I had an interesting experience which made me wonder how this works, and which businesses get screwed or benefit from currency movements. The $A has crashed about 20% since I booked my travel to the US.
First: flight bookings through US travel website. I cancelled my trip and received a refund, which was more than my original payment because I paid in US dollars. So I carried the currency risk, all good.
Second: hotel bookings through US travel website (hotelclub.com) that offers either US or Australian dollars. I paid very cheap rates which were nonetheless 100% refundable, and I chose Australian dollars. Let's say I paid $A1,000 = $US900 at the time and my Australian credit card was charged. Last week I got my refund of $A1,000, although at some point $US900 would likely have been floating around the system and that's now worth $A1,300. Which of these is true?
First: flight bookings through US travel website. I cancelled my trip and received a refund, which was more than my original payment because I paid in US dollars. So I carried the currency risk, all good.
Second: hotel bookings through US travel website (hotelclub.com) that offers either US or Australian dollars. I paid very cheap rates which were nonetheless 100% refundable, and I chose Australian dollars. Let's say I paid $A1,000 = $US900 at the time and my Australian credit card was charged. Last week I got my refund of $A1,000, although at some point $US900 would likely have been floating around the system and that's now worth $A1,300. Which of these is true?
- The website held the currency risk. It would have passed on $US900 to the hotel when I checked in, instead it keeps the profit (or takes a loss if the currency goes the other way)
- The hotel held the currency risk. But what would it pay back to the agent in the event of cancellation?
- I held the currency risk. If the $A had instead strengthened it would refund me less than $A1,000, but instead it took the profit above that.
- The hotel would have demanded more money when I arrived, because the Aussie dollars held in trust were not worth enough to cover their costs. At current rates I would need to pay them an extra $US200 to make up the difference to the already cheap advance rates (probably $US2000 = $A3000 if I book the room now)
