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impact of currency exchange rate on hospitality and tourism industry

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Xiaohang Luo

on 15 September 2013

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Transcript of impact of currency exchange rate on hospitality and tourism industry

FACT
In the past 10 years, the US Dollar gradually become weaker than Euro and Chinese Yuan.
Impacts of currency exchange rate
on hospitality and tourism industry

Xiaohang Luo
Major conclusions
The rise and fall of currency exchange rates have a huge impact on international travel and tourism

When a hospitality firm operates business in other countries, the firm will face foreign exchange risk and opportunity on its profits
Foreign exchange risk and opportunity
when a hospitality firm operates business in other countries, the firm will face foreign exchange risk on its profits. Because when a hospitality firm owns a business in other country, it will generate profits in the local currency, when this firm want to bring the profits back to its own country, the profits must be converted from foreign currency to its own currency,

if its own currency is stronger than the foreign currency: lost profits.

If its own currency is weaker than the foreign currency: earn some extra profits.
News (issue): weak dollar benefit foreign tourists
http://seattletimes.com/html/travel/2015148443_trbriefs29.html
2003:
Dollar : Euro
1 : 0.89
Dollar : Yuan
1 : 8.26
2013:
Dollar : Euro
1 : 0.74
Dollar : Yuan
1 : 6..16
Impact on international travel and tourism
When the currency in your country is strong:
you can buy much more currency to spend in the country you like to spend your vacation.
It can make your travel much more cheaper.
your willingness to travel to other countries will increase the revenue of hospitality industry in other countries.

When the currency in your country is weak:
It will make your travel more expensive.
Demand of traveling from international tourists will increase.
This result is good news for hospitality industry in US because when economy of US is down, the US Dollar is weak as well. The declines in domestic travel may be offset by a rise in international tourists.
Foreign exchange risk and opportunity
Example:

if an American hotel brand opens a hotel in China and generates 1 million Yuan per year,

This hotel only can bring $121,950 dollars back to US in 2006

This hotel can bring $163,430 dollars back to US in 2013.

Because US dollar is becoming weaker than Chinese Yuan in past 8 years, many US hospitality firms that operate its business in China and Europe benefit from fall of dollar.
Full transcript