Do I deserve an exchange rate discount?

MoneyMan
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?

Related story:   Seeing both sides of St. Lucia

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?

View Results

Loading ... Loading ...


  • Jeff W.

    I voted no. How could you even begin to implement such a system? Would it swing both ways? The value of currencies in relation to each other change every day. If I purchased the tour today, you cannot know how much of that was spent immediately or held onto until the actual tour.

    Cary purchased the tour last year, and is taking the tour in May. Some portion of the tour price certainly paid for the salaries of the tour people now. Or the utilities, website, phone bills, etc. Not sure how you could untangle all of that.

  • Kairho

    It’s hard to believe you are begrudging a commercial company a 30% margin!

  • RichardII

    “High touch” quality products require higher staff to customer ratios and better qualified staff. I am not sure high cost products actually result in more profit… There is ample evidence to the contrary, the mass market tours and cruises cut costs and services to the bone and seem to be quite profitable.

    But, in the end, if Tauk can price their tours as they do, and make a living doing it, with happy customers. Then, I’d say they were fairly priced.

  • KennyG

    Many companies that do a lot of international business hedge away their currency risk in advance so that daily/weekly/monthly fluctuations in exchange rates don’t hit their bottom line so much. This means that whether the dollar/loonie moves up or down or the lira/dollar moves, they are trying to be as non-impacted as possible. If they werent hedged their bottom lines would look like a roller coaster, something most companies would rather not have happen. It may mean giving up some potential currency exchange profits at times, but also means they are somewhat protected when currency exchange rates move the other way. Mr. Saich should have thought about this when he bought the tour and bought or sold some $$/loonie futures contracts himself to take advantage if currencies moved, of course he could have lost money if they moved against him!. The tour company is not in the currency speculation business. They again, hedge away as much of that risk as possible.

  • Nathan Witt

    I can’t see what the business did wrong here. They didn’t do anything shady or use crappy terms and conditions to enrich themselves at their customer’s expense. They probably made the currency exchange at the time of purchase, meaning that later fluctuations don’t change the amount of money they got, or they hedged their currency exchange rates, and either way, they didn’t enrich themselves at all. Besides, fairness dictates a two-way street, and if this customer would happily call up Tauck and volunteer an extra $1,000 if the exchange rates fluctuated the other way, fine, but I expect that’s not the case. Informed consumers are generally a good thing since it keeps businesses in check, but because people’s capacity for logic seems to end when it stops benefiting them, it can throw a wrench in the works, too.

  • Annie M

    Yeah sure the tours they should be discounted as long as the consumer is willing to play the game on the other end – if the value declines, they agree to pay a higher price.

    What a ridiculous claim.

  • Annie M

    The company did nothing wrong, it is a ridiculous request. I bet the consumer would be screaming if the value went the other way and the company told him he had to pay more because the value declined.

  • MarkKelling

    Is the same tour offered now at a lower price in USD? If so, it would be nice for the company to offer a rebate to those who already paid. But I see no reason to require companies to do anything like that.

  • Mel65

    I can’t even imagine the complexity of a company having to keep track of exchange rates on basically a daily basis. What a huge burden that would put on them. It’s silly for the OP to want that money back. If she was willing to pay X amount for her trip, she needs to just accept the rate and move on. If she were in Europe and the exchange rate changed before her credit card cycle ended would she want that adjusted too? *Eye roll*

  • Fishplate

    OMGee! Somebody made money on their business!

    If we begrudge the profit made by this business, should we start speculating on the profits of everyone with whom we do business? Should we insist that every business disclose their costs?

    A profit is not a “scandal”, Chris. Not unless you are willing to include the profit that businesses make on volunteer labor.

  • KarlaKatz

    Amen! I use a 35% rule, when doing markup for resale… and, that’s generous: most of my suppliers recommend 50%.

  • KarlaKatz

    Sooooo, that $1,600 RT I purchased in November is now being sold for $1,200. Does American owe me a refund? Too ridiculous to even ponder.

  • IGoEverywhere

    In the many hundreds of posts that I have read, this is among the more ridiculous. The client has the right to book a tour or not to travel with a tour company. That is IT! You are making an assumption, wrongly do, that every seat is sold on every tour. Tauck as well as every other tour company, has to eat unsold seats, tickets, empty seats on the busses, etc. You have no idea what profit margins may be or not be on any given tour. Tauck specifically states that they are charging USD. Again, that is IT!. Bulk buy may apply to Carnival, Apple, and Pleasant type companies, but Tauck offers 100% exclusive small tours. They care about being the best of the best and you have to pay for that service. $10,000.00 per couple, 4 nights in Vienna, plus air. This is what they charged for the President’s Christmas package in 2015. It sold out! Who has the right to be concerned about the profit margin?

  • Jason J Olson

    While most companies now have added the fuel surcharge or currency fluxuation clause to their agreements, the reality is they rarely ever impose it. At least that is what I see in the US based travel market for overseas travel. Their cost of business is absorbing – for better or worse – such changes.

