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How to Increase Revenue with Tour Costing and Pricing

By Erick Tomaliwan

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Do you remember the game show where contestants had to guess how much something costs? Yes, of course, it’s The Price is Right !

As an experience provider, your life might be as entertaining as a game show — especially when it comes to tour costing and pricing. And as you probably know, your prices need to cover your costs — all of them.

Learning how to price a tour package is no small feat. Sure, being fully booked is wonderful, but your goal is to be profitable. And, if you can create a sustainable pricing structure early on, you’ll be resilient in the long term.

In this post, you’ll learn what goes into tour costing and pricing and learn how to re-evaluate pricing at the end of each busy season.

What goes into tour costing and pricing

Pricing impacts how guests feel about the experience they’re buying. If a booking is priced too low, it may seem cheap. On the other hand, if an experience is priced too high – it might be out of budget for your target market.

Most people, consider themselves to be somewhere in the middle when looking at pricing. Meaning if guests are presented with 3-4 options, they’ll gravitate towards the middle-range tour package options.

When setting your pricing, you’ll want to account for operating costs as well as profitability. Doing so will nudge you further towards setting prices that align with the goals of your tour business. And while pricing itself may not be complicated, it is an art.

You wouldn’t be alone if you’ve made the error of evaluating your tour business competition and setting prices just below or slightly above in order to attract bookings.

And while we can understand wanting to increase your share of the market, you should base your pricing on insights from your unique tour business.

When pricing a tour package, consider these questions:

What type of activity or tour are you producing/selling?
How many people can you accommodate?
How many tours will you be running per day?
What operating expenses do you have?
How many of your costs are fixed vs. variable?
Are you a seasonal business that experiences high demand at certain times of the year?

how to price a tour while factoring in expenses and profit

Guests want you to tell them why a tour is worth the price you’ve set. Be sure to note duration, add-ons and whether transportation is included in the total price. Ultimately, you want your brilliant tour description to back up the price and make it easy for guests to say, “that sounds like it’s worth it.”

Looking for a better way to price your tours?

How to price a tour package

One method of tour costing and pricing involves a cost-plus pricing strategy where you input all of your expenses and anticipated revenue. From there, you’ll add in profit and revenue targets.

When pricing tours and activities, you’ll usually hear something about setting objectives or knowing your bottom line. Here are some expenses to account for when establishing the costs of running a tour business:

Example fixed costs for your tour business

Administrative costs (2-5%)
Booking software (5-10%)
Business Insurance (10-20%)
Employee wages (20-25%)
Equipment depreciation (10-30%)
Leasing and/or rental costs (20-30%)
Phone and Internet bills (2-5%)
Utilities (5-10%)

Sample variable costs

Accommodations
Transportation
Gas and maintenance costs (5-10%)
Hourly guide wages (depends)
OTA commissions (10-30% of the booking price)

When pricing a tour, you’ll want to know your capacity and overall operating costs. Once you know your baseline expenses, you can use this information to develop a sense of your target profit margins.

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Methods for setting the price of a tour

Using a method known as cost-plus pricing, you’ll combine all of your anticipated expenses and add a profit on top. The basic principles of pricing a tour package account for:

fixed costs
variable costs
a markup or profit margin.

You will calculate costs + expenses + profit + commission structure (which is usually a percentage based on the tour price including the total number of guests).

Ask yourself these questions to address when pricing a tour:

What are your costs per person?
If you were to book as a group, ie 4+ people, how much can you charge per person?
Let’s say you price the time slot as a fixed amount and add an additional fee per person on top of the minimum guest count
You can also set a price for a private tour booking, regardless of the number of guests

Alter your profit margin depending on the season and number of guests. Let’s say you need 4 guests to break even. And if you have 6 guests who book, the additional two people then make the tour profitable.

This way your time is always being compensated and you’re not burning out by running tours that aren’t paying for themselves. As Peter Syme says in his interview with Tourpreneur “many tourism business owners are guilty of underestimating their costs and undercharging as a result.”

Packaged tours typically follow a structure with a designated amount of time for each activity. Some tour companies present lower prices designed to get potential customers in the door. For instance, even if a single booking may not be profitable, this strategy may generate enough volume to make it worthwhile.

Sure, competing on price alone can be tough, especially if you’re offering the same activity or a similar type of tour. When pricing a tour package, forecast, plug in the numbers of how many bookings you need to break even and turn a profit so you know what you’re working with.

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1. Tour type

Perhaps you’re in the business of food or walking tours where all your guests have to do is show up and be entertained. On the other hand, you might be a kayaking guide or provide guests with bicycle rentals. Consider whether you have additional costs as a result of the tour type you offer.

Looking at your local competitors, similar companies and OTA’s will help you get a sense of market rates.

Sure, it’s helpful to get a benchmark when looking at tour prices — but don’t let this define your pricing objectives. Ultimately, your approach to tour costing and pricing needs to cover costs and establish a profit margin — even if it’s only 10-15% after your costs are accounted for.

If you’re already in your busy season, you might find yourself stretched thin with what you can do independent of additional staff.

If you operate multiple tours daily, do you need to keep staff on hand to run additional tours?

For instance, is there a busy season or peak booking times when you offer a waitlist for guests?

Are planning to offer group tours or sticking to private tours? This decision factors into how much you can charge per booking.

Guests should be able to tell what is included in the tour price with ease. An added perk of private tours is in alleviating concerns about not meeting minimum guest requirements. This means you can run tours with fewer people and still be profitable.

Thankfully, the benefits are there for both guests and tour businesses alike. For guests exploring whether to book a private tour, the expectation is that they’ll pay more in exchange for a higher-quality experience.

3. Duration

Are you taking guests on 1-2 hour tours or multi-day expeditions? The duration and frequency of your tours will be dependent on how the amount of staff you have available.

Longer tours have the potential of increased profits if account for all fixed and variable costs. Multi-day tours need to account for greater fixed expenses and increased booking logistics as well.

4. Upselling

When creating travel packages , consider what your guests want and whether they’ll pay more if you make their travel plans even easier. Perhaps you can increase your tour price by adding in a meal or transportation option as part of specific tours.

As you look to create added value travel , you’ll see more guests share and rave about you on review platforms. One way to look at this is to view every booking as an opportunity to provide guests with more value than they’ve paid for, especially if the activity the experience is a once-in-a-lifetime opportunity.

5. Seasonality

Do you find yourself with an insane summer season or is the wintertime busy with bookings? Depending on your tour business model, certain expenses, like staff wages can significantly increase your costs depending on the season.

As part of your seasonal marketing strategy , you’ll find a different approach might work better. One option might be to offer early bird pricing deals in the Winter ahead of the Spring season.

Your tiered pricing strategy might be encouraging smaller groups to book together. With different tactics that speak to your customer’s needs, you can incentivize guests to book and stay longer depending on your pricing objectives.

Sure, seasonality may mean dramatic fluctuations in your pricing. And while the tipping point might be 20-30% lower than what you could charge for the same experience in your busy months.

At the end of every busy season, aim to dedicate one day to reviewing reports from the last 3-6 month’s worth of bookings. This will let you see if you’re turning a profit, if your costs are creeping up and whether there are opportunities to boost prices for improved margins.

6. Operating expenses

Administrative, rental and staff wages can play a massive role in your tour business margins. At the same time, it pays to know your overall operating expenses, one of the benefits of a booking system subscription model is knowing some of your costs every month.

This way, you can account for costs and estimated bookings or your sales forecast when pricing your tour. Plus, once you determine your break-even point, you’ll have more knowledge available to help you decide how to price a tour package.

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Why profit isn’t a dirty word

Building profit into your tour costing and pricing means you’re creating a contingency plan ahead of slower booking periods. And depending on whether you accept a booking deposit (usually anywhere from 25-50% of the tour price) or require full payment in order to reserve a booking, booking payment(s) may be spread out.

Let’s say you have funds flowing out of the business for overhead or wages for your tour guides, you need to be able to recoup the cost of doing business with your tour prices.

Cash flow is essential when you’re building and scaling a tour business. And why it’s in your best interests to build in profit from the beginning.

Profit margins might look like anywhere from 10-40% of your posted tour price, depending on your specific business model along with the season. Sure, businesses are designed to make money. The added benefit of running a profitable business is that it gives the power to determine when and how fast you scale.

Remember, you’re in the business of providing memorable experiences for your guests. If you’re committed to being it for the long haul, tour costing and pricing needs to reflect your hard work. In order to serve future customers, by strategically pricing your tours, rentals and activities, you’re setting your business to run sustainably, over the long term.

What goes into pricing private tours

Given how the pandemic impacted group tours in many parts of the world, private tours have grown in popularity. In addition, your capacity for multiple tours will be limited if you focus on private tours, which explains why pricing for these types of tours is typically higher.

Sure, you might not have to pay as much in staff wages, as part of your variable costs, but you still need to account for fixed costs with your tour pricing.

In addition, some guests are willing to pay more for the convenience of having a guide all to themselves. And according to this Tourpreneur article on pricing private tours, you need to distinguish how private tours differ in value when compared to group pricing in marketing efforts.

Let’s say you have a couple who prefers to tour at their own pace. Perhaps they find group tours exhausting or they would rather have the flexibility to explore hidden gems at a different pace or time. If niching into private tours, account for the limation placed on you without being able to charge more for each individual person who joins the tour. So, where does this leave you?

You need to charge accordingly for your time. Is it more expensive for the two people booking a private tour? Yes — most likely.

Since private tours are considered more of a luxury offering, private tour packages typically yield a higher price point. For guests, a one-on-one experience offers increased value through flexibility and personalization.

