Agents continue to be left bewildered by prices on booked trips being subject to wild currency fluctuations, as covered by Travel Weekly yesterday. This has led to the obvious question: Who is responsible for holding currency risk?
While currency risk is generally held by a supplier who manages this via several different tools, including a buffer, current economic instability means that currency fluctuations are increasingly falling outside of the ranges suppliers have adjusted for. Some trips, such as cruises for example, are often booked years in advance, meaning that there are likely to be significant fluctuations between the time that the trip is booked and the time that the trip is delivered.
CATO managing director Brett Jardine told Travel Weekly it is important for travel agents to be aware of the terms and conditions and communicate them accurately to their client.
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“Under Australian Consumer Law (ACL), a travel agent is an “agent for the tour operator or wholesaler” (assuming they are based in Australia – not the consumer), they are effectively an extension of the tour operator/wholesaler. To say the agent has been hit with a price hike is incorrect. It is the consumer who is ultimately paying, as the booking terms and conditions sit between the consumer and the tour operator/wholesaler (not the agent),” he said.
“All good agents would be passing along the operators booking T&Cs to the client at the time of booking which is required under ACL. All tour operators and wholesalers have (or should have) a clause that refers to currency fluctuations – this is something that the entire industry should be very well aware of, regardless of your role.”
How suppliers manage their currency risk
General manager of Sun Island Tours, John Polyviou, told Travel Weekly that the European tour provider regularly changes its currency rates on new tours but uses a variety of tools – including FX hedging and applying a buffer – to avoid adjusting prices on existing bookings.
“While you mentioned the US dollar, the Euro has changed by 11 per cent in the past three weeks. Sun Island will only be using a new exchange rate for new bookings. All existing bookings, whether paid in full, deposit only, or even quotes made in the last five days, remain priced at the old exchange rate,” Polyviou said.
“To provide more context around how and why we do this – we protect ourselves from price fluctuations for existing bookings by using the deposits paid to lock in foreign currency as soon as possible. This is a significant reason why we charge deposits in the first place. Without this process, we would be reduced to gambling on the exchange rate with client funds. Sun Island reviews the exchange rate weekly and we purchase foreign currency based on projected turnover.
“All of this happens because, after 35 years, we’ve found that being as conservative as possible is the only way to do business in an industry as unpredictable as travel,” he said.
Polyviou added that currency management is one of the reasons agents see using a wholesaler as beneficial.
“While I can’t speak for other wholesalers, I believe that one of the reasons for paying a deposit is to lock in the price,” he said. “That’s how it is in many other markets; I don’t know why travel should be different.”
Going directly to DMCs
Both Jardine and Polyviou said that buying directly from DMCs can open retail agents up to currency and legal risks that they may not be aware of or equipped for.
“If the agent is packaging multiple components and selling at a package price under their own T&C’s then they are likely acting as the tour operator (contract principal) themselves, and subject to their T&Cs, they may have the right to surcharge due to currency fluctuations,” Jardine said.
Polyviou seconded Jardine’s point, adding that “agents who book their clients’ travel directly with overseas suppliers need to manage the risk and currency fluctuation themselves” and that “many may not have done so”.
“It could be an issue that consortiums or even ATIA may need to address,” he said.
EXCLUSIVE: ‘I’m horrified’ – Agents slapped with price hikes after suppliers pass on currency costs
