How this Aussie travel company grew internationally
Michael Cohen started the travel company Blue Powder after returning from a stint overseas as a ski instructor in Canada and Europe. When returning from the trip of a lifetime, it soon became apparent that this was what Michael was going to do for the rest of his life.
Michael and the staff at Blue Powder started small and local, transporting people from the big cities to the domestic slopes of Perisher and Thredbo. Eventually, the company expanded into the business it is today, a solo and group travel company specialising in bespoke international ski holidays catering for all shapes and budgets.
How Blue Powder expanded to the international slopes
Michael explains, “It started when we would drive groups of corporate clients from the city on a Friday night to go skiing, or teach them how to ski, and then drive them back on Sunday.
“We’ve skied all around the world and know all the best resorts, and that’s where it all started. I came back from spending a couple of years in Canada and Europe in ski resorts as an instructor and came back and thought ‘why not continue living the dream?’
“In the end there wasn’t much money in domestic travel as what there is in the international side, so after about 5-6 years, we got out of that and moved to the international market, and that’s where it really grew.”
How OFX were able to help in a volatile currency market
When it came to transition from domestic to international travel, not everyone considers the role foreign exchange can play in being able to offer competitive prices for your own customers.
“That’s where OFX came in to help with transferring money to hotels, ski hire stores and ski resorts. You can send small amounts, large amounts and OFX have always been really great to deal with. And as the business has grown over the years, all our staff all have their own logins and it takes them two minutes to do it.”
The travel industry in particular is dominated by online travel agencies but with that, customers are often required to use their bank or a credit card, which means they lose out on a bad exchange rate.
“It’s another area where OFX is great for us because if someone were to pay for a hotel overseas with their credit card, they get a worse exchange rate than what they would get using OFX. So we can use that as a selling point as well, and we tell people to compare that to the bank and they always come back to us because we’re using your [OFX] rates.”
A little bit of loyalty goes a long way
For Australian companies operating in the international travel sector, a strong Australian dollar is hugely important for booking international holidays.
Michael explains that when working with a customer to plan their ski holiday, they’ve learnt to quote at around 0.70 AUD conversion rate to mitigate against the risk of constantly fluctuating markets. This means that if the dollar is strong, the company makes a profit, and if the dollar crashes, the company makes a loss.
“We either take the loss and we’ve lost 3-4%, or we go back to our customers and say they have to take the loss because we have that in our terms and conditions, but you upset a lot of people when you do that So you’ve got to make the decision. Some staff will say, ‘unfortunately there’s been a drop in the market, and you’ve got to pay a little bit more’, but I just can’t do it because my customers have been with me for 10-11 years.”
In this instance, Michael values the loyalty that has come with being a long-time user of OFX’s service, in the same way he values loyalty to his own customers. Having used OFX for over a decade, Michael has built a strong relationship with his account manager Brett. This means that anytime Michael is unsure about the Australian dollar movements, he can call up or send an email and Brett is on hand to help.
“It’s been hugely important to our growth. Brett has come in over the years and taught me about the market and how it works and can offer advice.”
This also helps for when a transfer goes wrong which, in today’s fast-moving and technologically-enabled world, does happen. With OFX, Michael explains that you get the kind of personalised service to help in those situations that you simply don’t get from a bank.
“I accidentally bought $150,000 worth of Japanese yen and I was supposed to buy $15,000, but I was able to ring up and say ‘quick, you’ve got to catch this!’ You can make mistakes, and OFX always say, ‘no worries, lets fix it’.”
Managing a potentially volatile Australian dollar in the future
Now that Blue Powder has attracted people from around the world looking for a specialised ski experience, there’s still lots of avenues for growth.
Having predominantly booked holidays in Canada, the US and Japan, Michael relies on a strong Australian dollar. Thanks to the AUD remaining pretty stable over the last two years, their FX needs are predominantly spot transfers. However, some volatility in the AUD throughout 2019 has meant that locking risk management strategies, like Forward Exchange Contracts, are the natural next step.
Many businesses don’t take their FX risk into consideration and this can mean considerable losses during times of volatility, which can negatively impact your business. Volatility doesn’t necessarily have to be a bad thing. With the right currency strategy in place, and help from the right people along the way, volatility can help move your business in the right direction.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.