How to increase margins and reduce expenses

Every tour business has to account for fixed and variable costs which can fluctuate between the seasons. With inflation and operating costs rising each year, it’s worth reviewing pricing on a yearly or even seasonal basis. Savvy tour operators account for a marketing budget (consider this money you get to spend targeting your ideal guests and have fun with it).

Explore marketing distribution by exploring different channels, like OTAs as needed to help increase bookings as it makes sense for your business.

As distribution channels that can get you more bookings, OTAs typically take a commission of anywhere from 15-30% of your booking fee. As a result, setting aside some revenue earmarked for business promotion can increase direct bookings which allows you to keep more in your pocket.

Your bottom line refers to the amount remaining on a balance sheet displaying a company’s financials. Another term for this is net profit, or what’s leftover after commissions, expenses and salaries are factored in.

Most importantly, this is where seeing where your revenue meets your expenses, so you can charge enough to cover costs and still come out ahead.

As an added bonus, looking at your sales forecast can also help you in determining what type of booking software to invest in. Generally, you’ll have the option of either a fixed monthly subscription or a commission fee. Other reservation technology providers take a percentage of bookings with fees running anywhere from 5-6% depending on the provider you choose.

Final thoughts

Tour pricing is worth revisiting before diving into and after every busy season. In your slower times, you can evaluate data from previous bookings. With this insight, you can create even better, and more profitable, packages going forward.

Always look at what gets guests in the door. Is it your superior service? Is it your consistency and reliability? Are you a master at personalizing private tours or is your seasonal pricing strategy right on the money?

People are much more inclined to buy from companies they know and trust. Feel free to look at upselling opportunities to increase revenue and provide added value for your guests.

Look ahead and set some goals for where you want to be. Continue to lean into your pricing strategy so you have solid momentum to build and scale your business to meet the pent-up demand for remarkable travel experiences.

Want to take Checkfront for a spin?

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Online bookings. Flexible pricing. Outstanding support.

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Tour Costing Sheet Sample: A Complete Guide To Efficiently Manage Your Travel Expenses

1 Introduction
2.1 Components of a Tour Costing Sheet
2.2 Sample Tour Costing Sheet
3.1 1. Plan Your Budget
3.2 2. Record Your Expenses
3.3 3. Review and Analyze
3.4 4. Adjust Your Plans if Needed
3.5 5. Stay Disciplined
4 Conclusion

Introduction

Traveling is an exhilarating experience, but it can quickly become overwhelming when it comes to managing your expenses. Keeping track of all the costs associated with your tour can be a daunting task. However, with a well-structured tour costing sheet, you can easily monitor and control your travel budget. In this article, we will provide you with a sample tour costing sheet and guide you on how to effectively use it to optimize your travel expenses.

Why Use a Tour Costing Sheet?

A tour costing sheet is a valuable tool that allows you to plan, track, and analyze your travel expenses. It helps you understand where your money is going and enables you to make informed decisions to stay within your budget. By using a tour costing sheet, you can avoid overspending, identify areas where you can save money, and ensure that your travel plans are financially sustainable.

Components of a Tour Costing Sheet

A tour costing sheet typically consists of several key components:

Date: The date of the expense
Expense Category: Categorize your expenses (e.g., accommodation, transportation, meals, activities)
Details: Provide a brief description of the expense
Amount: The cost of the expense
Payment Method: How the expense was paid (e.g., cash, credit card)

Sample Tour Costing Sheet

Here is a sample tour costing sheet to illustrate how it can be structured:

How to Use the Tour Costing Sheet

Now that you have a tour costing sheet, let’s dive into how to effectively use it:

1. Plan Your Budget

Before you embark on your tour, set a realistic budget. Determine how much you are willing to spend on different expense categories such as accommodation, transportation, meals, and activities. This will serve as your baseline for tracking your expenses.

2. Record Your Expenses

As you incur expenses during your tour, diligently record them in the tour costing sheet. Fill in the date, expense category, details, amount, and payment method for each expense. This will help you maintain an accurate and up-to-date record of your spending.

3. Review and Analyze

Regularly review your tour costing sheet to track your spending patterns. Analyze which expense categories are consuming a significant portion of your budget. This will enable you to identify areas where you can cut back or find more cost-effective alternatives.

4. Adjust Your Plans if Needed

If you notice that you are overspending in certain areas, consider adjusting your plans. Look for ways to reduce costs without compromising the quality of your experience. For example, you could opt for budget accommodations or explore affordable dining options.

5. Stay Disciplined

Stick to your budget and avoid unnecessary expenses. It’s easy to get carried away while traveling, but staying disciplined will help you stay within your financial limits and ensure a stress-free experience.

A tour costing sheet is an invaluable tool for managing your travel expenses. By using it effectively, you can optimize your budget, avoid overspending, and make the most of your travel experience. Remember to plan your budget, record your expenses, review and analyze your spending, adjust your plans if needed, and stay disciplined throughout your tour. With a well-structured tour costing sheet and a little financial awareness, you can embark on your journey with confidence and peace of mind.

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Tour Pricing 101: How To Do It And What To Consider

Category: Marketing Strategy for Tour Operators
Date: October 7, 2022

Tour pricing can make or break your outdoor guiding business. Price your services too high and you won’t get enough customers to cover your costs or make a profit. Price your services too low and your costs will overtake your profits.

Maybe you want to start an outdoor guiding business because that’s your passion, your hobby, and your lifestyle. Sure, it could be cool to make money on the side guiding, but if you really want to start a full-fledged tour operation, you need to make a profit, not just break even, but to make money so your business stays, well, in business.

Figure Out The Costs Of Running Your Guiding Business

Before you can start pricing your tours, you need to figure out your costs. Typically, tour operators can expect to pay the following:

Equipment maintenance (shuttle busses, ropes, helmets, gear, etc.)
The salary of guides and staff
Any training courses you will offer to your staff
The commission for resellers (business partners, Online Travel Agencies, marketplaces, etc.)
Internet, cell phone, electricity, rent, and other bills
State and Federal taxes
Marketing costs (ads, website, social media, print, etc.)

Pay Yourself

Another thing you should consider when setting your prices is how much you want to pay yourself. Start by adding up the time you spend on your business. Next, to price your time, set an hourly rate you want to earn from your business, and then divide that by how many tours you can sell in that time.

Since outdoor guiding trips are a service and not a product, you also have to consider how much time a single trip takes out of your day. If one trip takes 4 hours, you need to account for that in your costs. If you’re paying yourself $50/hour, you need to make at least $200 just for your salary for that trip. Then, consider the other costs too.

Seasonality

Also, don’t forget about seasonality. Will you operate all year long or just parts of the year? You need to make sure you take this into account while pricing your trips to make up for profit dips throughout the year.

Variable vs. Fixed Costs

Finally, another component of determining your costs is looking at variable and fixed costs. Variable costs are things that change in price week-to-week or month-to-month, like gas, food, and electricity. Fixed costs are costs that don’t change as often, like your internet bill, cell phone, rent, and staff salaries.

Next, Determine Your Profit Margin For Tour Pricing

You have a good idea as to how much it’ll cost to run your tour business. Next, you need to figure out how much money you want to make on top of that, a.k.a your profit margin, a.k.a how you’ll stay in business and don’t have to work a side job(s) to keep your passion running.

What You Need To Make To Break Even

Find out how many tours you need to provide in order to break even (by the week or by month). Start at your monthly costs then work backward.

For sake of simplicity, say your monthly costs are $1,000/month. To find the weekly breakdown, divide $1,000 by 4.3 (the average number of weeks in a month). That equals $232.55 (round up to $233). To break even, you’d have to make $233 per week from your tours.

Markup Percentage

Next, you need to determine your markup percentage to make a profit. A markup is how much your trip is “marked up” before it’s sold. If OTAs charge a 10-30% commission, it’s safe to assume that a 10-30% markup is within the industry standard ( psst.. clients aren’t as opposed to service fees as you think. Check out our article on Airbnb’s service fees and how they’re able to charge as much as they do ).

Say you want to make a 20% profit on your rock climbing trips. Take your costs per trip and divide them by one minus .2 which gives us .80. For example, say it costs you $100 per person per trip. Divide $100 by .80 and you get $125. $125 is your target price.

100/.8=$125

Or, if you want to make a 30% profit, take 100 and divide it by .7 (1-.30=.7).

100/.7 = $142.85

$142.85 would be your target price per person per trip.

Here’s the formula to do this equation on your own:

Target price = (Variable cost per product) / (1 – your desired profit margin as a decimal)

Putting it together:

Figure out your monthly costs and find the weekly breakdown of that cost. Then determine what that cost is per person so you can correctly markup your cost per person to make a profit. Don’t forget to factor in seasonality in there too!

Cost Analysis For Your Tour Pricing Strategy

Say you’ve decided on $143 per person for a 4-hour rock climbing trip and you have a client-to-guide ratio of 4:1. That means you’d make $572 if you sold all four seats on this trip. But is this something that people are willing to pay for?

Compare With Competitors

Look at other guiding companies in your area or in neighboring cities that offer similar tours as yours to see their prices. For instance, we looked up rock climbing guides in Phoenix, Arizona and for a four-hour climbing trip for a group of four, we saw $155, $145, $145, and $175 from four different companies.

Don’t Automatically Go With Lowest Price

Don’t just go for the lowest price if your tours are unique and offer something different than your competitors (which they should).

You should already know by now what kind of trips you want to offer and how you’ll differentiate yourself from other tour operators in your area, so price your trips to reflect that (and don’t automatically go with the lowest price). As you can see, there’s a $30 difference between the lowest and highest price for rock climbing guides in Phoenix, Arizona.

If you stuck with your price of $143, you’d be the lowest price out of your competitors, even if it’s by $2. And you’d still have room to grow. If this price still allows you to pay for all the necessary costs to run your trips and make a profit, this might be a good starting point.

