Cost of escaping cold to rise as Sunquest raises prices to offset falling loonie

MONTREAL - The cost of escaping the frigid Canadian cold will rise next week as Sunquest becomes the first tour operator to explicitly raise its prices to compensate for the falling loonie.

Online advertisements warn customers to book by Jan. 11 to take advantage of lower prices.

Sunquest, a unit of Thomas Cook, said the increases apply mainly to rising hotel costs, but also in part to fuel which is also purchased in U.S. dollars.

Kerry Sharpe, a spokeswoman for Thomas Cook Canada, said there is no set increase.

"The increase will depend on the cost of the hotel itself — the more expensive properties will see a higher increase, for the less expensive ones the increase will be less noticeable," she wrote in an email.

Transat A.T. (TSX:TRZ.B) has mused about adding a currency surcharge but spokeswoman Debbie Cabana said no decision has been made.

Analyst David Tyerman of Canaccord Genuity says raising prices makes sense.

"I would expect all airlines and package tour operators to raise prices to offset higher costs. The pace will be determined by what the competition level allows," he said.

Transat said during its fourth-quarter conference call in December that U.S. costs represent 40 per cent of winter expenses.

The Canadian dollar is down eight per cent from last year, so a three to four per cent increase in prices would be required to offset the increased costs from the weaker loonie, Tyerman said.

"Hedging could complicate the calculation in the short term, possibly leading to a lower increase in the near term, but eventually a three to four per cent increase in prices would be needed."

Air Canada (TSX:AC.B) said it is not considering a currency surcharge on air fares.

"As a global carrier with points of sale throughout the world, as well as originating in Canada, we consider currency fluctuations throughout the world on a daily basis in our pricing of air fares," said spokeswoman Isabelle Arthur.

But Air Canada Vacations, which offers package tours in competition with Sunquest, Transat, Sunwing and WestJet Vacations, warned that hikes are possible.

"Given recent fluctuations in the Canadian dollar, Air Canada Vacations may be placed in a position of increasing vacation package prices," said Wanda O'Connor.

WestJet (TSX:WJA) said it was undecided.

"Historically, our package prices (air plus hotel) have always varied based on costs, including foreign exchange," the company said in an email.

"We are concerned about the continuing slide in the Canadian dollar and are monitoring the situation very closely, but have not made any decisions on a course of action."

Sunwing couldn't be immediately reached for comment.

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