Zero-dollar battle continues

A law  to enforce minimum pricing on tour packages will be introduced this April.

According to the legislation, due to be come into effect 6 April, tour companies registered in Thailand must comply with a tour pricing rule that states the price to the customer should not fall below a pre-determined cost level.

The Ministry of Tourism and Sports’ Tourism Business and Guides Committee approved, 2 March, the addition of an article to the Tourism Business and Guides Act BE 2551.

All told there are 19 special articles that must be introduced by 5 April (two years after the Act was gazetted in 2007). One of the articles outlines the rules for minimum tour prices that inbound tour companies are duty bound to follow.

The rule states that a tour package price should not be lower than aggregate expenses incurred on services such as accommodation transportation; meals; guide wages; accident insurance; site entrance fees; and other necessary expenses.

According to Tourist Business and Guides Registration Centre director, Thanathorn Tonghorm, the rule will curtail tour companies from selling what are called “zero-dollar tour” that are considerably lower than tour expenses and rely on shopping commissions to provide a profit margin.

In some instances the tours are free. Guides would even bid for a tour group placing cash up-front with the overseas operator to handle a group’s visit. The entire tour costs and profit was then covered by referral commissions paid by shops. Shops paid per head (usually Bt200 to Bt300 per person entering the shop) and also a commission on generated sales of around 35 to 45%.

Some tour companies tap these commissions by working alongside  free-lance guides. Instead of cash, the company directors  go for free tour buses for sightseeing trips or even negotiate  a company car based on a guaranteed annual volume in visits.

In general, tourist related shops inflate prices by 35% to cover these commissions.

Once the rule takes effect the Ministry will have to make random checks on tour companies in Thailand to ensure compliance. If found guilty of selling below cost, a company could be fined Bt2,000, lose their registration certificate, or face a two-year prison sentence at the discretion of the court.

Meanwhile, one of the committee members representing the private sector and Federation of Thai Travel Agents spokesperson, Charoen Wangananont, said the committee would have to conduct follow up surveys on the rule to see if it was working correctly.