The currency curveball: How SMEs can thrive amid exchange rate chaos

For small and medium-sized enterprises (SMEs) in the Travel & Tourism sector, exchange rates can feel like an unpredictable storm, sometimes pushing profits forward, other times capsizing carefully laid plans. In today’s interconnected world, a sudden fluctuation in the value of the dollar, euro, pound, or yen can directly affect your pricing, your margins, and even how appealing your offerings are to global travellers.

This volatility is not a passing phase. Global events, from geopolitical tensions to inflation spikes, are making currency fluctuations more frequent and more unpredictable. For many operators, especially those dependent on cross-border clientele, navigating these changes is now a core part of survival. Understanding this reality and responding strategically is essential for turning one of the biggest Travel SME challenges into a competitive advantage.

Why currency fluctuations hit travel SMEs hard

SMEs often operate on tighter margins. A 5% overnight drop in the home currency might sound like good news for attracting foreign travellers as your services suddenly cost less in their currency, but it can wreak havoc if your supplier contracts, marketing spends, or loan repayments are in stronger foreign currencies.

• Pricing becomes a guessing game: Locking in a price months in advance for a tour or hotel package can backfire when the currency shifts before delivery. Either your profit margin erodes, or you are forced to raise prices suddenly, risking customer dissatisfaction.

• Profitability is constantly under threat: Even small percentage changes can mean the difference between breaking even and sinking into losses, especially for SMEs already operating in competitive, price-sensitive markets.

• Customer perception can change overnight: For inbound travellers, a favourable currency rate might make your destination more attractive. But for outbound packages, unfavourable rates can lead to cancellations or reduced spending.

Strategies to stay ahead of the currency curveball

While you cannot control the market, you can control how prepared your business is to adapt to it. Here are some strategies that can turn currency chaos into opportunity.

1) Dynamic pricing models

Static pricing in a volatile market is like sailing with a fixed rudder in a shifting wind. Dynamic pricing allows you to adjust rates in real time based on currency movements, demand, and competitor activity.

For example, hotels can use revenue management software to tweak room rates daily or weekly, ensuring that margins remain stable regardless of currency shifts. Similarly, tour operators can create flexible pricing for packages, with clauses that allow for adjustments when exchange rates swing beyond an agreed threshold.

The key here is transparency. Communicate clearly to customers that prices reflect real-time conditions. When explained well, travellers appreciate the fairness and understand the value of booking early.

2) Currency-hedged supplier contracts

One of the smartest moves for SMEs with recurring international payments is to negotiate supplier contracts with built-in currency hedges. This can be done through:

• Forward contracts: Agreeing today to buy a certain amount of foreign currency at a fixed exchange rate for a future date.

• Currency clauses: Ensuring suppliers agree to settle in your home currency, transferring the fluctuation risk to them.

• Tiered pricing: Setting different prices based on exchange rate bands, giving both sides predictability.

For example, a boutique tour operator in Dubai sourcing luxury villa stays in Italy could lock in a euro rate for the next 12 months, ensuring stability in package pricing regardless of market chaos. This reduces one of the biggest Travel SME challenges of cost unpredictability.

3) Promote in-market spending options

Exchange rate volatility can deter travellers from making big pre-trip payments, especially if their currency is weak at the time of booking. Offering in-market spending options can help bridge this gap.

• Encourage travellers to book essentials like accommodation and transfers upfront but pay for add-ons like excursions, meals, or spa treatments after arrival.

• Partner with local businesses to create bundled ‘spend as you go’ experiences.

• Offer local currency payment options through mobile wallets or cards to remove friction.

By making travellers feel they can control their spending in real time, you ease their worries and boost the local economy, a win-win that strengthens your community connections.

Turning chaos into competitive edge

Currency swings can be intimidating, but they also present hidden opportunities for agile SMEs. A weaker home currency can suddenly make your destination the hottest ticket in town. A stronger one might push you to innovate with domestic travel offerings. Either way, the winners will be those who treat exchange rate monitoring as a strategic function.

Global travel will always be tied to the ebb and flow of currencies. For small businesses, the trick is to adopt flexible pricing, hedged contracts, and customer-friendly spending options that can transform one of the most unpredictable Travel SME challenges into a lever for growth.

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