Travel sector: currency strategies in a price-sensitive industry
Whether you are a tour operator, a booking agency or a reseller, you are facing the same issue in a highly dynamic and extremely price-sensitive industry: pressure to compete with your prices while maintaining your margins. Currency management plays a crucial role here.
- Online price-comparison tools, competition checkers and travel meta search engines make every cent count when it comes to winning over customers and convincing them to book with you.
- Dynamic rate setting, common with airlines, has now also gained importance in the hotel sector. Ever more bookings are done online, so is dynamism the way of the future?
- Either way, with increasing globalisation, travel to countries with foreign currencies will continue to increase by the day, with a need to manage the risk and keep up with the volume of payments.
Currency management essentials for travel firms
Whether your business is offline, online or a mix of both, your actions should be focused on three main areas:
Flexibility in the pricing strategy and its impact on hedging
Travel operators working with static prices (i.e. a seasonal catalogue) need a straightforward method to seamlessly hedge their fixed prices. Online players, meanwhile, require a flexible system to hedge their currency operations on a day-to day basis. Most businesses need a flexible structure to combine both.
High volume of small multi-currency payments
The travel industry works with a large network of international providers, normally generating big volumes of payments of small amounts in diverse currencies. An efficient tool to automate and centralise payments can help companies save time and improve efficiency by cutting down on bureaucracy.
Managing complex cash flows
A simple platform to make transactions at the best rates available at any time, will allow full control of all hedged operations and currency exposure to minimise risks, increase margins and, ultimately, boost free cash flows.
“A significant percentage of our payments are in foreign currencies, therefore, we are forced to manage volatility risk if we don't want to lose money. Having the assistance of an expert in that field is crucial to protect our profit margins and remain competitive”