If you realize that you aren’t offering enough value on your trips for the cost, consider adding specific services that don’t add much to your cost, but have a high perceived value by customers like simple meals or snacks, bottled water, photos, etc.

Test And Adjust Your Prices

Test and adjust once you’re live. If you realize no one’s booking with you and they’ve mentioned the price, consider dropping it a touch (make sure you still make a profit). If you’re getting a lot of customers, but you’re losing money, you’ll need to increase your prices so you can stay in business.

As we saw in our Phoenix, Arizona rock climbing guides example, you’re more likely to fall into the latter situation (cost > price) since you’d have the cheapest tours. Luckily, you’d still have a lot of room to increase your prices before you get too expensive.

Make Your Tour Pricing On Your Website The Lowest Price

Your website is the best place for customers to book trips, so you want it to be the easiest and cheapest way to do so (psst… make sure to use streamlined online booking software so your website is, in fact, the easiest place to book a trip with you).

Charge Phone Booking Fees

Some outdoor tour operators charge a phone booking fee, which we think is ingenious. Sure, you want to help customers and answer their questions. And some customers need to have a ton of information before they feel comfortable booking a trip with you.

The problem with that is you could end up spending too much time on the phone answering their questions and booking the trip for them when you could be leading trips yourself or advertising your business.

You want to make $50/hour, right? How much money do you lose when you spend it on the phone booking customers when they can easily do it on your website?

Markup Your Trips For Resellers

If you work with a reseller or an online travel agency (OTA) like Expedia, TripAdvisor/Viator, GetYourGuide, and Klook, make your prices higher on those websites than on yours. OTAs charge commissions anywhere from 10-30% of your trip cost, so mark them up higher to make up for the commission cost.

By charging a phone booking fee and marking up your prices on OTA websites, you incentivize people to book on your website because it’s the cheapest option.

Adjust Your Tour Pricing For Inflation

Pricing is never a ‘set it and forget it’ strategy. Things are always changing. You need to be flexible and change with the economy. And adjusting your tour pricing for inflation is a necessary evil.

No one likes what inflation rates do, which is jacking up prices. Unfortunately, you aren’t immune to inflation rate increases. Plus, you don’t want your costs to be greater than what you’re charging because then you set yourself up for running out of money to run your business.

As of this writing (October 2022), the inflation rate is at 8.26%, which means your prices should reflect that since you’re paying more for gas, food, etc as an operator. If you’re charging $143 per person for a trip, an 8.26% increase would be an additional $11.81, so that’d come out to $154.81.

With that price adjustment to account for inflation, you’re actually still competitively priced. What you can do is what we mentioned earlier: add more services to your trips that don’t add a lot to your operating costs, but make customers feel like your trips have a higher value compared to others.

By showing your customers the value of your trips and the experience they’ll get by booking with you first, when they finally see the price they’ll know what they’re going to get for that cost. And they’ll be able to assess for themselves if your trip is worth it. If you’ve done a good job illustrating everything you offer, then there will be no doubt in their mind you’re the guide for them.

Note: Use this article as a starting point, but hire an accountant so you can get a professional opinion as to what you should be charging for your tours to not only cover costs, but make a profit.

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How to Increase Revenue with Tour Costing and Pricing

By Erick Tomaliwan

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Do you remember the game show where contestants had to guess how much something costs? Yes, of course, it’s The Price is Right !

In this post, you’ll learn what goes into tour costing and pricing and learn how to re-evaluate pricing at the end of each busy season.

What goes into tour costing and pricing

You wouldn’t be alone if you’ve made the error of evaluating your tour business competition and setting prices just below or slightly above in order to attract bookings.

And while we can understand wanting to increase your share of the market, you should base your pricing on insights from your unique tour business.

When pricing a tour package, consider these questions:

What type of activity or tour are you producing/selling?
How many people can you accommodate?
How many tours will you be running per day?
What operating expenses do you have?
How many of your costs are fixed vs. variable?
Are you a seasonal business that experiences high demand at certain times of the year?

Looking for a better way to price your tours?

How to price a tour package

One method of tour costing and pricing involves a cost-plus pricing strategy where you input all of your expenses and anticipated revenue. From there, you’ll add in profit and revenue targets.

Example fixed costs for your tour business

Administrative costs (2-5%)
Booking software (5-10%)
Business Insurance (10-20%)
Employee wages (20-25%)
Equipment depreciation (10-30%)
Leasing and/or rental costs (20-30%)
Phone and Internet bills (2-5%)
Utilities (5-10%)

Sample variable costs

Accommodations
Transportation
Gas and maintenance costs (5-10%)
Hourly guide wages (depends)
OTA commissions (10-30% of the booking price)

Methods for setting the price of a tour

Using a method known as cost-plus pricing, you’ll combine all of your anticipated expenses and add a profit on top. The basic principles of pricing a tour package account for:

fixed costs
variable costs
a markup or profit margin.

You will calculate costs + expenses + profit + commission structure (which is usually a percentage based on the tour price including the total number of guests).

Ask yourself these questions to address when pricing a tour:

What are your costs per person?
If you were to book as a group, ie 4+ people, how much can you charge per person?
Let’s say you price the time slot as a fixed amount and add an additional fee per person on top of the minimum guest count
You can also set a price for a private tour booking, regardless of the number of guests

1. Tour type

Looking at your local competitors, similar companies and OTA’s will help you get a sense of market rates.

If you’re already in your busy season, you might find yourself stretched thin with what you can do independent of additional staff.

If you operate multiple tours daily, do you need to keep staff on hand to run additional tours?

For instance, is there a busy season or peak booking times when you offer a waitlist for guests?

Are planning to offer group tours or sticking to private tours? This decision factors into how much you can charge per booking.

3. Duration

Are you taking guests on 1-2 hour tours or multi-day expeditions? The duration and frequency of your tours will be dependent on how the amount of staff you have available.

Longer tours have the potential of increased profits if account for all fixed and variable costs. Multi-day tours need to account for greater fixed expenses and increased booking logistics as well.

4. Upselling

5. Seasonality

As part of your seasonal marketing strategy , you’ll find a different approach might work better. One option might be to offer early bird pricing deals in the Winter ahead of the Spring season.

Sure, seasonality may mean dramatic fluctuations in your pricing. And while the tipping point might be 20-30% lower than what you could charge for the same experience in your busy months.

6. Operating expenses

Why profit isn’t a dirty word

Let’s say you have funds flowing out of the business for overhead or wages for your tour guides, you need to be able to recoup the cost of doing business with your tour prices.

Cash flow is essential when you’re building and scaling a tour business. And why it’s in your best interests to build in profit from the beginning.

What goes into pricing private tours

Sure, you might not have to pay as much in staff wages, as part of your variable costs, but you still need to account for fixed costs with your tour pricing.

You need to charge accordingly for your time. Is it more expensive for the two people booking a private tour? Yes — most likely.

How to increase margins and reduce expenses

Explore marketing distribution by exploring different channels, like OTAs as needed to help increase bookings as it makes sense for your business.

Most importantly, this is where seeing where your revenue meets your expenses, so you can charge enough to cover costs and still come out ahead.

Final thoughts

People are much more inclined to buy from companies they know and trust. Feel free to look at upselling opportunities to increase revenue and provide added value for your guests.

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How to Increase Revenue with Tour Costing and Pricing: 4 Best Strategies 2023

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As the owner of a tour business, you know that making money is the key to success. Setting the right tour costs and prices is one of the most important ways to bring in more money. Costing and pricing your tours right not only helps you make money, but also keeps you competitive in the industry.

In this article, we’ll show you the most important steps for how to increase revenue with tour costing and pricing. Just scroll down and have fun, so let’s do that!

Understand Your Costs is the first things you will need to know about How to Increase Revenue with Tour Costing and Pricing?

First, let’s talk about what tour costing and pricing mean Before to under stand about How to Increase Revenue with Tour Costing and Pricing. To figure out how much a tour will cost, you have to add up all the costs, such as staff salaries, rent, transportation, lodging, activities, guide fees, and any other costs. Tour pricing is the process of figuring out how much to charge for a tour so that it makes money and stays competitive in the market.

Whether or not your business does well will depend on how well you price and cost your tours. If your prices are too high, customers will go to your competitors instead. If you set your prices too low, you might not make enough money.

Before you set a price for your tours, you should have a good idea of how much they cost. You’ll need to think about three types of costs: fixed costs, variable costs, and direct costs .

Fixed costs

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Costs that don’t change no matter how many tours you offer are called “fixed costs.” This includes things like paying staff, paying rent, and paying for insurance.

Variable costs

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On the other hand, variable costs are costs that change based on how many tours you give . Transportation, gas, and lodging are all examples of variable costs. These costs will also go up as you add more tours. It’s important to calculate these costs correctly so you can figure out your profit margins and set prices for your tours that are competitive.

Direct costs

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Direct costs are the expenses that are directly related to each tour you offer . There may be fees to get into attractions, fees for guides, and costs for certain activities. To figure out how much each tour costs, you need to know and figure out these direct costs.

If you know exactly what your costs are, you can set the right price for your tours and make the amount of money you want. By taking into account all of these costs, you can set prices for your tours that are accurate and take into account both fixed and variable costs as well as direct costs.

Determine Your Target Profit Margin

How much profit do you want to make on each tour.

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Once you know all the costs of your tour, it’s time to think about how much money you want to make. This means, basically, deciding how much money you want to make on each tour. Finding out how much of a profit a travel agency in the adventure business makes can be quite an adventure in and of itself. It all depends on the services they offer and how well they market themselves.

