Newcomer Conversion rate in BA hotels

[Russell]

@Jazmin I appreciate the clarification, and I understand your concerns more clearly now.
The point you're emphasizing is the sudden and significant increase in hotel prices due to changes in the official exchange rate, which doesn't align proportionally with the inflation affecting other industries. This disparity, where hotel prices double almost instantly while other costs remain stable, raises valid questions about the pricing policies of certain hotels.

Your research highlights instances where hotels may force customers to pay in USD or apply the blue dollar rate when paying in ARS, particularly when booked through platforms like booking.com. This contrasts with the standard practice of letting credit cards handle the conversion at the official rate. Your example underscores the discrepancy between the hotel's pricing approach and the relatively stable prices observed in other sectors.

Concerns about dual pricing and the potential for gringo pricing in some businesses are valid. While many businesses maintain transparency and fairness, it's essential to be aware of these practices and seek out establishments that adhere to a consistent and fair pricing policy.

Your intention to pay the real price and avoid overpaying is completely understandable. It's crucial to make informed choices and support businesses that operate ethically. If there's anything specific you'd like to discuss further or clarify, please feel free to let me know.

 

[matr28]

Certainly, I understand your perspective better now. Let me summarize your points:
The individuals who can take advantage of the blue rate are generally those with stable currencies (USD, Euros) that are desired by locals. These individuals typically fall into categories such as:

1. Someone running a business in Argentina may not benefit from the blue rate.
2. Someone residing in Argentina may only leverage the blue rate if they are on an expat salary.
3. Foreign visitors to Argentina who don't earn in USD or Euros and are not high-salaried may be the ones who can make use of the blue rate.

You acknowledge that while there are hotels in Argentina that offer poor value for money, it's bemusing when some foreign tourists perceive Argentina as a bargain, given the high initial pricing due to hyperinflation.
While you agree that some merchants may take advantage of foreigners (gringos), you don't believe there is a distinct dual pricing system for hotels between locals and foreigners. You reference despegar.com as the Latin American equivalent of Expedia, indicating consistency in pricing.
You pose a question about visiting Argentina and the use of credit card terminals charging in USD or Euros directly. You note that those who charge in foreign currencies typically use peer-to-peer transactions or request payment in cash, leaving the decision to agree to the individual.
I appreciate your detailed insights and clarifications. If there's anything specific you'd like to delve deeper into or discuss further, please feel free to let me know.

 

[Russell]

@matr28 Certainly, here's a paraphrased version of your text:

I've never been to Argentina before, but I've lived in other Latin American countries for a couple of years. I'm planning to visit Argentina in three weeks and stay for a couple of months. Based on information from forums like this one and Reddit, people suggest confirming with hotels if they can pay the official rate in ARS. Some reports mention needing an Argentinian ID at certain hotels to access the official rate instead of paying in USD or Argentinian pesos converted with the blue dollar rate. It seems to be a case-by-case basis, and I'm still unsure about the prevalence of this practice. Thanks for the tip about using despegar.com with a VPN; I'll give that a try.

Given my background and interest in economics and business pricing strategy, I argue that hotels increasing their rates in ARS by more than double overnight, without a corresponding change in costs, will likely result in a decrease in demand. This, in turn, may prompt other hotels to lower their prices to increase sales, compete for market share, and eventually lead to an overall reduction in rates. Of course, this might not apply to high-end establishments like the Four Seasons or Marriott, where guests might not be as price-sensitive in ARS.

In line with my perspective, I plan to avoid individuals and businesses that insist on charging me in USD or providing prices exclusively in USD during my trip.

 

[matr28]

I agree that the market is likely to adjust over time, and it may take a few weeks for the effects to become more apparent.
The change is not necessarily that the prices doubled overnight, but rather that the currency arbitrage or savings diminished significantly overnight. This reduction is due to the much smaller difference between the parallel and official exchange rates.
As this rate difference becomes increasingly insignificant, the black market (or blue market) tends to disappear. A notable example is Venezuela, where there hasn't been an effective black market for the past 2-3 years. In contrast, a decade ago, people were resorting to carrying briefcases to transport large amounts of bolivars due to significant discrepancies in exchange rates.

 

[Russell]

I agree that the market is likely to adjust over time, and it may take a few weeks for the effects to become more apparent.
The change is not necessarily that the prices doubled overnight, but rather that the currency arbitrage or savings diminished significantly overnight. This reduction is due to the much smaller difference between the parallel and official exchange rates.
As this rate difference becomes increasingly insignificant, the black market (or blue market) tends to disappear. A notable example is Venezuela, where there hasn't been an effective black market for the past 2-3 years. In contrast, a decade ago, people were resorting to carrying briefcases to transport large amounts of bolivars due to significant discrepancies in exchange rates.

