Pricing is inseparable from the success of your tourism product. Get it wrong, consumers won’t want to buy it, and distributors won’t want to sell it. Get it right, and have an abundance of bookings and profit!

So what are the most important elements that tour operators need to factor into their pricing?

1. Operating Costs

There are 2 types of operating costs:

  • Fixed costs. These are the costs that do not depend on output. No matter what your sales are, these costs stay the same. Some examples are rent, equipment, and insurance.
  • Variable costs. These costs change according to output and typically increase in proportion to it. Examples are wages, gas, electricity, maintenance, stock, bank fees, and marketing.

Combined, your operating costs tell you what it costs you to run your tour or activity business.

2. Profit Margin

When you calculate your operating costs, make sure you’re being accurate, so that you can decide on a good price that gives you enough profit while still being competitive.

To figure out which one of your products’ profit margins can be increased, look at:

  • Your competitors. If your competitors’ tour or activity is at a significantly higher price, then assess what value they’re adding to justify the difference.
  • Demand from past and future customers. If there’s a high demand, then you can increase your rates. If not, then think about what value you can add to your product to make it more attractive, without sacrificing profit.

It would also be worthwhile to target a particular market that you know works well for you.

3. Distribution Network Costs

Your valued agents are the ones that help you to distribute your tour or activity to the masses. And of course, they don’t do it for free! Their sales skills boost your bookings, and your commission boosts their income.

All of your agents receive a different level of commission depending on where they are in the distribution network, so understand where they fit into it. Payment is expected after they send  a booking your way.

So it’s smart to split your booking channels into direct (via your website’s online booking system) and through agents (a modern booking system will allow them to instantly send you bookings through it).

If you don’t have tour booking software that supports this, we can help! Take a free trial of Rezdy if you’re keen to dive into it, or if you’re just interested in learning more, get in touch with our sales team.

 

Image courtesy of freedigitalphotos.net

 

Topics , ,

Join over 30,000 tour and activity professionals on Rezdy

Simon Lenoir, Founder and CEO of Rezdy Online Booking Software
About Simon Lenoir

Simon has over 15 years’ experience as an IT professional. He also has extensive experience in the travel industry from being an around-the-world traveller and managing a dive centre in Southeast Asia for over 3 years. Simon is now dedicated to providing the best online booking solution for tours and activities operators; he is the brains behind Rezdy.Outside office hours Simon is a true activity addict – mountain biking, sailing, swimming, beach volleyball – just to name a few. But most of all he loves diving in Australian waters.

Leave a Reply

Your email address will not be published. Required fields are marked *

3 Costs You Need to Consider When Pricing Your Tourism Product

, ,

Pricing is inseparable from the success of your tourism product. Get it wrong, consumers won’t want to buy it, and distributors won’t want to sell it. Get it right, and have an abundance of bookings and profit!

So what are the most important elements that tour operators need to factor into their pricing?

1. Operating Costs

There are 2 types of operating costs:

Combined, your operating costs tell you what it costs you to run your tour or activity business.

2. Profit Margin

When you calculate your operating costs, make sure you’re being accurate, so that you can decide on a good price that gives you enough profit while still being competitive.

To figure out which one of your products’ profit margins can be increased, look at:

It would also be worthwhile to target a particular market that you know works well for you.

3. Distribution Network Costs

Your valued agents are the ones that help you to distribute your tour or activity to the masses. And of course, they don’t do it for free! Their sales skills boost your bookings, and your commission boosts their income.

All of your agents receive a different level of commission depending on where they are in the distribution network, so understand where they fit into it. Payment is expected after they send  a booking your way.

So it’s smart to split your booking channels into direct (via your website’s online booking system) and through agents (a modern booking system will allow them to instantly send you bookings through it).

If you don’t have tour booking software that supports this, we can help! Take a free trial of Rezdy if you’re keen to dive into it, or if you’re just interested in learning more, get in touch with our sales team.

 

Image courtesy of freedigitalphotos.net