Most of the time, a h ealthy profit margin for a tour company is between 10 and 20% of the money made from each tour. Travel agencies that focus on adventure activities like hiking, camping, rafting, and other outdoor activities tend to have higher profit margins than those that only offer traditional vacation packages. This is because the cost of providing these services is usually lower than the cost of providing more traditional services. This is because these services are smaller and don’t have the overhead costs of larger operations. But every business is different, and it’s up to the owner or manager of each business to figure out what strategies for pricing and making money work best for them.

There are a few common ways to set prices that can help you reach your profit goals . Basically, your pricing strategy should depend on a number of things, such as how much it costs, who your target audience is, and how much competition you have. By giving these things careful thought and trying out different pricing strategies over time, you can find the best way to run your tour business. We’ve put together a list of the most popular strategies, which you can see below.

What pricing strategy will you use to achieve this profit margin?

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Cost-plus pricing is the first one. This is when you set your price by adding a certain amount to your costs. It’s a simple way to make sure that your price covers your costs and makes you money. For example, if the total cost of a tour is $1,000 and you want to add a 20% markup, you’ll charge $1,200 for that tour.

Price competition is another strategy. With this method, you set your price by looking at what your competitors charge. To do this, you will need to look into what other tour companies charge for similar tours. Then, you can set your price within the same range, taking into account your own costs and how much money you want to make.

Both ways of setting prices have pros and cons. Cost-plus pricing is easy to figure out and makes sure you’ll cover your costs, but it might not be competitive enough in the market. Competitive pricing, on the other hand, can make your tours more appealing to customers, but it might not be profitable if your costs are higher than those of your competitors.

So, to figure out which pricing strategy is best for your tour business, you need to think about your business goals, your ideal customers, and how the market is doing right now. And don’t be afraid to try out different prices to see what works best for you.

Set Your Prices

Consider the value of your tours to customers.

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When deciding how much to charge for your tours, it’s important to think about what makes them different from the others. What are some unique things you can do that will make people want to book with you? To figure out how much your tours are worth, you can do some research by looking at what people say about your business and how much other similar tours cost. So, you can set a price based on what people are willing to pay for the experience you’re giving them.

Research the prices of your competitors

It’s also important to keep an eye on what your competitors charge so you can stay competitive. By looking at their prices, you can get an idea of what the going rate is for tours like yours and set your own prices accordingly.

Let’s say you run a tour company in a certain city that offers historical tours with a guide. If you look at the prices of other companies in the area that offer similar tours, you can figure out if your prices are fair or if you need to change them. For example, if you find that your competitors charge much less than you do, you may need to lower your prices to get more customers. Even if your tour is unique and there aren’t many direct competitors in your area, you should still find out what people are willing to pay. You can do this by looking at how much similar experiences cost in other places or by using surveys or focus groups to find out how interested and willing to pay customers are.

Test different price points to see what works best

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If you want to try out different prices, you can offer special deals and promotions to see what gets the most attention. For example, you could give people a discount if they book early or if they book more than one tour with you. With time, you’ll learn what pricing strategy works best for your business and brings in the most money. Just keep in mind that this may take a while, so be patient and keep trying different things until you find the right balance.

Monitor and Adjust Your Prices

Keep track of your costs and how they change over time.

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Setting the right price for your tours is a process that goes on over time and needs constant attention and changes. It’s important to keep an eye on your costs on a regular basis to make sure your prices are still fair. For example, if the cost of your transportation or lodging goes up, you’ll need to change your prices to cover the extra costs. If you don’t do this, your profit margin will go down, which can hurt your business’s income.

Monitor your sales and profit margins

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Keeping track of your sales and profit margins is also an important part of pricing. This helps you figure out if you’re making enough money or not. If your prices are too high, you might need to lower them to get more customers. On the other hand, if your prices are too low, you may want to raise them to make as much money as possible.

Make adjustments to your prices as needed

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By keeping a close eye on your costs and sales, you can make smart decisions about how to change your prices to make the most money. Remember that keeping an eye on your prices and making changes to them is a key part of running a successful tour business.

To sum up, if you want to make more money with your tour business, you need to take important steps like calculating your costs, figuring out your target profit margin, setting your prices, and then keeping an eye on them and changing them as needed. By doing these things, you can make sure your business stays competitive and still makes money with our Traveler theme.

We think you should try these ideas and see how well they work for you. Keep in mind, though, that pricing is not a one-time job. It is an ongoing process that needs careful attention and changes over time. With the right pricing strategy and constant monitoring, you can make more money and take your tour business to the next level.

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Thoughtful pricing strategies for tour operators

Tour costing and pricing is one of the most important things to get right, especially for new tour operators. Even experienced operators with established pricing strategies can’t rest on their laurels, and need to review and tweak their pricing according to changing market and business conditions.

In recent years, tour companies have had to scramble to adapt multiple parts of their business, including pricing, to a new world–first with COVID-19, and then with rapidly rising inflation. Adjusting your prices can seem overwhelming, but it doesn’t have to be. Here are some important things to consider when pricing your tours and activities.

The importance of pricing objectives

As with all parts of your business strategy, setting prices takes a lot of thought. You could, for example, aim to establish a name as the go-to budget operator for a particular destination, but you don’t want to price so low that you struggle to make a profit—or even stay in business. And what about travelers’ perception of your brand? Go too cheap and you may put some people off. On the flip side, go too far down the premium pricing route and you risk putting your tours out of reach for a lot of travelers and not generating enough business.

To get your tour pricing right, it’s important to do some thorough research, know your audience and market inside out, undertake a lot of number crunching, and ideally do some testing.

The first step is to consider your goals or, in this case, your pricing objectives. Once you know these, you can make clear-headed, informed pricing strategy decisions. Otherwise you’re just throwing out some numbers and hoping for the best. Consider the following common tour pricing objectives:

Retain customers: Do you want to build a loyal, long-term customer base? Typically, this means fairly consistent pricing so you don’t upset existing customers with out-of-the-blue price raises.

Differentiate your brand: Pricing is one way to stand out from the competition—either pricing lower to be the go-to budget tour operator or pricing higher to be known as a premium option in the market. Alternatively you could take a price-matching approach and aim to stand out in other ways.

Make more profits: You’re obviously in business to be as successful as possible. Maximizing profits typically involves keeping your costs as low as possible and your prices as high as possible, as well as by selling as many tours as possible. All of this requires thoughtful pricing.

Maximize sales: Another common objective is to sell as many tours as possible. Do you price low to corner the market? Do you adjust your pricing at different times in different markets to keep sales high?

Maintain your brand image: Pricing also affects branding. There’s a big difference in how a brand is perceived if they price low or high. How do you want your brand to be seen?

Your pricing objectives should align with your broader business objectives, your stage and place in the market—e.g. a new or established name—and your financial circumstances.

4 key pricing considerations

Once you know your objectives, you need to consider the various factors that go into tour pricing. Here are some of the main things to focus on when setting prices for your tours and activities:

1. Know your costs

You simply can’t consider pricing without considering operating costs. The two work together like a fine wine paired with the perfect cheese. Knowing your costs helps you establish a minimum price starting point—your break-even point—capable of at least keeping you in business. Your costs can be put into two broad categories:

Fixed costs: Rent, utility bills, staff salaries, and equipment and software maintenance or operation are all examples of fixed costs. These are predictable expenses.

Variable costs: These include less predictable costs. For tour operators, these often depend on how many tours and activities you sell and what they are. For example, you may need to hire more guides one season to cope with an increase in demand. Other costs to consider include commissions, staff training, and marketing.

Ideally, you want to figure out a per-tour and per-activity cost to help you price your tours and activities appropriately. This pricing method is known as cost-based pricing. It’s perhaps the simplest strategy. When you know your per-tour and per-activity cost, you can mark up (or down) as needed according to your overall pricing objectives, and in a way that helps you reach your revenue targets.

2. Know your value

Every tour you sell has a particular value to your customers. They are buying an experience rather than a product, so a tour that has a very high perceived value—for example a once-in-a- lifetime experience—can have a higher price.

You can add value to your tours by offering specific services that may not add too much to your costs but have a high perceived value to your customers. For example, including meals or hotel transfers, etc.

Travelers value different things. Some might place a lot of value in an all-inclusive package to a highly popular resort, while others may place great value on doing something different and unique. You should aim to price your tours and activities accordingly. Knowing your target audience is a key part of this.

3. Know your competition

Who is your competition and how do they price their tours? You almost certainly have competitors who offer similar tours or operate in the same locations. Even if you have few or no direct competitors, you are still competing with the many other things people have to spend their travel budget on.

Knowing how your competition prices their tours, and what value they offer, will help you establish a benchmark price so you can position your tours appropriately. If travelers are used to paying a certain amount for a particular type of tour—the market rate—you need to know what that is so you can then price higher or lower depending on what you offer compared to your competitors.

This is some of the most important research you can carry out, so take your time with a deep dive into your competition:

Who is the premium operator in your space?
Who is the budget option?
What do their customers get for their money?
Where do they sell their tours?
What reviews do they get (a great way to see if customers feel they are getting value for money)?

4. Know your market

As well as knowing the market rate for tours and activities, you need to know the demand within your market. If there is high demand, you may be able to charge higher prices and focus on adding value. If demand is low for some reason, e.g. it’s a new type of activity that hasn’t taken off yet or there has been a change in market conditions that reduced demand, then your price can reflect that lower demand, and then rise as demand increases.

Adapting pricing to market conditions is known as market-based pricing. The key is to constantly monitor your market, including what people want and what they’re willing to pay for—and how much they’re willing to pay—as well as your competition, inflation, and other timely factors.

This pricing model includes seasonal pricing, dynamic pricing (which we look at below), and last-minute pricing and discounts.

Pricing integrity when pricing tours and activities

Almost all travelers are price-conscious to some degree. No one wants to feel like they’re paying too much for something. And everyone loves to feel like they’re getting a good deal.