  • Gary K

    Sorry, not a very good example (though I don’t disagree with what I think is your point) — per Honda “99% of the Honda and Acura vehicles sold in the U.S. in 2015 were manufactured in North America”, and the proportion has been >= 90% since 2012.

    http://hondainamerica.com/manufacturing/

  • Maxwell Smart

    like airline tickets & hotels, there are 55 difference prices for basically the same thing.
    TO avoid exchange rate movements, most operators that I’m aware of pay the foreign currency when they get the funds. If you leave it in the bank, you can earn a massive 1-2% interest !!!!
    A few years back, I was working for a snow tour operator.
    Had a family booked to go to Colorado for 3 weeks. Not including air, the cost was AUD$10k. It was booked through a very big Australian wholesaler.
    The AUD$1 = USD$0.90. Suddenly the AUD$ starting dropping against the USD$.
    We always suggested to clients to pay in full to avoid any exchange rate variation, but this one client didn’t want to. They paid 50% & the wholesaler, confirmed to Colorado operators, that the clients were going, but the 50% was parked in their bank a/c.
    We told the clients the cost of their holiday was going up, repeatedly (we had told them upfront as well, it would if AUD$ dropped).
    By the time, they got their act together the AUD$1 had dropped in value to USD$0.60.
    From 90 cents to 60 cents is a massive 50% increase in costs. Their $10K, holiday went to $15K, so instead of paying a balance of $5k, they had to pay a balance of $10k.
    They complained to us, but we had told them many times. (previous to this, the AUD$ had not moved much, a cents up or down).
    Now that wholesaler, sends deposits overseas, when they are received, but if the same thing happened, the original $5k balance, would still become $7.5k.
    We also dealt with some resorts on a direct basis, to avoid lots of foreign currency payments, we often paid deposits by credit card (the U.S. operators charged no card surcharge) but the dodgy OZ banks did. Not only did the banks use an exchange rate very favourable to them, but they charged a fee on top of this for an international credit card transaction.
    BTW, the big 4 Australian banks are the most profitable in the world, by far.

  • Maxwell Smart

    where on earth do you get your 20-30% profit margin info from ?
    Some tour operators make much less than this & they also risk huge amounts of money.
    Eg. to get the best rates with airlines, hotels, etc. the tour operator must put down non-refundable deposits & if the economy turns, or more terrorist activity, the tours can be hard to fill, which means more advertising cost, or dropping prices, or throwing in things FREE.

  • Maxwell Smart

    travel is a small margin, high volume business. Many make far less than 10% let alone 30%. If they turn over big volumes, that’s fine, but if not …
    In Australia, it’s almost impossible to sack anyone. We have the FAIR WORK COMMISSION, which was set up by a previous leftist govt & is effectively run by the unions. The current govt is trying to fix this, but can’t (we’re having a double dissolution election in July, as senate is run by a few loonies & the lower house, can’t get any legislation thru the senate) ………………
    so all business, don’t want to hire more staff in the good times, cos they can’t get rid of them in the bad times, so they may put on some people on contracts, or, as is more often the case, ask everyone to work longer hours in good times & less in bad times. This is also problematic, as overtime hours worked, are more expensive.
    Smart employees, suggest time on in lieu, which suits both employer & employee better, but govts want to stick their nose in, where it’s not wanted.

  • Maxwell Smart

    you obviously don’t work in travel(tiny margins) or banks(huge margins).

  • Maxwell Smart

    hedging currency/fuel whatever is fine, but costs money to set up & a small to medium sized business, can’t afford these costs. I investigated fuel hedging for an airline once with 50+ aircraft & the costs, couldn’t be justified. It seems only the big boys hedge.
    Heard that Southwest Airlines, a few years ago, made no money at all out of running an airline, but they did make money out of fuel hedging, which kept them going.

  • Maxwell Smart

    Why ? It’s paid. The banks would surly give a refund on the exchange rate(NOT).
    The 2 dodgiest professions in the world, bankers & lawyers are involved here.

    & the worlds worst bankers are in the good ol USA. How many weren’t shot dead or at least in jail over the massive banking frauds, shows how corrupt U.S. govt is.

  • Éamon deValera

    Has this turned into some Socialist propaganda machine? There is nothing wrong with getting compensated for one’s work. People who sell things, be it coffee, coffins, or cruises have to charge more than what they pay for their wares simply to exist.

    That twelve dollar wrench you bought in the tool department cost less than two dollars to make. Is it wrong for them to pay the truckers, and unloaders, and sorters, and stockboys, and salespeople and HR and accountants and computer programmers and any of the myriad of people who work to provide us with things we want?

  • Harvey-6-3.5

    In addition to the comments below, if the OP didn’t want to pay Tauck’s markup, he could have arranged transportation, hotels, scenic locations, and guides on his own. There is no doubt this is cheaper, but much more labor intensive. A group trip we planned with our family overseas was cancelled, so I replicated it on my own. While it probably saved us $5,000, it required dozens of hours of my time, and probably wasn’t quite as guided as the tour would have been.

  • KarlaKatz

    ha, ha… no… REAL service/retail based sector.