Travel Gains Currency on Rising Rupee

A strong rupee has made international holidays cheaper by around 10 per cent. Enjoy it...

Summer holidays have become cheaper. Last year, a 17-day European tour was costing Rs 209,000. This year, the package is going for Rs 190,000, costing by 10 per cent less. Similarly, a 16-day US tour package costing Rs 242,000 is cheaper by 7.4 per cent.

In the past year, the rupee has been strengthening against major currencies such as the US dollar, the euro and the British pound. A year ago, the exchange rate for the dollar was Rs 49.67. At present, it is Rs 44.44, a rise of 10.52 per cent. Similarly, the rupee has appreciated 10.47 per cent against the Chinese renminbi, 10.67 per cent against the Hong Kong dollar, 8.43 per cent against the euro and 7.96 per cent against the pound.

The strengthening of the rupee against the dollar is a key reason. Many currencies, such as the Hong Kong dollar, the Saudi rial and the UAE dirham are pegged to the dollar. When the dollar depreciates, so do these currencies.

No wonder outbound travellers are looking at longer destinations. "Due to the strong rupee, we are seeing an increased interest in long-haul destinations like Europe and the US," said Anand Kandadai, vice-president, outbound tours, Makemytrip.com.

A typical long-haul destination is one in which the air-ticket cost is around 30 per cent of the total expenses. Examples of such destinations are the US, Europe, Australia and Mauritius. Kandadai said though there had been an increase in air fares by around 5 per cent compared to last year, as fuel prices had risen, a traveller could easily save an additional 10-12 per cent due to reduction in hotel and other costs.

The top five destinations: The destinations that have benefited the most from the currency appreciation are the US, Europe, Thailand, Singapore and Malaysia. "If one goes by the number of bookings at the start of the season, there has been an increase of 20 per cent for Europe," said Kandadai.

Most tour operators take a portion of the money in the rupee. The major chunk is pegged to the US dollar, the euro, the pound or the Australian dollar, though the payment is in rupees. Take the example of an African package called African Grandeur. The 15-day tour is for Rs 79,000 and $2,650 (Rs 117,766 at an exchange rate of $1=Rs 44.44). This helps operators deal with currency fluctuations.

While exchange rates are one big factor, a person also needs to consider what the rupee can buy in the destination he is visiting. If the dollar has weakened against the rupee but inflation is high in the US, exchange rate gains will be wiped out.

Other destinations: That's not all. Saurabh Jaiswal, a Nagpur-based businessman who travels frequently to Europe for work, is planning to take his family to Greece during the summer vacation. "During my recent visit, I discovered that hotel rooms are available at huge discounts. In addition, the rise of the rupee against the euro saves me quite a sum," Jaiswal said.

With traditional tourists from the US or Europe cutting down on international travel due to the economic crisis of 2008 and 2009, many destinations such as Singapore and Malaysia have become cheaper this year. A seven-day package to Singapore and Malaysia is 20 per cent less this year as compared to last year.

Travel advice: If a foreign destination is on your mind, travel advisors say you should rush to do the booking. "The exchange rate benefit is available for visitors booking their travel at least a month in advance. Else, air fare and last-minute hotel bookings can nullify the gains," said Veena Patil, managing director, Kesari Tours.

SOURCE: Business Standard
By Tinesh Bhasin
Date - April 16, 2010
Location - Mumbai