This is where “pricing integrity” comes into play. The more common definition of pricing integrity from a tour operator’s perspective is how fair, transparent, and consistent your pricing is. As mentioned earlier, you don’t want to surprise customers with sudden and drastic price increases. And you don’t want to offer some customer groups a huge discount while others pay full whack.

Making sure your pricing is fair and consistent for all of your customers, and giving them full transparency, ie. no hidden and unexpected costs while or after booking, is very important for your brand. This is especially important in a post-COVID world, where customers increasingly want to deal with brands they can trust and rely on—especially over the long-term.

Another definition of “integrity” is to describe something that is structurally sound. This can also apply to your pricing strategy. A sound, sustainable pricing strategy can be the solid foundation on which your business success is built.

Dynamic pricing for tour operators

Dynamic pricing is a market-based pricing strategy that is very common in the travel and tourism industry, and one that is increasingly accepted by consumers.

If you’ve ever noticed how airline ticket prices change depending on when a ticket is booked, or when ski hill passes change price the nearer you get to the day you want to ski, you’ve seen dynamic pricing in action.

Dynamic pricing has been used in the travel industry for years, and it’s also common in the entertainment, retail, sports, and other sectors. It enables you to adjust your pricing based on a variety of factors in order to fill more seats, increase profits, and even offer your customers incentives for early booking.

Dynamic pricing is a way for tour operators to maintain price integrity, by rewarding customers who book early or showing that you can adapt to their changing needs, while also adapting to changing market conditions.

To succeed with dynamic pricing, you need adaptable online booking software. Rezgo provides a rules-based pricing system that enables you to set up automated pricing adjustments based on a variety of factors, such as date, remaining capacity, early birds, and promo codes, so you can offer the right pricing for every situation. Developing the right pricing strategy, or combination of strategies, is a crucial part of running a tour operator business. Be aware though that even when you settle on a pricing strategy, it’s never really settled, just like how your website is never really finished. You need to always keep a close eye on your market and competitors, and make tweaks and improvements to make it work better for you.

Written By | Rob Mathison

Rob Mathison is a Vancouver-based freelance writer focusing on tech, travel, digital marketing, and education. He is a co-author of The Complete Resident’s Guide to Vancouver.

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Pricing Strategies for Tour Operators

Price setting for tour operators requires a strong mix of marketing strategy and financial analysis. The people, accommodation and components that make up the experience/holiday you provide can be incredibly diverse and pricing strategies often evolve as a tour operator develops its brand and market share.

What to Consider When Setting Your Pricing Strategy

Setting the right price for your products or services can determine your success as tour operator, influence customer perception, and directly impact your bottom line. In this ever-evolving marketplace, mastering the art of pricing requires a keen understanding of various factors that come into play:

How unique is your business? The more unique your product the more flexibility you will have to decide your pricing.
What value added services do you provide that enhance the perceived value of your offering? Some examples include free parking, a purchase incentive such as champagne on arrival or discounted tickets to a particular attraction or eatery.
What market do you want to attract and what position in that market do you want to establish? Research your target market in relation to product needs, price sensitivity, length of stay etc.
What are your operating costs? Calculate your break-even point and therefore what your minimum pricing should be for profit goals (estimates of revenue, occupancy rates etc will be needed).
What do competitors with similar products and services charge within your market? Competitors’ prices do influence the maximum rate at which your product can be sold but you must be aware of your own financial position (debt levels, cash flow etc) before you can decide whether you should compete on price.
When launching it may be necessary to set prices lower than your longer-term pricing expectations in order to attract volume, credibility and establish your brand. As you become more established with regular bookings you can consider increasing prices.
What is your overall marketing strategy? If you cater for the luxury traveller pricing may not fluctuate much at all but if you are targeting the budget traveller you will rely on volume of bookings.

Pricing Strategies Tour Operators Can Use

Mark up pricing strategy.

Set the prices of your holidays, tours and activities to ensure that you make a profit on each sale. Identify all of the costs associated with running your business which includes the time spent developing and promoting a holiday or experience.

The fixed costs include rent, building maintenance, any machinery and insurances. Variable costs include wages, energy, repairs, petrol, uniforms, bank fees, promotional and travel costs.

Mark Down Pricing Strategy

A mark down pricing strategy requires tour operators to mark down their prices in order to remain competitive.

It’s ideal during slower months. If the cost for your offering is normally £400 per person, then you might mark down your prices to £299 per person to allow you to (hopefully) earn some profit on each booking, while remaining competitive and keeping the business afloat.

It might even mean you generate more bookings than you would have without this promotional discount – and thus earn more income.

Tourists are increasingly turning to “packages” to meet all of their holiday needs - hotel, airfare, transfers, tours and activities all for one inclusive price. Developing packages with complementary tourism partners is a good way to stimulate demand and add value without having to discount.

Packages can also be used to target niche markets effectively, e.g. golfing holidays, food and wine tasting, beauty and relaxation etc.

You can use “disguised pricing” which hides the exact cost of individual components and also the extent of discount provided by contributing operators.

“Visible pricing” which gives your clients the flexibility to select their preferred package components according to their travel preferences and budget.

All tourism businesses should have a rack rate, an official rate before any discounts are applied. These are the “brochure” prices printed in advance of the coming season. The rack rate for activity and attraction operators is more likely to remain the same during a peak holiday season without any day to day discounting. However, accommodation providers will be changing their rack rate almost daily to reach capacity.

Seasonal Pricing

This is different price levels throughout the year to cover low and high seasons. These are usually the same date periods each year and apply for school holidays, public holidays or for local events where the dates vary each year.

Last Minute Pricing

A common pricing strategy for accommodation suppliers and tour operators to fill any last-minute gaps. It involves discounting prices according to take-up which are then promoted on last minute booking websites.

Discounting

Discounts are often applied in the offseason or to assist with yield management but be selective in their implementation because it could become a fast route to reducing your profitability.

With last minute price deals, just select those where you really need more takers. Consider adding conditions to a discounted price like a minimum stay or number of travellers in the booking.

Tourists do become used to discounted prices and you therefore run the risk of not only making it harder to charge your normal rates, but it will also devalue your product.

Common Pricing Types

Per Person pricing - is a set price per person, commonly used by activity/attraction and transport operators, accommodation providers and campsites. Options may include an adult, child and senior citizen price.

Per Unit pricing - is a set price for 1 unit of the product, e.g. price per night. Usually, the advertised price is for 2 adults or 2 + child rate.

Single or double occupancy - is common for B&B’s, there is a single rate and a double rate (which is not double that of the single rate).

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https://www.rezdy.com/blog/mark-up-vs-mark-down-pricing-strategy/

http://www.encore.ca/en/travel-trends-2018-travel-prices-are-going-up/

https://www.rezdy.com/blog/tips-about-selling-packaged-tourism-products/

http://www.tourismindustryblog.co.nz/2010/03/pricing-strategy-for-tourism-businesses/

https://www.researchgate.net/publication/316972324_Pricing_strategies_of_tour_operator_and_online_travel_agency_based_on_cooperation_to_achieve_O2O_model

https://www.destinationnsw.com.au/wp-content/uploads/2014/03/Tourism-Business-Toolkit-VOL2-Chapter3.pdf

https://acteavo.com/blog/5-must-marketing-tools-tour-operators/

https://www.4hoteliers.com/features/article/5378

https://www.gov.uk/cma-cases/online-travel-agents-monitoring-of-pricing-practices

Topics: Travel , Tour Operators , Online Travel Agents

How To Price Tour and Vacation Packages

Tour and vacation packages price formation is one of the most important business decisions every tour provider has to make.

If you set the right tour price, it’s the key to a profitable business.

But if you set the price too high or too low it will, at best, limit travel company’s growth. At worst, it could cause severe difficulties in sales revenue and cash flow.

So, the questions here are:

Do you know how much it will cost you to introduce new tours or vacation packages?
How to calculate the cost price of your tours?

Many tour providers don’t really know how to calculate their cost price and undercharge for their tours.

Whether you came up with a new tour and you don’t have the price yet, or you are just starting a travel company— don’t rush the process of price formation .

tour and vacation packages price formation, price formation, setting the price, price determination, price discovery, tours and activities, tour price, tour prices, how to calculate costs, travel agency, travel company

Perhaps the most frequent error with introducing a new tour and vacation package or starting a travel company is either undercharging or overpricing.

To help you solve the pricing challenge, we did a little research and gathered all the useful stuff in one place and voilà! Here’s the pricing guide made especially for tour providers and travel industry professionals.

It will guide you through six essential steps in tour and vacation packages price formation and key factors in travel company’s price formation.

If not already, in the pricing guide we made for tour providers, you will get more information on a dynamic pricing model in tourism attractions. Download the guide and learn what it is and how to boost your sales with it.

Let us know how you have set your prices. We are very interested in how tour providers deal with competitive pricing.

Start your day with blog posts made for tour providers—subscribe to Orioly newsletter and receive fresh content on a monthly basis!

ORIOLY on April 12, 2018

by Lidija Šomodi

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October 20, 2020

Back to Basics: Components of a Tour

All month, we’ve been highlighting basic concepts from various areas of travel. This week, we’re considering the building blocks of successful tours and FITs.

Tours require the combined skills and resources of many people. What do they consider in choosing the components of the tour, and how are the pieces put together?

For a thorough examination of this topic, we suggest you enroll in The Travel Institute’s Travel Introductory Program, the TRIPKit® . But, today, we are taking a quick snapshot of the all-important components of a tour.

