Foreign exchange risk for travel agencies: complete 2026 guide

Foreign exchange risk for a travel agency refers to the impact of currency fluctuations on the profitability of a booking. It affects any agency that sells a trip in euros while purchasing services from foreign suppliers in another currency.
Hotels, transfers, guides, activities or destination-management services: when these purchases are paid several months after the sale, an exchange-rate movement can significantly reduce the expected margin.
This guide explains how to calculate your foreign exchange exposure, measure its impact on your margins and choose an appropriate hedging strategy, without turning your agency’s financial management into a trading desk.
If you purchase hotel nights in dollars, transfers in Thai baht or destination services in Moroccan dirhams, part of your margin indeed depends on a factor you do not control: the exchange rate applied at the time of payment.

1. What is foreign exchange risk for a travel agency?

Foreign exchange risk arises when there is a time gap between when an agency sets the selling price of a trip and when it pays its suppliers in a foreign currency.
This gap is particularly common in tailor-made travel and B2B tourism:

a MICE group may be sold 6 to 9 months before departure;
a long-haul tour may be marketed a season in advance;
supplier deposits and the final balance may be spread across several due dates.

During this period, the selling price is generally contractual and no longer changes. By contrast, the actual cost of services purchased in foreign currencies continues to fluctuate.
A movement of just a few percentage points in a currency pair such as EUR/USD can therefore reduce part of the margin on a booking where most purchases are made in dollars.

Why does foreign exchange risk reduce a travel agency’s margin?

Let’s take a simple example.
A travel agency sells a trip for €180,000, with a significant share of the services invoiced in dollars. If the euro depreciates against the dollar between the quotation being signed and suppliers being paid, those services will cost more in euros.
Because the price charged to the client remains unchanged, the difference is absorbed directly by the agency’s margin.

Key takeaways:

Foreign exchange risk mainly depends on the volume of purchases in foreign currencies and the time between the sale and payment.
An agency that sells and purchases exclusively in euros has little exposure to foreign exchange risk.
As soon as a foreign currency enters a booking budget, exposure exists.
A favorable exchange-rate movement improves the margin; an unfavorable one reduces it. The real challenge is therefore to control this uncertainty.

2. What costs are associated with a travel agency’s international payments?

The exchange rate is not the only cost to consider when paying a foreign supplier.
An international payment may include several cost components, some of which are not very visible on bank statements.

2.1 The markup applied to the exchange rate

This is often the least visible cost.
A bank or provider may apply an exchange rate that is less favorable than the benchmark interbank rate. The difference between the two represents part of the real conversion cost.
To assess the cost of a payment in a foreign currency, it is therefore essential to compare the rate actually obtained with the market reference rate.

2.2 International transfer fees

Paying a supplier abroad may also generate:

sending fees;
fees linked to the SWIFT network;
correspondent bank fees;
other fees depending on the currency and the banking route used.

For small payments, these fixed fees can represent a significant share of the total cost.

2.3 Foreign-currency account fees

Some institutions also charge for:

maintaining foreign-currency accounts;
internal conversions;
access to certain currencies;
or specific services related to international payments.

These fees must be included in the overall cost of multi-currency management.

2.4 The cost of exotic currencies

Not all currencies are handled in the same way.
The Thai baht (THB), Vietnamese dong (VND), Moroccan dirham (MAD), Mexican peso (MXN) or Indonesian rupiah (IDR) can be more complex or more expensive to manage depending on the provider.
For a travel agency specializing in tailor-made travel, these currencies may nevertheless represent a regular share of supplier payments.

Key takeaways:

Compare the exchange rate actually applied with the market reference rate.
Multiply the difference by your annual volume of foreign-currency purchases to measure its impact.
Include transfer, account and conversion fees in your true cost.
When fixed fees are significant, combining certain payments can help reduce their relative weight.

3. How do you calculate foreign exchange exposure?

To measure a travel agency’s foreign exchange risk, three pieces of information are already enough to produce an initial estimate.

1. The share of purchases in foreign currencies

Calculate the proportion of your purchases that is not denominated in euros.
For example, if a booking represents €100,000 in costs and €60,000 must be paid in dollars, 60% of the cost base is exposed to foreign exchange risk.

2. The payment horizon

Measure the time between:

the quotation being signed;
and the final supplier payment.

The longer this period, the more likely the exchange rate is to move.

3. The expected margin

Finally, compare the foreign-currency exposure with the booking’s margin.
The same currency movement obviously does not have the same impact on a booking with a 30% margin as on one with an 8% margin.

How can you simulate the impact of an exchange-rate movement?

A simple method is to apply several scenarios of adverse exchange-rate movements: for example -3%, -5% or -8%, depending on the currency and the time horizon considered.
You can then measure the impact on your margin.
Example:
On a €180,000 booking including €100,000 of purchases in dollars and showing an expected net margin of 15%, an adverse 5% exchange-rate movement can increase purchasing costs by around €5,300.
The margin would then fall from €27,000 to around €21,700, a profitability decline of close to 20%.

Key takeaways:

A booking where more than 50% of purchases are made in foreign currencies and where the time horizon exceeds 6 months deserves a specific analysis.
Test this method on your main past bookings to measure the real impact of currency movements on your activity.
Distinguish the margin displayed at quotation stage from the margin actually recorded after suppliers have been paid.
The lower your margin and the greater your foreign-currency exposure, the more important it is to manage foreign exchange risk.

4. How can a travel agency protect itself against foreign exchange risk?

Once exposure has been identified, several solutions can help bring foreign exchange risk under better control.
Travel agencies generally work with three main categories of providers for international payments: traditional banks, neobanks and foreign exchange specialists.

