The travel industry has always faced challenges of low profit margins of 5-7% and long transaction cycles averaging 50 days. However, a new issue has emerged in recent years - Rising cross-currency volatility, creating additional stress for an industry operating on thin margins to begin with.
While travel platforms and marketplaces have long been able to hedge against currency volatility, they weren’t in a position to offer such functionality to their customers. Until now. Today, travel platforms can integrate currency protection solutions into their platforms. This allows their customers to pay using their own currencies, lock in currency exchange rates for the future, and eliminate currency risk completely.
The need for such functionality becomes evident when you consider the numbers. By conducting a thorough exposure analysis of a large travel bedbank, we discovered that:
Close to 10,000 daily transactions at average value of €700 each
45% of online bookings were canceled
60% of bookings lost an average 3% of potential profits due to currency fluctuations
These figures are typical across the industry, and highlight the need (and opportunity) for travel platforms to offer added value, in the form of currency protection solutions, to their customers. Such hedging solutions would ensure no revenue is lost due to FX fluctuations stemming from canceled bookings, and that the 3% loss per booking due to currency fluctuations is no more.
By offering integrated cross currency solutions to your customers, both sides will enjoy:
1. Stop fearing cancellation losses
With an average of 25-40% of online bookings being canceled as a result of a dynamic market and shifting consumer preferences, you need a way to reduce risk and protect your revenues. The key issue lies in the fact that there is no way to know which transactions will be canceled, and which won’t. With an embedded cross currency solution, you can hedge on all transactions, even those which are canceled meaning you won’t lose any money.
2. Stand out from your competitors & provide added value
By using an integrated cross currency solution you add a new functionality to your platform. Whereas other platforms and marketplaces don’t let customers hedge themselves, when working with an integrated cross currency solution, your customers will be able to do just this. All currency pairs, over any time frame at the click of a button. This protects them from currency volatility as they can use hedging to plan better for the future with stability. This provides you with a strong competitive edge over other platforms.
3. Offer competitive prices
Due to the fact that the average transaction cycle in the travel industry is around 50 days from creation to realization, platforms and marketplace typically increase prices around 2% to 3% to protect themselves from potential FX volatility. This doesn’t need to be the case however, as travel businesses can hedge the transaction the moment it is created. Doing so provides security, and means that prices do not need to be bumped to absorb FX-related losses. The result? More competitive pricing that can help in winning new business and, ultimately, generate more revenue.
4. Lock rates effortlessly & win new business
A fully automated solution that’s integrated into your platform enables your customers to analyze exposure, lock rates, and move funds with one-click. All of this without the need to use wires or convert at the bank. This means the entire hedging process is made hassle-free, intuitive, and simple for your clients
On top of this, embedded currency protection solutions are easy to set up and integrate with your existing finance systems and IT infrastructure. With no lengthy, complex onboarding required, your business can swiftly reap the benefits of embedded currency solutions.
By providing a much-needed value-added service, not only will your offering stand out for new customers, it will also increase the likelihood of retaining existing ones. On top of this, the simplicity by which customers can avail of your hedging offering significantly improves the customer experience & journey.
Grain: A fully automated, API-based solution that eliminates cross currency volatility for travel marketplaces and their customers
Grain offers the only end-to-end, integrated currency solution that enables travel platforms and marketplaces to eliminate FX risk for their customers – travel agents, bedbanks and others buying and selling travel inventory. All of this without the need to use wires or convert at the bank. On top of this, you can even generate revenue from all hedged transactions through the Grain revenue sharing model.
Our API-based solution is intuitive and straightforward, meaning your customers can secure the best rates for their bookings in real-time. Contact us to learn more about how you can use embedded currency protection solutions in your travel marketplace, and see how to start your hedging journey today.
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