Inbound-travel firms hit the most

Companies in the in-bound travel business have been affected by the strengthening of the rupee against the dollar. For instance, Kuoni Destination Management - whose business increased by 32 per cent this March against the corresponding month last year "" has lost nearly Rs 1 crore with the appreciation of the rupee.

Industry experts said that the 3.6 per cent appreciation of the rupee last month has had a proportionate loss for the inbound travel firms. Every 1 per cent rise in the rupee erodes 25-50 basis points in the profit margins of exporters.

All the business done by inbound travel operators is done in dollars. "We quote everything in dollars. Unfortunately, the appreciation has occurred in February and March, two of the busiest months for tourists visiting India. So when we convert now, we stand to lose a lot of money," said Himmat Anand, chief operating officer, Kuoni Destination Management.

Another tour agent said inbound travel firms would continue to lose money unless a process of re-pricing packages is undertaken. "But that is a long and cumbersome process. Contracts with hotels and transport services are long term and, therefore, cannot be changed easily," he said.

Tour operators that are in the outbound travel segment, however, stand to gain. "Firms have already been paid in advance in rupees. They will now convert the rupees to dollars for services being rendered overseas such as hotel bookings. These firms will get more dollars for the contracted dollar price for these services," said Ashwini Kakkar of Mercury Travels.

More good news for operators specialising in outbound travel: The summer months of May, June and July are their busiest months.

The hotel industry is saying that the strengthening rupee will not have that much of an impact. "The healthy mix of approximately 60 per cent domestic tourists and 40 per cent foreign travellers will help in neutralising the depreciating dollar," said B Hariharan, vice-president, sales and marketing, ITC Hotels.

As for the future outlook for the appreciating rupee, the travel industry has a mixed reaction.

Anand, for example, is of the opinion that the Reserve Bank of India will have to intervene to artificially cool down the rupee. Kakkar, on the other hand, believes that the rupee will continue to strengthen and that the RBI will not interfere. "Intervention by the RBI will have implications on inflation. It will have to release money in the market to buy dollars," he said.