism Association, Khanh Hoa), transportation is the most important and decisive factor of the tourism industry in particular and the economy in general. For travel companies, increasing airfares can push up tour prices to
30 - 40%. The current trend is that when people travel domestically, they often do not go on tours but travel independently in small groups of friends and family. Airfares are too high, if customers "cancel the deal", tourism will lose revenue; and if customers switch to traveling by train or using family cars, the journey will take 1 - 2 more days of travel, which means less time to have fun and less spending. "This is not only the price during peak seasons and holidays, but it is a long-term story of the tourism industry. Once a new, higher price level is established, it is very difficult to reduce. If this situation continues, the Vietnamese tourism industry will face the risk of having to watch tourists go to other countries to stimulate demand. The government should have a plan to stabilize airfares such as reducing taxes, fees, and slowing down the price increase rate," Mr. Nguyen Van Thanh proposed.
However, regulating the aviation market at this time is not simple. A representative of an airline said that the current crisis in the aviation industry is partly a result of a long period of doing business in an unreasonable operating mechanism. This year, airlines have cut and reduced many domestic routes because the price ceiling mechanism does not follow the market, flying more means losing more, while the financial health of airlines is no longer as good as before the pandemic. Airlines have raised the price ceiling issue and proposed to remove the price ceiling for many years, but the consideration and resolution has been too slow, forcing each airline to act on its own to cut and reduce routes and flights for the survival of each business.
Passengers check in at Noi Bai airport on March 2.
According to this representative, airlines manage ticket prices according to the average target price, aiming to reach an average ticket price so that they do not lose money, and if they make a profit, it is good. To have more seats for sale at the cheap fares that domestic travelers often use, airlines must have the opportunity to sell a number of seats on flights at high fares, usually to passengers traveling for non-tourist purposes (business travelers, business travelers, visiting relatives, etc.), buying tickets close to the flight date and wanting flexible ticket conditions (can change, refund - cancel tickets). The more seats sold at high prices to such passengers, the more seats on flights will be available for price-sensitive passengers. However, the price ceiling mechanism creates a leveling of the ticket types, between the rich who want more service conditions and flexibility, and those with lower incomes, the poor, who want cheap airfares with strict conditions, having to buy tickets far from the flight date.
"Experts have dissected this issue a lot. The question is when will the price ceiling mechanism established during the subsidy period be abolished? When will Vietnamese airlines be allowed to operate and develop according to market mechanisms? Why does our country continue to maintain a domestic airfare management mechanism that the rest of the world no longer has? Only when these questions are answered can we discuss a truly effective "handshake" between aviation and tourism. Otherwise, it will be very difficult to hope to stabilize airfares and develop sustainable aviation and tourism," the airline representative emphasized.
Domestic air passengers during Tet holiday decrease abnormally
The report on total exploitation data during the peak period of the Lunar New Year of Giap Thin 2024 of Tan Son Nhat International Airport recorded that, for the first time after the Covid-19 pandemic, the number of domestic passengers passing through Tan Son Nhat Airport during the peak season of the Lunar New Year decreased quite sharply, even more sharply than the 2020 Tet season.
Accordingly, the total number of international visitors increased sharply by 33.87% compared to 2023, a sharp increase of nearly 2,600% (about 26 times) compared to the period of 2022. However, the number of domestic visitors decreased by nearly 11.15%. This shows that the number of people from the Southern region flying home for the 2024 Giap Thin Tet holiday is much less than the 2023 Quy Mao Tet holiday. This reality was predicted earlier, when in the context of economic difficulties, workers' income decreased, the price of air tickets for Tet this year increased very high and many routes were scarce.
Targeting people using personal vehicles
The shift to rail and road is also limited in capacity and service capacity. Therefore, the target group that can be mobilized the earliest and fastest is personal vehicles. Family car passengers are a very large force, so any destination that targets that group will be very sustainable. This requires coordination between tourism promotion of localities, service groups and transportation, so that it is harmonious, rhythmic and reasonable.
Mr. Cao Tri Dung, Chairman of Da Nang Tourism Association
Accelerate attracting foreign customers to make up for the gap in domestic customers
According to tourism businesses, the increase in airfares will also affect the international tourist market, but not much, because domestic airlines still prioritize maintaining the main international routes; at the same time, there are foreign airlines to share the load. Therefore, the possibility of achieving the target of welcoming 17 - 18 million international visitors this year is still feasible. To accelerate the reception of international visitors to compensate for the gap in the number of domestic visitors that may decrease sharply, businesses recommend continuing to expand visa policies, visa exemptions for potential visitors with high spending such as Australia, New Zealand, Western European countries, Eastern European countries... At the same time, building a strong national promotion and advertising campaign, so that new products, new "blockbusters" can truly promote their potential to attract international visitors to Vietnam.
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