Exchange rate problem for holiday home owner

Krissy_3

I live in France and run a gite business here. So far, I've always advertised my prices in sterling and euros - I take sterling payments from UK guests via cheque or bank transfer and euro payment via the same way into my French bank account from other European nationalities. My problem is that with the falling £ rate, my income has dropped substantially year on year, even taking into account a slight price increase for 2008 (bookings are about the same as 2007). For 2009 I'm considering just pricing in € and taking credit card payments. But if the £ continues to fall, will customers be very unhappy not being sure about the total cost of the holiday (the rate could slide further from the time they book and pay a deposit to the time they pay the balance). But is it fair for me to take the hit on the exchange rate as I have done this year, especially in view of the fact that all the running costs including things like electricity, have increased in price? Any opinions/advice on the best thing to do would be welcome!

itsakidsworld

Hi Krissy,

I fully understand your situation as the falling pound against a strong euro affects our company also.

We are part of a large organisation and we have had meetings to try to find a way to help our paying clients get the best value for their cash.

We have decided that the only fair option is to advertise the price in euros with a guide price comparison against this price in UK pounds sterling. Then if the clients wish to pay in UK pounds sterling into a UK account, the transfer rate is agreed at the time of booking. We do have to alter our prices at the moment on a regular basis but we feel this is worth the effort.

We work with currency exchange companies and so have upto date information regarding the rate and we always offer a slightly better rate than the tourist rate. We do this in the hope that sterling recovers but this is not always the case!!

Krissy_3

Thanks, IAKW. I wasn't sure if advertising in euros only would put people off, but I have to do something. I was going to advertise in euros, but put a currency converter on the site to, so people could see what they would be paying in sterling. The only problem is that I get bookings often 12 months ahead, and the equivalent sterling price by the time they came to pay the balance (2 months before) could be quite a lot higher if the £ continues to slide.

pboae

It would put me off. We regularly book gites in France, often 12 months ahead or more. Typically the price is advertised in Euros, and converted at the time of booking, and that is the final price I would expect to pay.

I need to budget for my holidays I wouldn't want the hassle of not knowing what the final price would be. That's the main reason I tend to end up in gites with British owners, just because I can deal in sterling.

If the situation were reversed, would you be looking for ways to return the additional profit you'd made to your visitors? ;-)

Krissy_3

pboae, I think it is more than fair to stick to the same price agreed at the time of booking, which is what I've done with all the 2008 bookings. I'm not looking to rip anyone off, but the sudden decline in the value of the £ has had a huge impact on me as I live in France and the gite business is my income. But the price should be agreed at the time of booking. Advertising only in euros at the current euro price on my advertising sites will mean about a 15% increase in price in real terms from 2008/9 and as long as I can recoup that, just to bring me back to 2007 income that would be good. Another alternative is to keep prices the same and just charge extra for things like bed linen, towels, final clean etc. which at the moment are all included.

Voyager2002

As a business surely you can 'hedge' to give yourself some protection against further exchange rate falls. Or at least maintain some of your money in each of the two currencies so that you win as well as lose from each change.

Anyway, you could (i) set prices in sterliing that are sufficiently high to protect you against the pound falling as low as you expect it to fall, but (ii) offer a hefty discount to people who agree to pay in euro, and perhaps an even bigger discount for people who make full payment well in advance.

Krissy_3

About 88% of my business comes from the UK, without exception so far people have paid in sterling because I've offered that facility to keep it cheaper for them (no bank charges for transferring abroad). If it was 50% I wouldn't be anywhere near as worried. I know you win and lose from exchange rates, but I'd never have predicted a fall like the one in the last 12 months.

LesD

One of the reasons you are 'suffering' is presumably because the majority of your expenses are in Euros. Why not look at rebalancing these with Sterling purchases?

Or, you could even now look at investing some of your accumulated euros into Sterling property - which will now be c20% less expensive than last year. (Well it would be if UK property prices hadn't risen disproportionately!)

This is what exchange rate movements are about. Balancing the income/cost of different economies.

Your 'pricing' problem is just another aspect of your marketing. What is the 'value' of your property to hirers? Do you want to take the exchange risk of hiring to folks like 'pboae' or would you rather the hirer take the risk?

Do you want to gamble on exchange movements or do you want to take out a contract with a currency specialist for a given period?

Only by costing out the options can you make an informed decision. Views on here cannot take into account your own circumstances.

pboae

Krissy, I think that I may be confused about what it is you are actually proposing. Do you want to advertise the price in euros and then base the final price on the exchange rate at the time of booking? Or do you want to base the final price on the exchange rate at the time of the holiday?

The former is what most owners do, and what I would expect to happen. I can see how it might cost you money if the exchange rate drops further in the meantime, but I don't really see that there is much you can do about that.

Krissy_3

The more I think about this, the more I'm sure I will advertise in euros only next year but offer the possibility to pay everything up front to avoid an increase in price due to the exchange rate. If you booked with a French property owner in France, you wouldn't expect to pay in sterling, in fact if you bought anything from a euro company, you would pay the current exchange rate. I don't see why, just because I'm from the UK originally that I should have to continue to deal in sterling when all my costs are in euros. Of course I will lose some potential customers (like pboae) but renting holiday homes is never going to make you rich at the best of times, I certainly can't afford to make a loss. If I change, I will stick with euros, even if the £ does get stronger, I don't want to have my cake and eat it, just make a fair living. I know several other holiday home owners who already operate like this and don't have a problem with their bookings, hopefully it will be the same for me.

itsakidsworld

Krissy,

I think keeping everything in euros is an excellent idea because you maintain the price you charge for your property.

Of course people in the Uk wish to know how much the cost is in pounds but you simply provide the exchange rate at that the time of booking.

By having a UK bank account you offer clients the option of paying direct into the bank by various, cost saving methods, thus helping them reduce the charges they would have if they had to exchange to euros and pay.

If the clients wish to pay in euros them you provide your euro account details and that is it.

keep things simple and have belief!!