Normal International Operations Reduce Need For Forex Hedging
Currency changes challenge the profitability of international hotel operations. Generally, guests pay in the local currency, but the profits are often repatriated in dollars, euro, or yen. So, when the local currency's exchange value drops, a hotel's profit declines in dollar or euro terms. However, hotels and other companies that use revenue management can adjust rates and effectively gain a foreign currency hedge through normal revenue management. When international travelers find that a hotel is suddenly "less expensive" to patronize because of a currency change, more travelers stay at the property. At this point, the revenue management system recommends raising the hotel's rates, but those rooms are still effectively a bargain. Revenue per available room further increases through both higher rates and higher occupancy, even after the currency conversion, Chang and Ma found.
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