CriterionTraditional bankNeobankForeign exchange specialistRate transparencyLow, markup sometimes not clearly detailedMediumHighExotic currenciesLimited or expensiveLimitedBroad coverageForward contractsOften reserved for large accountsRarely availableAvailableDedicated contactGeneralist relationship managerAutomated supportCurrency expertRegular B2B flowsYesPartiallyYes

Forward contracts to secure an exchange rate

A forward contract is one of the instruments most directly useful to an agency exposed to foreign currencies.
It makes it possible to fix in advance the exchange rate that will apply at a future date.
The agency therefore knows its purchasing cost in euros as soon as the quotation is signed, regardless of how the market moves between the sale and supplier payment.
The objective is therefore not to speculate on currency movements, but to secure the margin on a booking.
Among the specialists active in this segment, Devyzz supports travel agencies and tour operators with their international payments, notably through multi-currency accounts, payments in more than 140 currencies and foreign exchange risk hedging solutions.

Key takeaways:

Currency hedging is primarily designed to reduce uncertainty, not to predict market movements.
It is particularly relevant for bookings with high exposure and a long payment horizon.
It is important to compare the rate obtained with the market reference rate.
The right strategy depends on the amount, currency, due date and level of risk the agency is prepared to accept.

5. How do you manage foreign exchange risk in travel agency software?

Currency hedging can only be effective if the agency knows precisely how much it needs to hedge, in which currency and on what date.
Foreign exchange risk management is therefore also a matter of production management.
A travel agency software solution designed for tailor-made travel should make it possible to:

enter each purchase in its original currency;
retain the exchange rate used and its date;
recalculate gross and net margin when the rate changes;
distinguish euro-denominated costs from costs exposed to foreign currencies;
track supplier payment due dates;
consolidate margins by currency and destination;
identify the bookings with the highest exposure.

Ezus’s budgeting tool and financial management module notably make it possible to manage multi-currency budgets and track the various financial components of a booking.

Key takeaways:

A budget converted only into euros can hide the booking’s true exposure.
The purchase currency must remain identifiable until the supplier is paid.
Margin monitoring should be performed at booking level, not only at the annual profit-and-loss level.
Linking supplier payments to the budget reduces duplicate data entry and improves monitoring of foreign exchange differences.

6. How do you implement a foreign exchange risk management policy?

Not every agency needs to implement a complex hedging strategy.
A simple policy can already help bring exposure under better control.

Step 1: identify the most frequently used currencies

Start by analyzing your purchases over the last 12 months.
Identify:

the currencies used;
the amounts purchased;
the main suppliers;
the destinations concerned.

You will then be able to determine where your exposure is concentrated.

Step 2: define an exposure threshold

Set a threshold above which hedging should be considered.
For example, you can combine:

a minimum amount of foreign-currency purchases;
a minimum period before payment;
and a minimum percentage of exposure on the booking.

Step 3: simulate different scenarios

Test the impact of an adverse exchange-rate movement on the booking margin.
This makes it possible to distinguish genuinely significant exposures from fluctuations that the margin can absorb.

Step 4: choose which bookings to hedge

Focus your hedging on bookings where:
foreign-currency amount × exposure duration × margin sensitivity
represents a significant risk for the agency.

Step 5: track differences between forecast and actual results

After payment, compare the expected rate with the rate actually obtained.
Over time, this analysis helps improve your exchange-rate assumptions and your hedging policy.

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Frequently asked questions about foreign exchange risk for travel agencies

What is foreign exchange risk for a travel agency?

Foreign exchange risk is the impact of exchange-rate fluctuations on the margin of a booking. An agency that sells a trip in euros but pays a hotel in dollars several months later sees its actual purchasing cost change between signing and payment.
If the euro depreciates against the dollar during this period, the cost of the service increases in euros and the margin expected in the quotation decreases.

How can a travel agency reduce the cost of international payments?

Three levers can be combined: compare the rates actually applied by several providers, reduce the weight of fixed fees where possible, and choose a provider suited to the currencies used by the agency.
The exchange rate obtained should be compared with the market reference rate in order to measure the true conversion cost.

Should every booking sold with foreign-currency exposure be hedged?

No. Hedging is not necessarily relevant for every booking.
It becomes particularly useful when a booking combines a significant amount in foreign currencies, a distant payment date and a margin that is sensitive to exchange-rate movements.
An agency can define an internal rule based on an amount threshold and a time threshold in order to identify the bookings to analyze.

How do you incorporate foreign exchange risk into a tailor-made travel quotation?

Enter each purchase in its original currency and associate it with the exchange rate used and the corresponding date.
The client price can remain expressed in euros, while the internal budget retains the purchase currency. The agency can then track how the cost changes and measure the impact on margin.

What role does management software play in foreign exchange risk management?

Production management software mainly helps identify and measure exposure.
It can show which currencies are used, the amounts involved, the bookings exposed and the payment due dates.
It does not necessarily replace the provider that performs the conversion or hedging: the two functions are complementary.

Are small travel agencies affected by foreign exchange risk?

Yes, as soon as they regularly purchase services in foreign currencies.
Agency size is not the only relevant criterion. Annual foreign-currency purchasing volume, average payment delay and the margin on the bookings concerned are also determining factors.
A small agency that regularly makes purchases in dollars may therefore be more exposed than a larger organization that pays most of its suppliers in euros.

Not yet an Ezus customer? With our travel agency software, manage your margins in real time across all your purchasing currencies and centralize budgets, supplier payments and invoicing in one place. Discover Ezus in a demo.

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