Your understanding is correct. The blue dollar rate reflects the real exchange rate in the free markets, and it's not arbitrage. The official rate, set by the government, is what's considered artificial in this context. Arbitrage would typically involve taking advantage of price differences between markets, but in the case of the blue dollar rate, it's more about reflecting the market's valuation of the currency.

In a reverse comparison, if we consider an American imported $1000 iPhone, the government's increase of the official rate from 350 to 800 won't necessarily have a direct impact on the price of iPhones in ARS. The pricing of imported goods, like iPhones, is influenced by various factors beyond the exchange rate, such as import taxes, distribution costs, and profit margins. Therefore, the iPhone's price in ARS may not undergo a significant reduction even with a change in the official exchange rate. The effects on pricing are more nuanced and depend on various economic factors beyond the exchange rate adjustment.

 

[Russell]

Also...It's important to emphasize that the official, blue dollar, and real exchange rates impact more than just tourism or the spending of tourists in Argentina. The majority of currency exchanges are driven by trade activities, including both imports and exports. Despite the official rate being set at 350, it doesn't necessarily mean that Argentina can import goods from other countries at the rate of 350/1 USD. The exchange rates, particularly the real or blue dollar rate, play a crucial role in determining the competitiveness of Argentine businesses engaged in international trade.
Furthermore, the dynamics of tourism are highly competitive, much like international trade. If Argentina were to significantly increase costs for tourists, it would not only impact its appeal as a tourist destination but also place it in direct competition with other travel destinations in Latin America, such as Mexico, Peru, Colombia, and beyond. In the global tourism landscape, pricing becomes a decisive factor, and abrupt cost increases could potentially affect Argentina's attractiveness compared to other destinations worldwide.

 

[matr28]

Argentina has multiple parallel exchange rates, including MEP, crypto, cold play, Qatar rates, among others, creating a complex scenario. It's challenging to determine which rate, including the blue rate, is the most accurate, and websites like http://www.dolarhoy.com provide insights into these variations.

The doubled price perspective is significant for Argentinians holding pesos, which have now been devalued. On the other hand, for foreigners with USD or EUR, their savings are halved due to the changed exchange rates. These perspectives are equivalent statements, dependent on one's viewpoint.

Regarding electronics pricing, it's worth noting that there isn't an official Apple store in Argentina, and the market is dominated by resellers. Prices are influenced by the initial cost (based on the sourcing country) and local demand. Typically, electronics cost 50-200% more in Argentina compared to the US for the same item. If locals start resisting the reseller market, prices may adjust on platforms like MercadoLibre accordingly.

 

[Russell]

Currently, I believe the real exchange rate is around 1000. Arbitrage opportunities wouldn't be significant among the various parallel rates if they are freely determined by market forces.

In my view, the devaluation of the peso isn't primarily due to the announcement of an official exchange rate change (although it could devalue if more money is printed). The devaluation only occurs at the official bank rate, which is practically unused as there is a higher black market rate. When Argentina imports from other countries, it does so at the real exchange rate, as no country would export to Argentina at the official rate if the real rate is more favorable.

Unless they increase the official rate to match or exceed the black market rate, nothing substantial will change. Prices will remain stable, assuming there's no additional money printing and productivity remains constant.

For me, arbitrage involves those who sell an item worth 100,000 ARS, convert it at the official rate, and charge customers in USD (e.g., booking.com/airbnb).

Even if Argentina were to dollarize, prices wouldn't suddenly match those in the United States for goods and services. Due to the limited amount of dollars in the Argentine system with the same production of goods and services, dollars could buy more in Argentina. This could reduce currency uncertainties and potentially boost Argentina's overall economic productivity, which would be a positive development. However, Argentina can also stabilize the peso as long as they refrain from excessive money printing.

Regarding hotels doubling prices in Argentine pesos, if their costs remain the same (or at least don't increase proportionally to the price hike), hotels that maintain or reduce prices might outperform those that increase prices.

 

[roland]

It is incorrect to say that the hotel will now be $1000

 

[roland]

However, it's important to note that the dollar rate was artificially inflated because it was based on the lower official rate used in the conversion from before.

 

[blair]

Refusing to accept pesos is against the law.

 

[StatusNomadicus]

is against the law.

as is charging a Cubierto without providing 250mL of water, sodium-free salt, and gluten-free bread, but let me know when you find a single restaurant that follows the CABA law