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Tour operator Sunquest is raising prices on its package vacations in reaction to the falling Canadian dollar, spurring rivals to also consider an increase.

Package tour operators are poised to follow the lead of Sunquest, which plans to raise prices on its package vacations because of the falling value of the Canadian dollar.

"At this point we are not announcing a currency surcharge, however we cannot rule it out as a possibility if our dollar doesn't strengthen," Janine Chapman, vice-president of marketing for Sunwing Travel Group, said in an e-mail Thursday.

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"The relative weakness of the Canadian dollar definitely has a significant impact on the costs of our flight operations and hotel rates," she said.

Sunquest, a unit of TravelBrands Inc. of Mississauga, said on Thursday that it will increase prices after the Jan. 11 weekend, "allowing anyone who is thinking about booking a vacation, a few days in which they can do so at the current, lower price.

"Tour operators generally pay for the cost of hotel accommodations in U.S. dollars. The Canadian dollar's value has deteriorated to such an extent that we must raise our prices."

Canaccord Securities analyst David Tyerman said in an e-mail that other package tour operators – and the airlines – are likely to also raise their prices.

"I would expect other airlines and package tour operators to raise prices, although the timing is always hard to predict," he said.

"I am not surprised to hear that Sunquest is raising prices. Much of the cost structure is based in U.S. dollars (hotels and aircraft fuel especially) so the airlines and package tour operators will have to increase prices, either through package price changes or surcharges, to protect margins in the fact of the weak Canadian dollar."

Air Canada Vacations said in a statement that it may have to raise prices "given recent fluctuations in the Canadian dollar." WestJet spokesman Robert Palmer said the airline is monitoring the situation but that no decision has been made.

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Transat A.T. Inc. spokeswoman Debbi Cabana said no decision has been made regarding the possible implementation of a currency surcharge.

Transat chief executive officer Jean-Marc Eustache said on a conference call in December that his company could in the near future impose a currency surcharge of $25 to $30.

The Canadian dollar slipped to 92.15 cents (U.S.) Thursday and its year-long decline is expected to continue.

Most airlines and tour operators lock in a fixed exchange rate in hedging contracts but those contracts eventually run out.

Sunquest spokeswoman Kerry Sharpe said in an e-mail Thursday that the amount of the price hike will depend on the hotel part of the package.

"If it is a more expensive property, the increase will be higher; if it is a less expensive resort, the increase won't be as noticeable."

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While the price hike will vary, hotel costs could rise by about 2 or 3 per cent, Bryan Klompas, executive vice-president at Sunquest, said in an interview.

He didn't rule out price cuts if the dollar reverses course and starts strengthening again. "It's a very competitive industry," he said. If the loonie does go back to par, "then we'd revisit."

With a file from reporter Tavia Grant

(Editor's note: An earlier online version of this story incorrectly identified Sunquest as a unit of Thomas Cook Canada. It is a unit of TravelBrands Inc. of Mississauga.)

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