If you were developing a tour, what would you include? Obviously, the answer depends on the intended market. Some tours offer a minimum of elements; others are all-inclusive. Let’s take a look at some options:

Transportation. Most tours include transportation as part of the package. A fly/drive package combines air transportation and a car rental. An air/sea or fly/cruise combines air and ship transportation; a rail tour includes transportation by train; a motor coach tour uses buses to carry tour participants from destination to destination to visit major attractions. Many tours also include transfers to and from airports, hotels, and rail stations.
Itineraries. Tours tend to use one of three types of itineraries: — A circle itinerary brings travelers back to their starting point via a different route. Passengers experience varied sights and places throughout, without retracing their steps. This approach suits tours that aim to cover a broad area, such as “Highlights of Central Europe.” — An open-jaw itinerary begins and ends in different places. For example, a “Highlights of Italy” tour might visit Milan, Venice, Florence, Pisa, and Rome, without returning to Milan. This type of itinerary works well when returning to the starting point would mean retracing steps or visiting less-desirable locations. — A hub-and-spoke itinerary is an increasingly popular approach. Travelers set up their base at a hotel in one city for several days and take day trips into the surrounding area, thus avoiding packing, unpacking and moving baggage. They also might spend one night away from the home base. The hub-and-spoke approach allows travelers to explore a region in depth. For example, on a “Highlights of France” tour, travelers might be based in Paris and take day trips to the numerous sights within striking distance of the City of Light, such as Versailles or Giverny.
Accommodations. Proximity to sightseeing attractions, transfer services, parking for the motor coach, and accessibility for travelers with disabilities may all be important in selecting hotels for a tour. Hosted and independent packages usually offer participants a choice among several hotels in different price ranges. On escorted tours, participants stay together at a hotel.
Meals. Tour operators can cut costs substantially by requiring tour participants to pay for their own meals or by adjusting the kind of meals offered. A tour operator that includes five dinners and five lunches is offering more than an operator that includes 10 breakfasts. A tour operator that permits an unlimited choice from the menu (à la carte) is offering more than an operator that arranges a set menu or limited choice. Meals plans are detailed in the TRIPKit and can be as varied as the tour itself.
Sightseeing. Tours usually include some attractions that are standard tourist draws, such as Walt Disney World Resort, Busch Gardens Tampa Bay, and Universal Orlando Resort in Florida. On an independent or a hosted tour, travelers generally receive sightseeing vouchers and admission tickets ahead of time or pick them up at the first stop on their trip. On an escorted tour, attractions might be added during the tour, depending on the interests of the group.
Other Components. The fare for some tours includes services—such as baggage handling—or covers tips, service charges, or taxes. Some tours offer additional amenities, such as flight bags, free drinks, or gifts.
Price. Whatever the components of a tour, travelers are likely to weigh them against its price. A small percentage of tours are quoted per couple (the most obvious are honeymoon packages). But the majority of prices are given per person, double occupancy , meaning that each person pays this price when sharing a room with another. Single occupancy prices are higher, sometimes much higher; the additional price paid by a person traveling alone is called the single supplement . A few tours try to find a roommate for a traveler who does not wish to pay the single rate. When the tour operator will not guarantee a roommate, the traveler may have to pay the single supplement, often referred to as a forced single .

All of these moving parts require careful planning. And that emphasizes, once again, the incredible value and worth you bring to the table every time you work with a client!

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5 tips to find the right price for your tours and activities

Pricing your tours can be tricky. There are a lot of factors and variables to account for, and that’s just to calculate how much you should charge our customers. What about how to implement your final pricing structures? It can turn out to be a real pandora’s box, this question of pricing.

Here are 5 things to consider when deciding the right price for your tours or activities.

1. What are your operating costs?

Your operating costs consists of two main categories, namely

1. Fixed costs

These are costs that occur and remain unchanged regardless of the number of tours or activities you run. This could be your rent, administrative costs, annual costs or cost of storing your equipment.

2. Variable costs

This refers to the costs you incur according to the number of tours or activities you run. It includes wages for your guides, cost of fuel, meals during your tours or a commission you pay your re-sellers.

2. What is your break even point?

After calculating your costs, you will have an idea of how much is needed to cover the costs of running your trips, and more importantly, start making profit.

This helps you to calculate the minimum number of bookings you need per tour or activity, to ensure that you do not make a loss.

Head over to this site to read more about break even analysis .

3. How about your profit margin?

Decide how much profit you would like to make on each tour. The most common way to figure out your profit margin is by using the cost-plus pricing method. You simply take the cost of running your tours or activities and add $X or X% to your cost. X will be the profit you wish to make.

When figuring out how much to profit you should aim to make, it would be wise to consider the following:

1. What is your value add?

What sort of added value are you providing your customers? Does this addition justify the additional amount you want to charge your customers? What are your competitors doing? You could opt for one of these options:

1. No frills

Think about low-cost airlines. The price of each flight advertised is based on the cost of getting from point A to point B, without the luxury of checking in bags, in-flight entertainment, meals and other amenities. You could choose to price your tours this way, where perhaps refreshments are not included, but could be for an additional $10.

2. Frill me up

An all inclusive package tour comes to mind when I think of added frills, where everything is included in the price. This might be refreshments, photos during the activity or tour, entry tickets and so on. The trick here is to decide what frills really add value, differentiate you from competitors, and justify the amount you wish to charge customers.

Read our post about adapting your tours or activities for luxury travellers to find out how to create real value for your customers.

2. What is the market rate for your type of activity?

What are your competitors valuing their products at? What is your pricing strategy? Can you remain competitive with the price you’ve set for your tour or activity? You could run a simple Google search for market rates and use it as a guideline for how you could price your tours. You don’t have to be the cheapest option available, but you shouldn’t be charging 5 times the market rate either.

3. What is the demand for your offering?

If you’ve run your business for a few years now, you would have the data to determine when demand for your offering is high and when it is low. You could use this to your advantage, as we will explore in the next point.

Read this article for a more in-depth explanation on these different forms of pricing .

4. What is your pricing strategy?

Within the tour and activity industry, it is common to change the prices for your offerings according to demand. Here are a few pricing strategies you could consider:

1. Seasonal pricing

It is common to charge customers a higher rate when demand is high and supply is unchanged or low. This usually means that tour and activity operators charge a higher price during high season and an even higher price during peak seasons. The opposite is also true, prices drop during off-peak and super off-peak seasons.

2. Daily pricing

Hostels and hotels regularly practice this, where they charge more for weekend stays than week day stays. You could do the same for your tours and activities too. Alternatively, you could also charge customers extra for public holidays.

3. Time of day pricing

This is also another way to maximise profits, where pricing varies according to the time of day. If, for example, a popular time for customers to book your activities is between 11am to 4pm, you could add a surcharge to those times of the day.

4. Last minute pricing

This is perhaps the trickiest strategy to implement. These could be discounted offers, like they do for some theatre shows, where customers are only allowed to buy a ticket a few hours before the show or on the day itself.

If your ultimate goal is to get your tours booked to capacity, this would be a good strategy to push for last minute sales. However, you need to decide if this outweighs the potential income you could have made from un-discounted bookings.

5. Discounts

Finally, you can always choose to provide discounts for group bookings or corporate events. These usually bring in a large number of customers, giving you the opportunity to blow their socks off and turn them into ambassadors for your company.

5. Can you implement your pricing strategy effectively?

Say you've already figured out how you'd like to price your offerings and they differ according to season, day of the week and there are opportunities for discounts for group bookings. Do you have an effective booking system that allows you to account for all these variables? Can your system communicate these changes to all your different distribution networks?

I'm not one to brag but I do need to tell you that our system ca n do all this, and more. Which is why we believe in it so much. It was designed to be flexible and adaptable to any tour or activity you run, allowing you to give your customers the best experience possible.

These are just a few things to think about when setting the right price for your tours. I hope this has been helpful.

Ready to get more bookings? Let us help!

Posted by Nicole Kow

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KPIs for Tour Operators: An Essential Tool for Maximizing Revenue

Table of Content

What are s.m.a.r.t. goals, the importance of tracking kpis for tour operators, kpis for tour operators: booking volume, kpis for tour operators: occupancy rate, kpis for tour operators: average booking value, kpis for tour operators: customer acquisition cost (cac), kpis for tour operators: online reviews and ratings, kpis for tour operators: website traffic and conversion rate, kpis for tour operators: customer lifetime value (clv).

In this day and age, there are a lot of resources out there on how to improve your tour and activity business. In fact, on this very blog you will find so many articles and ebooks covering the subject that it would take a lifetime to read them all. While the barrier to accessing the right knowledge is relatively low, the real challenge is adapting all these strategies and best practices to your own reality. The main reason travel professionals struggle to execute their plans is that they often forget to set S.M.A.R.T. goals, define relevant Key Performance Indicators (KPIs) and monitor them continuously. But what do we mean by S.M.A.R.T. goals? And what are the most important KPIs for tour operators and activity providers? In the following sections, we’ll answer these questions and more.

Before trying a new business strategy, you need to clearly define the goals you want to achieve, which can be more complex than you think. For this reason, we suggest you to adopt the “S.M.A.R.T.” framework, which is an acronym that stands for:

Setting a broad goal like “I want to sell more tickets” can be detrimental to your business because it makes it difficult for you and your staff to focus your efforts in a constructive way. You need to be as specific as possible, and the best way to do that is by asking yourself a few questions:

What is the end result of this project?
Who will be involved in the project? Can this be done internally, or will I need to hire outside contractors?
What resources can I use to accomplish this goal? What is my budget?
What are the best distribution/sales/marketing channels I should consider using?

Simply put, a goal is “measurable” if it has a number attached to it so you can easily track your progress. Monitoring these numbers (the tour operator KPIs we’ll talk about in the following sections) not only helps you stay focused and motivated, but it also allows you to see if you need to make adjustments to your original strategy before it’s too late.

