How do currency changes affect your business?
Changing Exchange Rates
Currency prices are constantly changing from day to day. In fact, exchange rates are continually fluctuating from minute to minute! With an increasingly global economy, such fluctuations can have considerable effects not only for large, multinational corporations, but also for small businesses.
While international exchange rates may seem like a minor detail in comparison to a company's balance sheet, the two are actually closely related. The relative strength of currencies influences profit margins with the potential to erase or inflate them, and can also identify a more profitable demographic. If exchange rates were so important for even solely domestic businesses, they would obviously play a profound role for international travel agencies, who serve as mediators between a domestic market and an international environment.
The relative strength of a currency can also affect the consumer's travel decisions. When the US dollar is weak in comparison to the Euro, American travelers may hesitate to visit Europe; meanwhile, European travelers would be eager to come to the United States. Understanding how the currency market is moving help understand where your target market is moving, and as a result, how to most effectively market to them.
The Internet
The Internet has also contributed to the interconnectedness of the world's economies. Never before has it been so easy for consumers to compare and purchase goods and services from abroad. Therefore, it is necessary that travelers are able to gauge prices accurately. They want to know how much their money is worth once they're abroad. It is also important for the businesses to be aware of currency fluctuations because it has a very real impact on their relative competitiveness against other companies in the industry.
However, the Internet has also become an invaluable tool for the travel and tourism industry. Travel and tourism has become the single largest category of products and services sold over the Internet. The proportion of business being conducted via the Internet is constantly growing thanks to the increasing number of benefits the Internet provides. For example, some airlines offer discounts for purchasing flights online since they are then able to save money on labor (that would be the employees working the sale centers). The Internet has also given low-cost airlines, such as the ones that have invaded Europe's airports, and less known travel agency companies an equally accessible outlet to market themselves.
Essentially, the progressively more global economy shows no indication of slowing down, and technology only contributes to this end. If businesses expect to continue to meet the needs of their consumers and remain profitable, they will have to take exchange rates and, more importantly, changes in exchange rates, as well as international consumers into greater consideration.