(Extract from “Niseko Alpine Review – December 08″ – to subscribe for our latest edition click here)
2008 will go on record as the year the world, certainly Australia learnt about currency and its impact.
With a swing of 40% on the AUD the impact was profound and certainly put many in a very difficult situation to meet commitments. Even the holidaying guests faced a bleak increase in their holiday packages, a pain certainly lessened by the concerted effort of all Niseko operators to discount prices.
Our long term outlook, over the next 5 years, remains unchanged; go long on Japanese yen assets. The short term positions appear to be an aberration.
How do you protect against such currency volatility?
1. Pay in advance
Not only do you reduce your currency exposure you can benefit from discounts as many operators will discount for advance payment.
2. Borrow in yen
An automatic hedge to that level of the loan.
Often from deposit to settlement is over 12 months so purchase consistently over that period at favourable rates. If you have a longer term view, look for opportunity like our Niseko Taisetsu with only 5% deposit, balance on completion mid 2010.
4. Hedge the currency.
You either buy forward currency or use futures contracts to lock in the price of your currency.
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