Perhaps you’ve done all of the market research possible, and you have identified the hole in the market that your tour and activity company can fill. Maybe you’ve invested hundreds or thousands of dollars into online marketing, and you know that all of the most motivated travelers are going to see what you have to offer. These are all necessary steps, but it may be for naught if you don’t know how to price travel products.
If you price your products too low, you’re going to be left without the funding you need to grow your business. If you set your prices too high, tourists are going to pass over your brand in favor of a lesser-priced competitor.
These tips will help you learn how to price travel products with ease:
Your operating costs are the most basic costs of your business. In short, they outline what it takes for your tours and activities to run on a daily basis. When calculating your operating costs, you will want to consider both your fixed costs and variable costs. Your fixed costs stay the same, no matter what. Common examples of fixed costs include your building rent or your insurance costs. Variable costs are flexible — they change based on output and often increase over time. Wages, for instance, are an example of a variable cost.
Before you set a price for your tours or activities, you need to know how much revenue must be generated from each booking. To do this, you should determine a profit margin. Your profit margin may fluctuate based on the season, but you should have a general idea of where you want each booking to be. Consider evaluating your competitors’ rates when determining your profit margin, as this will help you strike the right balance between staying relevant while still generating revenue for your business.
Your distribution network is necessary for spreading the word about your tours and activities. Without a strategic distribution strategy in place, you won’t be able to reach many of the most motivated travelers across the most powerful market segments. That being said, distribution does not come for free. You will need to pay commissions to the agents who resell your tours and activities. You may need to adapt your pricing strategy to accommodate your distribution costs, particularly if you often rely on OTAs and other major distribution agents who require higher fees to do business.
It’s important to remember that your tour pricing strategy can be a fluid entity. In fact, most tour operators find that one pricing strategy works better for their peak season, while an entirely separate strategy works best for the slow travel season.
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Image credit: Sebastien Gabriel