Do I deserve an exchange rate discount?

By | March 22nd, 2016

Cary Shaich is taking a Tauck Eastern Canada tour in May, with stops in Toronto, Montreal, Ottawa and Quebec City.

It’s the perfect time of year to visit Canada, and even better because the surging dollar increases Shaich’s buying power. More souvenirs!

And that’s the problem.

“Tauck will be paying with Canadian dollars,” he says. But since booking his trip last year, the value of the greenback has increased, meaning that Tauck is earning more money. He thinks the savings should be passed along to him.

“Some discount would be appropriate for the exchange rate that Tauck will take advantage of,” he says. By her math, the currency valuation has made Canada about 15 percent cheaper. He wants a refund of $1,000 from Tauck.

Hang on.

Some tour operators reserve the right to increase prices to cover fuel surcharges, tariffs and taxes, and to reflect fluctuations in foreign exchange markets. If the tables were turned and the dollar had slid 15 percent versus the Loonie, would Tauck be asking for more money?

The answer from Tauck: no.

A company representative told Shaich that it agrees to its rates at the beginning of the year when it sets rates for the following year’s tours. So it’s locked into that rate, regardless of the currency.

That seems fair to me. As long as Tauck would eat the loss if the currency tanked, I wouldn’t be able to argue for a $1,000 refund for Shaich.

But this brings up an even more interesting question. With consumers having access to so much more information now — they’re able to follow even the smallest currency fluctuations online — are companies failing to adequately explain their business model? Or are they not interested in saying too much for fear their customers might be able to calculate their generous profit margins, and, potentially, leave in disgust?

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Tour operators have no reason to let us peek behind the curtain. A company like Tauck is able to negotiate sweetheart rates for its products. A competent tour operator should make 20 to 25 percent profit margins. But a company like Tauck, which has a reputation for high-touch service, can probably do much, much better. (Tauck does not publicly disclose its earnings.)

No, the real scandal here isn’t a paltry 15 percent earned thanks to a mercurial Loonie; it’s the 30 percent pocketed by operators buying services such as tours, meals and transportation in bulk, and then reselling them as packages. If people knew how much operators were making, would they be torching their tour buses?

Nothing wrong with making a buck or two (and I will refrain from using the words “free market” in my poll). But this is where everything is headed. If you’re running a business, your customers know more than you think. It’s only a matter of time before they do something about it.

Should tours be discounted when the value of a currency declines?

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