High air fares are cramping the domestic tourism sector, according to tourism businesses.

"Tourism will be strongly affected by higher transportation costs as transport on average accounts for up to 70 per cent of a tour's price," said Nguyen Van Luat, director of the Phuong Bac Tourism and Advertisement Joint Stock Co.

"We have already been hit by high road transport costs due to rising petrol prices. Now, if air fares increase, we will face huge losses."

According to Luat, tourists coming to Viet Nam often visit several places across the country, instead of confining their stay to one town or city.

"In a tour that lasts 14-21 days, visitors will travel a great deal, and often they will fly from one destination to another," Luat said.

"If the air fare increases, the tour price will be more expensive so that tourist may choose to visit other countries in the region over Viet Nam.

"Higher air fares do not only affect foreign visitors but also domestic tourists, who may opt to travel less."

Ho Lan Vy, a tourism worker, said higher air fares would have a significant impact on tourism, especially as the Tet (Lunar New Year) holidays have been approaching.

"Vietnamese workers have a long holiday during 2012 Tet and if air fares are pushed up, visitors will travel by car or go on shorter tours," Vy said. "Otherwise, they will fly to other countries."

In anticipation of the price rises, many Vietnam travel agencies have started to cut down on their expenses.

Many of these businesses used to provide bonuses to their staff by paying for trips to holiday destinations, but this practice is becoming less common due to rising air fares, said tour operators.

To help Vietnam travel agency overcome the challenge of rising fares, operators suggest the Government carefully consider the implications of increasing the ceiling price for air fares at this moment.

"Price is so important in the tourism sector," said Luat. "It creates competitiveness."

"While air fares must increase eventually, the gap between fare increases must be at least 24 months because we have to advertise and promote tours well in advance."

In May, the ceiling price for air fares was raised by 20 per cent.

Late last month, the Ministry of Transport granted in-principle approval to a proposal for Vietnam Airlines to raise the ceiling price by 1.5 times over current fare levels.

If the new levels are approved, the price for return air fare between Ha Noi - Ho Chi Minh City will be about VND8 million (US$380).