You will never reach your goals if they are not realistic, even if you follow all the other principles of the S.M.A.R.T. framework. A goal is actually achievable only if you’re confident you have enough resources (in terms of manpower, money, and knowledge) to accomplish it in a given time frame.

Even if you work for or own a large company, you still need to remember that the resources at your disposal are limited, so you can’t afford to waste them on projects that don’t contribute to your bottom line in some way. In other words, when defining a new goal, ask yourself if reaching it will effectively have a positive impact on your business.

To really focus your energy on achieving a goal, you need to set a start and end date for your projects. Having a deadline will help motivate you and, more importantly, allow you to set the right priorities for your business.

Using these criteria, here are some examples of possible S.M.A.R.T. goals for a tour or activity company:

Grow your email subscriber list by 25% in the next two months.
Increase your social media followers by 40% in the next six months.
Generate 15% more qualified leads from online advertising in the next three months.
Increase website conversions by 10% in the next four months.
Increase average booking value by 5% in the next two months.
Improve online review scores on TripAdvisor by 0.5 points in the next six months.
Increase click-through rate (CTR) on email marketing campaigns by 7% in the next three months.

As we’ve seen, one of the most important aspects of the S.M.A.R.T. framework is that you must constantly track your results so that you know your progress and can adjust your strategies as needed. The best way to do this is to define a set of Key Performance Indicators (KPIs), which, as the name suggests, are quantifiable metrics of your company’s performance. If you’re wondering what the most meaningful KPIs are for tour operators and activity providers, read on!

Booking volume refers to the total number of bookings made for tours and activities in a given period. This is a critical metric for tour operators as it directly relates to revenue generation and reflects the overall demand for their services. For instance, a steady increase in bookings suggests that an operator’s marketing efforts, tour offerings and customer service are resonating with its target audience and driving growth.

In addition, monitoring bookings helps travel companies identify seasonal trends and fluctuations, allowing them to adjust their strategies accordingly. When it comes to reservations, having a clear understanding of patterns and fluctuations allows operators to optimize resources, such as staffing and inventory management, so that they can efficiently meet customer demand.

Occupancy – a metric traditionally used in the hotel industry – can be calculated by dividing the number of tickets you’ve sold for your tours and activities by the total amount of seats available. This KPI for tour operators tells you how effectively you’re using your resources and whether you’re maximizing your revenue opportunities.

If you’re not happy with your occupancy rate, consider the following strategies:

Dynamic pricing: Implement dynamic pricing strategies based on demand, time of day or seasonality to incentivize off-season bookings.
Offer last-minute deals: Encourage last-minute bookings by offering discounted rates for low-demand tours close to their scheduled start dates. This can help fill the remaining seats and improve overall occupancy.
Adjust tour frequency: If certain tours have consistently low occupancy rates, consider reducing their frequency or eliminating them altogether. This will allow you to focus on promoting more popular tours with higher occupancy rates.

Average Booking Value (ABV) is the average amount of revenue generated per booking and it can be calculated by dividing total revenue by the number of reservations in a given period. ABV provides valuable insight into the effectiveness of your pricing strategies, and if it’s too low, it means you’re probably leaving money on the table. The best way to increase your average booking value is via up-selling and cross-selling strategies: in other words, offer your customers the opportunity to upgrade their experience or add additional services such as transportation, meals, or equipment rental during the booking process. Alternatively, you can bundle tours or activities at a discounted rate to encourage customers to book multiple experiences at once.

Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer and is calculated by dividing the total marketing and sales expenses by the number of new customers acquired in a given time period. As you can imagine, monitoring CAC allows companies to gauge the effectiveness of their marketing and sales efforts. Unlike the tour operator KPIs listed in the previous paragraphs, you want to keep your CAC as low as possible. One cheap and easy strategy to reduce acquisition costs is to encourage satisfied customers to refer friends and family to your tours and activities. You can offer people discounts or free add-ons on their next booking to entice them to join your referral program.

Online reviews and ratings play a crucial role in the decision-making process of potential customers looking for tours and activities. As marketers know, they take advantage of a cognitive bias known as “social proof”: when people are undecided, they tend to copy the actions and beliefs of others around them. Regularly evaluating customer feedback through reviews is also essential because it provides critical insight into the aspects of your business that need improvement, as well as the areas in which you already excel. To build your online reputation, other than encouraging happy guests to share their experiences on TripAdvisor and similar sites, don’t forget to respond to both positive and negative reviews. Thank customers for their feedback, acknowledge any problems they may have experienced, and offer solutions to rectify the situation if necessary.

Website traffic is the number of visitors who come to your website, while the conversion rate is the percentage of those visitors who complete a desired action, such as booking a tour or filling out a form to request more information. Traffic is a good indicator of the performance of your marketing efforts: the higher it is, the more prospects you’re driving to your site. On the other hand, the conversion rate shows if your target audience is effectively responding to your offer and/or if there are problems with your booking process. For travel and activity providers, the most effective way to increase traffic and conversions is to implement a booking system . With Regiondo – the leading software in this category – visitors to your website can make a reservation with just a few clicks, eliminating any friction in the booking process. In addition, Regiondo’s robust analytics tools make it easy to track the tour operator KPIs mentioned in this article.

Customer Lifetime Value (CLV) is a metric that represents the total net profit a company can expect to earn from a customer over the course of their relationship. It takes into account factors such as average purchase value, purchase frequency and average customer lifespan. CLV is essential for tour operators because it provides a picture of the long-term financial viability of their business and helps guide marketing, pricing and customer service strategies. As with the other tour operators KPIs, there is no magic formula for increasing CLV: the only thing you can do is focus on giving your clients the best experience possible, so they’re more likely to book additional tours or activities and recommend your services to others. You could also consider implementing a loyalty program by offering rewards, exclusive offers and discounts to returning customers: it’s a great way to encourage repeat business and foster a long-term relationship.

In summary, consistently tracking and analysing KPIs is paramount to the success of any tour operator or activity provider. KPIs provide valuable insight into various aspects of your business, allowing you to make informed decisions and implement effective strategies. By monitoring your progress against your S.M.A.R.T. goals, you can identify areas for improvement, optimize resources and ultimately drive growth and profitability.

If you’re looking for comprehensive reservation software that can help your organization track KPIs and optimize processes, consider scheduling a call with the Regiondo team. Our industry-leading software offers seamless online booking, real-time availability, and powerful reporting tools to help your company grow. Book your demo today and discover how we can help you unlock the full potential of your business.

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Costing, Estimating and Pricing

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on February 23, 2023

Fact Checked

Why Trust Finance Strategists?

Sometimes, students are confused about the exact meanings of the terms costing , estimating , and pricing . All of these terms are used in connection with cost accounts, but they each have different meanings.

Costing: Definition

Costing means ascertaining the actual cost . Specifically, it can be defined as working out the actual cost of an article that has already been produced or a service that has already been rendered.

Estimating: Definition

Estimating, in contrast to costing, refers to ascertaining—in advance—the probable cost of manufacturing an article, completing a contract, or executing a process in the near future. Estimating is based on past (recorded) experience.

Estimating necessarily involves some guesswork, but guesses should be guided by facts to the greatest possible extent.

One of the advantages of the cost accounting system is that it provides reliable data on the basis of which estimates or tenders for future work can be prepared much more accurately than would otherwise be possible.

In this way, the margin of error in estimating a cost is reduced, which enables organizations to provide quotes to clients at a competitive price.

When estimating cost on the basis of past cost data, the anticipated changes in relevant costs must be taken into account; otherwise, the estimates may not be correct.

Pricing: Definition

Pricing means fixing the selling price of an article. The pricing of an article already produced should be preceded by and based on costing, but other factors are also taken into account (e.g., price of competitive articles, price trends, etc.).

In cases where the pricing of an article has to be done before its actual production, it is preceded by estimating rather than costing, and it has to be based on the outcome.

However, in such cases, the process of estimating the figure itself must be based on actual cost data, adjusted to anticipated changes in the relevant items of cost.

Costing, Estimating and Pricing FAQs

What are the differences between costing, estimating, and pricing.

Costing refers to ascertaining the actual cost. Estimating, in contrast to costing, refers to ascertaining—in advance—the probable cost of manufacturing an article, completing a contract, or executing a process in the near future. Pricing means fixing the selling price of an article.

Who prepares cost estimates and tenders?

The person who prepares cost estimates and tenders is called the estimator.

What kind of information an estimator require before preparing a quotation or estimate?

An estimator requires all relevant data on past prices of articles, quantity of work done in similar circumstances, type of labour and materials, etc.

What is the difference between costing and pricing?

Costing implies ascertaining the actual cost of an article that has already been produced or a service that has already been rendered. On the other hand, pricing means fixing the selling price of an article.

How can I make sure that my prices are competitive?

There are a few ways to ensure that your prices are competitive: research your competition, understand your target market, and offer discounts or promotions. You may also want to consider offering lower prices for bulk purchases or for customers who sign up for a long-term contract.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Automatic Tour Cost Calculation for Travel Agencies & DMCs

Travel agencies and DMCs create lots of Tour Itinerary proposals for Tour package queries from B2B & B2C Clients. One of the most important aspects of the Tour Itinerary building process is tour cost calculation and defining the selling price of the Tour Itinerary proposal.

To calculate the tour costing, you need to check out the cost of Hotel Room (Extra bed price if needed), cost of meals, Transportation cost (Airport Transfers and Sightseeing cost) & Activities cost. You collect all these data in a paper or excel sheet to calculate the total cost and Also, you add your markup and GST to get the final Tour cost. Also, you need to do the same process again if you have received any change in itinerary from a customer.

If you need to calculate the per person costing then you need to get the cost of every service for every person involved in the Tour which requires more time and effort.

