Travel agencies: how to prevent currency exchange from eating into your margin on supplier payments

Booking a hotel in Bali, a coach in Marrakech, or a cruise in the Maldives almost always involves paying a local service provider in their own currency. For a travel agency, these payments often number in the dozens each month, sometimes with very short turnaround times. This situation carries a particularly high exposure to foreign exchange risk, often without the agency being fully aware of it.

Why travel agencies are particularly exposed

Unlike an SME that imports goods with orders planned well in advance, a travel agency often has to pay its suppliers urgently: a last-minute booking, a group adjustment, a schedule change. This urgency leaves little room to negotiate the exchange rate and frequently leads to accepting the rate offered by their current bank without comparing it.

Where the lost margin on your supplier payments is hidden

The margin applied to the exchange rate is rarely visible on the bank statement. It simply translates into an amount in foreign currency that is higher than expected once converted. On a payment of several thousand pounds or euros to an Asian or North African provider, this margin can represent several hundred pounds—invisible on a line-by-line basis, but very real across the entire season.

How to limit this loss of margin

Grouping payments to the same supplier or in the same currency helps reduce the number of conversions and therefore the associated fees. Systematically comparing the applied rate against the mid-market rate before confirming a major transfer also provides better visibility of the actual cost. For recurring payments to the same destinations, FX hedging tools allow you to fix a rate in advance and secure the booking's margin, even if the currency fluctuates between the booking and the settlement date.

Summary

For a travel agency, every supplier payment in foreign currency is an opportunity either to lose or to protect margin. Comparing rates, consolidating payments, and securing recurring amounts makes it possible to limit this loss without adding complexity to the day-to-day handling of bookings.

International payment specialists such as OSolto, registered with ORIAS (no. 26004337), assist travel agencies in managing their supplier payments in foreign currencies, offering dedicated support tailored to this sector.

FAQ

Why are travel agencies more exposed to currency risk than other SMEs?

Because they often need to pay their suppliers on short notice, leaving little time to compare exchange rates or negotiate payment terms.

How can I tell if the exchange rate offered by my bank is competitive?

By comparing it to the interbank reference rate at the time of the transaction. A gap of several percentage points indicates a high margin, which can often be negotiated down or avoided with an alternative provider.

Can I lock in the exchange rate in advance for a booking confirmed months before settlement?

Yes, instruments such as forward contracts allow you to lock in today the exchange rate that will apply to a future payment, thereby protecting the booking's margin even if currency values fluctuate in the meantime.

Does grouping my supplier payments really make a difference to my FX costs?

Yes, fewer conversions mean fewer fixed transaction fees and greater leverage to negotiate the applied rate, especially for the currencies you use regularly.