A survey of UK-based travel companies has revealed that more than half (51%) believe adverse currency fluctuations are affecting their business in one way or another.
More than half (54%) of the firms polled by Equiniti International Payments stated that currency fluctuations as the most frequent problem by far when processing global supplier payments, with a fifth (20%) citing the heavy administration involved in the processing of bulk payments as their second biggest pain point.
Andy Brown, Managing Director of Equiniti International Payments, commented: “As global market volatility continues to differ from region to region, currency fluctuations will remain a major hurdle throughout the travel sector.
“Travel businesses have typically turned to forward contracts to ease potential risks associated with currency fluctuations as these arrangements have protected them by locking in a specific rate agreed by both parties. However, this solution can be inaccurate, complicated and sometimes costly process as they are based on the currency traders experience and knowledge of the predicted state of the two currencies.
“With this in mind - and even though currency traders are right more often than not - the risks of an unexpected event could result in the spot price being more beneficial at the actual time of the deal as opposed to the forward rate booked sometime earlier.”
The period of time between when a customer purchases a holiday and the date they travel can represent a substantial risk for travel companies. Even a small exchange rate shift can have a big effect on margins and these risks are realised throughout the sector, with nearly half (49%) of travel companies surveyed viewing this as a concern when displaying prices in local currencies.
Andy Brown continues: “In order to not lose potential customers, travel businesses must make it as easy and efficient as possible for people to pay in their local currency, without creating undue exposure to currency fluctuations and risk potential cost implications.
“Recent innovations in the payments sector now allow travel companies to guarantee rates in multiple currencies, with travel companies able to easily, and automatically, source the value of international purchases in relation to its supplier. These technologies remove the need for forward contracts and provides organisations with a tool that can limit the risks on every sale in real-time, leading to greater speed and security.”
Equiniti International Payments offers a Multi-Currency Pricing with Guaranteed Rates (MCP+) solution, which allows travel businesses to sell to their customers in local currency and negates foreign currency risk. MCP+ ensures that an exchange rate is locked in when a customer makes a purchase and is guaranteed through to settlement to suppliers; ensuring that profit margins are locked in for travel companies and agencies selling internationally.