COMMENT CASH IN ON CURRENCIES FOREIGN EXCHANGE IS NOT ALL ABOUT RISK, SAYS KANTOX’S ANTONIO RAMI T


he travel industry has undergone massive changes in recent years.


The arrival of a new generation of


disruptive players, the emergence of innovative direct-to-consumer sales channels, and market developments like dynamic packaging have resulted in generalised price and margin compression across the entire travel chain. The collapse of Thomas Cook


last September highlighted the vulnerability of the traditional SDFNDJH KROLGD\ PRGHO ZLWK [HG prices printed in a catalogue. On top of its unsustainable debt


structure, the venerable tour operator had to contend with slow economic growth, currency XFWXDWLRQV %UH[LW LQGXFHG uncertainty about travel — and even \JVNDP, the Swedish neologism that encapsulates the shame of air travel on environmental grounds.


CURRENCY RISK...


However, currency risk is the number-one issue for many participants in the travel industry. This is understandable. Given the global nature of the


business, currency risk exists both on the sales and purchase sides due to the high number of daily small transactions with an extended period between booking and settlement. And, as new destinations are


made available to customers worldwide, more currency pairs are involved, further adding to the apparent complexity. We believe that this negative


ANTONIO RAMI


expand sales in promising new markets. Also, OTAs can boost conversion rates by providing clients with the ability to pay in their preferred currency.


...AND OPPORTUNITY


Finally, there are several ways in ZKLFK ); VDYY\ WUDYHO UPV FDQ SURW IURP IRUZDUG SRLQWV WKH difference between spot and forward currency rates. Fortunately, companies do not


have to face the trade-off between QDQFLDO ULVN DQG WKH GHFLVLRQ WR embrace currencies as a business opportunity. True, in an industry as dynamic


perception of FX risk is largely misguided. Currencies should be viewed as a business tool, rather than as a mere problem to solve. Travel companies can take


advantage of currencies in a number of ways. Buying in more currencies allows them to widen the range of inventory choices. For example, a British bed bank


buying capacity from Thai hotels can obtain better deals by sourcing in Thai baht and not just in British pounds. In addition, by purchasing in the


ORFDO FXUUHQF\ RI WKH VXSSOLHUV UPV DYRLG LQDWHG SULFHV FKDUJHG E\ suppliers who add mark-ups to compensate for their own FX risk. By selling in the currency of their


customers, travel companies can avoid passing on FX mark-ups to their clients, gain competitiveness and


and as complex as travel, currency hedging can be expected to be an equally dynamic and complex undertaking. However, automated FX risk


management solutions allow QDQFH WHDPV WR HIIRUWOHVVO\ manage FX risk and to scale their treasury operations, regardless of complexity. The Chinese symbol for risk is a


combination of ‘danger’ and ‘opportunity’, representing the downside and the upside of risk. It is high time for travel industry


participants to ditch the negative- only vision of currency risk. To successfully navigate the


treacherous waters of dynamic SULFHV FXUUHQF\ XFWXDWLRQV DQG low margins, the positive side of currency risk must be fully


embraced. O Antonio Rami is co-founder and FKLHI RSHUDWLQJ RIFHU RI .DQWR[


20 — FEBRUARY 2020 — TRAVOLUTION.CO.UK


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