Currency Hedging: The Benefits For a Travel Business

As we all know, there is a lot of uncertainty in the travel market for sellers. There are many elements of working in travel that, by nature, can’t be entirely secure. One of those things is currencies. Luckily, there is nothing that will stop eager travellers from hoping around the globe, and so the currency hedging solution provided a perfect fit for an uncertain issue.

However, for those that don’t specialise in domestic travel, currency hedging itself can be a point of uncertainty. Now more than ever, it is of great benefit to travel companies to take the time to look into currency hedging as many factors could affect how you exchange currency for your business and whether or not you can sell holidays the way you want to.

The Risks of Currency Exchange

The risk of selling a holiday in a foreign country to a consumer local to you, lies in the constant movement of currencies against each other. It is as much about time as it is about the difference in the currency itself. If your consumer books a holiday, and you must pay for that holiday in a foreign currency in six to twelve months’ time, that currency could move against your local currency so much that all of your profit disappears! If you are a company that works exclusively out of the UK selling travel services in Spain through a local tour operator, these risks could be the ultimate downfall of your business.

However, this is not to say that dealing in different currencies is without its benefits. Providing services in the destination’s local currency can help to expand your travel market, as there are more suppliers to work with, who could provide a better quality of service in their local area. There are also more diverse destinations to sell to your consumers, and ultimately, dealing in local currencies will make the customer happier, leading to good relationships in your business, and higher conversion rates.

What Is Currency Hedging?

There are a few different ways you can deal with the risks of currency exchange, though all come with their own risks. In a nutshell, currency hedging, entails entering into a financial contract, preferably with a specialist, that will protect you against both unexpected and expected changes in the currency exchange rate. It will often involve sacrificing a portion of your profit margins in order to protect your business, by securing a flat exchange rate for your future supplier payments.

This will help you to know your margin and to be more certain in setting prices that will continue to make you profit while dealing in foreign currencies. Putting a portion of your profit margin on the line could seem like a scary endeavour, but in the long run, it could pay for itself. The protection it provides could secure your profits and prevent your business from going completely bust through movements in currency exchange that can happen so quickly.

Currency Hedging at PTS

At PTS, we hold multiple trust accounts in different currencies, so that your consumers’ monies can be protected in whichever currency you choose. Alongside this, PTS work with currency providers to secure you the lowest exchange rates in the industry, providing you, the travel business, with the certainty you need to make the most of your services and keep the consumer confident in your business.

We also work with Universal Partners FX – a specialist currency exchange provider – to offer the most competitive rates to all PTS members. This means that you can set a currency exchange cost at the beginning of the year and move forward with certainty, having confidence in your profits and still providing quality travel services whilst dealing with good suppliers and tour operators.

Conversing with a specialist currency hedging provider is the key to confidence when you invest in currency hedging, and though it may seem daunting, doing it the right way will allow you peace of mind in the coming months of international travel business. To find out more about our currency hedging services, please visit our currency hedging page, or contact our team on 0207 190 9988, or via email to ask@protectedtrustservices.co.uk.