Airlines, Hotels Threaten Price Hikes Because of Shrinking Dollar

"The hotels begin preparing price lists for 2008 in August, and if the dollar-shekel  exchange rate remains as it is, we will consider increasing prices to make up for the erosion," warns Dan Hotels chief executive Ami Hirschstein.

Prices have eroded by 10-12% compared to the same period last year. Meanwhile, the hotels are battling the falling dollar exchange rate by improving cost efficiency "since all of our costs are in shekels" said Hirschstein.

The situation of Tel Aviv hotels May through June is good, thanks to economic growth and a resulting increase in business tourism, but Hirschstein says there was no improvement in 2007 compared to 2006, and the number of tourists will not exceed the 1.6 million-1.8 million person benchmark at the current rate of incoming tourism.

The possibility of reverting to a shekel-based pricing system has been discussed occasionally over the past few years. Although the solution of "shekelization" makes economic sense, since most of the costs are in shekels, the issue is problematic for agents overseas, who will have to take the risk upon themselves, says Hirschstein.
They may prefer to increase prices, or not sell hotels in Israel.

Airlines are also considering an increase of air fares. Avi Freidman, chairman of the panel of foreign airlines in Israel and manager of Continental Airlines here said yesterday: "Why should we reduce air fares? We should increase the price of tickets because they are issued in dollars, and we now receive fewer shekels."

Like every year, airlines, tourism wholesalers and tour agencies hold sales, but this year they have found a convenient marketing tool - the low dollar exchange rate.

Reserve now

"Other than the dollar exchange rate, which may increase, air fares are expected to increase by tens of percent  as we approach the summer season," says the manager of the Internet tour agency Gulliver.

"Reserving now for summer vacation can save hundreds of shekels." A family of five will save NIS 2,000 on a vacation to Turkey - if they order now."

Issta V.P. Marketing adds that the differences between early reservations and regular flights may total $150-200 per ticket.

Gulliver, for instance, offers a 25% discount for the summer months, for reservations made by May 31. Sources in Gulliver say that because of the high demand there have been difficulties in finding seats and hotel rooms.

V.P. Marketing of Ofir Tours says there is generally more demand than supply during the summer months, and advance reservations are recommended. As for the dollar exchange rate, he adds, many are expecting the rate to increase as summer nears, so the recommendation is to reserve in advance at a lower exchange rate.

The Daka-90 tourism agency reports the company's Web site shows that the rate of searches and telephone calls has increased by 50% in the past week. The company expects this trend will continue until the early part of July.

Sources in Tsabar tour agency say early reservation sales campaigns offer discounts off list prices that can add up to hundreds of shekels per traveler.

But list prices are fluid, particularly up until Tisha B'Av, when demand has not reached its height, and list prices may go down.

After Tisha B'Av, when demand picks up to peak levels, prices are expected to remain stable, said the source, assuming there are no major geopolitical events that affect tourism, as occurred in 2006.

Israir's marketing manager, Amir Hella, expects a 15% increase in the number of travelers to the United States this summer, arguing that the falling dollar will make people willing to take longer vacations. In addition, he said, many reservations are being made earlier, as customers are eager to enjoy the current low exchange rate.

Hella also predicted an increase in incoming tourism. Israir intends to operate four weekly flights from Israel to New York this summer.