In the tour and activity industry, pricing is everything. The price that you charge for your tour and activity products will have a significant impact on your ability to compete within your local market. So, how do you set your pricing? Well, you’ll want to lock down a tour pricing strategy. Generally speaking, you have two options: mark up pricing or mark down pricing.
Here’s what you need to know:
Mark up tour pricing strategy
- With a mark up tour pricing strategy, your prices are set so that each tour booked generates a profit. This requires you, as the tour and activity operator, to identify and understand all costs associated with the tour.
- Remember that your costs go beyond the resources and staff members used for the individual tour. You also have to consider the costs of developing the tour, maintaining business infrastructure, and marketing your products.
- Once you have determined what each tour costs your company, you can then set your pricing. For instance, if your city bus tour that lasts for six hours and accommodates up to 10 people costs $500 for you to run, then you may want to consider setting the price for $100 per person. This would allow you to generate $50 in profit for every person booked on the tour.
- A mark up pricing strategy is an easy way to ensure that you earn a healthy profit on each tour booked, but it can make it difficult to stay competitive in a market that relies heavily on tourism.
Mark down tour pricing strategy
- A mark down pricing strategy is another option for tour and activity operators to consider. With this pricing strategy, you set your tour prices lower in order to increase business, generate buzz, and drive out the competition.
- You still need to consider the costs that are associated with each tour, as you do not want your mark down pricing strategy to force you to lose money on each booking. Identify all costs associated with developing and operating the tour before implementing a price.
- With a mark down pricing strategy, you are going to earn less profit per booking but likely earn more bookings per tour. This is often a great option during the slow season at your tour and activity business. Instead of charging $100 per person for your city bus tour, charge $75 or $80 per person. You may not earn as much revenue, but your tour buses will be filled even when there are fewer travelers in the area at the time.
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Image credit: Tom Parsons