Widespread acceptance of the euro in a number of countries has made life a little easier for Laurie Fitzgerald. A convention manager with Smith, Bucklin & Associates, an association management firm in Chicago, Fitzgerald has planned international events for 14 years and recalls the days when she had to keep $150,000 in a Swiss bank account and collect registration fees or pay vendors in five separate currencies. Today, she says, “the euro has really simplified a lot of that.”
The euro has streamlined intra-European transactions, but that doesn't help planners taking groups elsewhere. Moreover, U.S.-based organizations planning meetings or sending incentive groups in euro-based countries, still face the hurdle of converting U.S. dollars to pay bills and, depending on the attendee base for a meeting, accepting registration or exhibitor fees in currencies other than the dollar. For budgeting reasons alone, a currency strategy should be a priority for any U.S. planner venturing overseas.
How detailed that strategy is depends in part on the type of event or incentive being planned. “If you're doing a small meeting with half a dozen or a dozen people, you can do everything over the telephone, and you can pay with credit cards,” says John Taylor, a spokesperson for Reusch International. Reusch, headquartered in Washington, D.C., is a global financial institution that specializes in international payments.
A larger meeting with several hundred participants will likely involve a number of contracts and deposits, sometimes years in advance. Many vendors will accept payment in U.S. dollars, but the U.S. organization will pay for the cost of converting that money. That's where several alternatives come into play: setting up a foreign bank account, or buying forward contracts.
Opening a foreign bank account makes sense in certain cases. An organization that is establishing a branch office overseas to run a complicated meeting on site, for instance, will need to deal with a local bank for payroll, lease payments, utilities, and other day-to-day operating expenses. But for most U.S. meeting planners, Taylor says a variety of factors — the time difference, complex regulations, tax implications, and expense — complicate doing business with a local bank.
And the cost of doing business with many of those banks, especially outside larger cities, is rising: Many local European banks that made money from currency conversions in the pre-euro era are starting to charge excessive fees for country-to-country wire transfers (even in euros) to make up for the loss of income from conversions.
Another alternative, a forward contract, is an agreement to purchase a specified amount of foreign currency at a specified rate in the future. In essence, it's a way to control the risk of wildly fluctuating exchange rates. “Most meeting planners are like other business people: They have budgets and want to lock down their costs,” Taylor says. “Foreign currency markets are always volatile, and the euro hasn't changed that.” A forward contract simplifies budgeting and registration fees, especially for meetings planned well in advance.
Many of Reusch's clients go even further toward minimizing their risk by setting up a foreign currency holding account. Then, they purchase a series of forward contracts at various intervals, which allows them to spread the exchange rate risk over time.
Staging an event with participants from various countries poses its own set of challenges for a U.S.-based meeting planner, including questions about how to accept registration and exhibitor fees.
“The financial institution you work with should be able to help you manage those incoming payments. You should not expect your attendees to pay in U.S. dollars; they're your customers,” Taylor says.
But, depending on the institution, a planner should beware of potentially huge fees for converting checks in various currencies. “Unless your financial institution has a large international department, it's not going to be equipped to help you manage those transactions in a cost-effective way,” Taylor says.
Fitzgerald says wire transfers, so popular in Europe, are no panacea for payments. Often they go through multiple banks and are difficult to trace. “By the time [one of these transfers] hit the U.S. bank, it had no name, just numbers, and we didn't know who had sent it,” Fitzgerald recalls. Now, to minimize such mix-ups, those who submit payments that way are asked to complete a detailed form for their bank at home and to phone before sending the payment so Smith, Bucklin & Associates' staff can walk them through the transaction. Fortunately, she adds, more people are paying with credit cards.
Part of the problem with tracing or accepting wires for international payments is the complexity of the procedure and the hodgepodge of standards that different countries follow. For example, “In Italy, if you leave off the suite number in your wiring instructions, the bank in Italy might not deliver it,” according to Taylor.
Although it may be getting easier, Fitzgerald admits managing foreign currency transactions is no simple matter. “It takes a lot of time for budgeting and understanding the complexity of it,” she says.
Megan Rowe is a contributing editor to Association Meetings and its sister Primedia publications. She formerly was an editor with Lodging Hospitality magazine and has written extensively on meetings and incentive travel.