Let's take an example of Andaman Tour Query received from B2B agent: -

Requirements:

Tour: 6 days for Family of 4 Adults and 2 Children (12 Yrs, 8 Yrs) from 25th Dec 2022
Places to visit: Port Blair, Havelock and Neil Island
Hotel Preference: 4 Star Hotels on MAP Meal Plan
Special Preference: Scuba Diving, Luxury Ferries and Glass Boat Ride

General Tour Cost Calculation Process

So, You search for Hotel cost for every place according to the Tour date and Room Type, Transfers & Sightseeing cost for everyday, Cost of ferries and Activities. Sometimes you need to ask the cost of Hotels, Transportation and Others from managers OR colleagues.
You paste all the components costing into an excel sheet or paper and You loosely calculate the total cost of Tour.
You add your markup and GST on the total cost to get the Final tour costing.
If you need to provide the per person costing then you calculate the cost of every component for every person.
If a customer asks you for changes in Tour Itinerary (4-5 changes for every convertible query) then you need to do the same process again.

Facing issue of wrong price calculation?

Manual tour cost calculation (Loosely calculated tour cost) brings lots of problems for Travel Agencies and DMCs like wrong tour cost calculation, error in picking up the component price and NO trail OR record of cost calculation if required later by the reservations team. Also error in tour cost calculation brings revenue loss and sometimes hurt the goodwill of Travel Agency.

But Sembark Travel Software is here to help the Travel Agencies and DMCs to automate the Tour cost calculation which is error free and fast.

How does Sembark Travel Software Automate the Tour Cost Calculation Process ?

Auto hotel cost calculation.

Auto prices fetch from database for hotels as per room type, meal plan, extra bed requirement (Adult, Child) & Date and provides the Hotel cost by combining costs of all hotels

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Auto Transport & Activity Cost Calculation

Auto prices fetch from database for Transport (as per cab type, type of service & Date) and Activity cost (as per day type of activity, Adult/Child/ Group and Date) & Auto Calculate the total cost of Transports and Activities

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Auto Per person price

Automatically calculate the per person cost (Adult and Child separately) as per the Hotels, Transports and Activities of every person involved in the Tour

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Markup & GST

Define markup in % OR absolute markup OR per person wise markup and GST & Get the Total Tour Cost

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Tour Package

Package holidays, popularly known as a tour package or simply the word ‘tour’ in the travel and tourism industry refers either to a package tour escorted or not escorted by the tourist guide.

When we say tour package, it means a pre-arrangement, prepaid trip that combines two or more travel components like airfare, airport transfer, accommodation, and other services . Practically, to define the tour package concept is complex one rather understand.

Holloway defines a tour package as “a total tourism product consisting of transportation from the market area to the destination, accommodation at the destination and recreational activities promoted by the tourists.”

According to Gregorg “a tour package is advertised journey including specific features, arranged and promoted with tour literature by a tour operator and paid for in full by the tourists before starting the tour.”

Technically, a package tour/tour package is a total tourism product as it generally includes transport from the origin place to the destination, accommodation at an en route place or at the destination and other recreational or travel services. These components are purchased by an individual, firm or company called the ‘ tour operator ‘. He combines all the travel components in a package and sells them at all-inclusive prices to the clients.

History of Tour Package

The term ‘tour’ was in vogue as early as 1670. The Britishers traveled to widen their knowledge of the continent, especially to study the culture and social life. This practice was gradually adopted by other lovers of cultural centers.

The result of the process was that many European historic and cultural centers were opened to the British tourist. By the early 1730’s the small fishing resorts around the British coast begin to attract tourists seeking to their diseases by drinking the sea-water or by immersing themselves in it.

The introduction of a rail link between the major centers in 1830, had a profound impact on the pleasure travelers for the first time. Many entrepreneurs began to inspire rail travel by organizing excursions for the public at discounted offers.

However, to ‘the origin of package tour’ the credit goes to Mr. Thomas Cook in 1855 , Cook, extended his business operation to different countries by introducing the first ‘ inclusive tour ‘ to Paris.

Mr. Cook put together all the components of tourism products and sold them as ‘inclusive tour’ to the tourists. His pre-packaged tour inspired other tour organizations in the travel industry to organize similar tours to all parts of the globe.

Most of Cook’s tours were a linear tour i.e., the person went from place to place on a single destination. Basically, Mr. Cook developed the concept of ‘grand tour and escorted tour’, the concept which is still used.

Incidentally, World War II has tremendously developed the package tour concept because of the following reasons:

Social and Economic Conditions
Increase in Aircrafts
Marketing Conditions
Legal Requirements
Integration took place.

Today, package tours are a vital segment of the world’s travel and tourism industry. According to WTTC, the package tour sales generate $25 billion annually in the United States, $18 billion in Europe, $19 billion in Britain, and $21 billion in Asia. Today tour sales represented 50 percent of all leisure travel sales and 35 percent of all travel agency revenues.

Types of Tour Packages

A travel agency/tour operator deals with variety of ‘tour packages,’ catering to the diverse needs of tourists such as adventure, beach, architecture, cultural, business, conference, incentive tours, ayurvedic packages, Buddhist, religious, incentive tour, special interest tours, cruise tour group tour, educational tour, heritage, monuments, wildlife lovers, etc. These are broadly classified into five categories :

Independent Tours
Escorted Tours

Hosted Tours

Incentives Travel/Tours

Freedom Tours

Independent tour.

Independent tours are prepared/formulated for those tourists who want to travel independently. The components of such tours are air travel, air transfer, accommodation, travel documents, sightseeing, boat riding, entertainment, and other travel services.

However, in some cases, the tourists are free to purchase every single component separately. Thus, this type of tour provides the tourists considerable freedom to plan the activities according to their own choice.

An independent tour may or may not be an all-inclusive tour. Therefore, tour price varies depending on the type of air travel, air transfer, accommodation and is inclusive of other tour components. The foreign independent travel (FITs) and domestic independent travel (DITs) are examples of an independent tour.

Escorted Tour

When a travel agency includes the services of a well educated and trained tour manager in its package, the tour is called an escorted tour. Basically, escorted tours are meant for those travelers who are planning to visit a foreign country first time.

The escort’s responsibilities and duties are to provide comprehensive information and assistance to the group or individual traveler, at the origin, en route and the destination place. The excursion tours are the example of escorted tours.

A hosted tour means when an agency utilizes the services of another agency at a particular destination. Suppose a group of French tourists is coming to India. When the group arrives in India, they are greeted at the airports by TCI, which assists them in clearing their baggage and transfer them to the hotel.

Their tour-host (TCI) is available to offer device and information about the local attractions and entertainment. Further, when the group arrives at another designation in India, a different travel agency greets them at each tourist spot. Thus, a hosted tour provides the tourists maximum level of pre-arranged and personalized services.

Incentives Travel/Tour

It is a motivational programme or a fully paid holiday which is given to the employees by the enterprises as a reward. Mostly in medium and large-scale companies and usually too distant destinations to spur them in maintaining their track record, to increase output, improve the image and moreover to earn the long period loyalty of the employees.

There are a number of the other packages offered by a tour company such as a custom tour an excursion tour, an adventure, and special interest package tours.

Freedom tours are becoming very popular these days among the working class. These tours are designed as per the choice of tourists. The tourist is free to choose and plan how they want to travel and enjoy their holidays. These types of tours are meant for that kind of people who like to decide how, when, and where to travel.

This tourist may an individual, family, group holidays for families and group travel for business. These tours are promoted and developed by the ORBIT.

Components Of Tour Package

What is to be included in a package tour largely depends and varies from one tour organization to another, or from the one country to another, or from one destination to another and from one market to another market. But there are certain well-defined travel services which always turn a part of a package tour irrespective of the tour operator/travel agency, destination and even the market condition.

If we study and see the package tours offered by Thomas Cook and Sons Ltd., Cox and King Ltd., and other international travel companies, we find that a package tour has two major components. Therefore, a standard package tour has two basic components namely:

Ground Arrangements

Travel industry experience has shown that the first component, i.e. ‘Travel’ is directly bought by the agency from the principal providers like airlines and transport operators and for ground arrangement, the travel agency management asks the ground operators.

The reason behind buying ground arrangement from a handling agency is that it represents as a ground operator at a particular destination for the numerous tour organizations. Secondly, the price offered by it are much lower than an individual agency obtain. Thirdly, it is very difficult to get credit from the supplier and finally, it ensures professional travel services.

Factor Affecting the Tour Package Formulation

Generally, the business of package tours involves great risk, high breakeven, high-quality product, and competitive prices. Therefore, the tour management requires in-depth tour planning and market survey. However, before a tour is designed the tour manager should take into consideration certain factors which are crucial in the formulation process.

These factors have a profound impact on the tourist’s satisfaction. The main factors are:

Purpose of Tour
Choice of Destinations
Tourist Budget
Legal Requirement
Types of Tourist Accommodation
Tour Period
Departure and stay information
Tour price; inflationary condition
Tour Reference Tools
Tour Features – political stability
The relationship between the host and tourist generating nation

Tour Package Design and Selection Process

The quality of a package tour is entirely based on the above factors. Essentially, to design/formulate a travel product, the tour manager has to take the biggest responsibility, intuitiveness, imagination, and innovation coupled with a lot of business activities which range from finding new exotic destinations and planning, organizing or promoting such tour.

The following are the main stages in the tour design and selection process:

1. Initial Research

(i) the destination research.

The decision to develop and formulate a new package is a multi-stage process that involves various positive and negative points/steps. Normally, the idea for a new product comes either from the tour executive within the company due to a review of the questionnaire completed by the previous tour members because of the political, economic and social development in a particular area.

When a tour manager see that a large number of old clients are interested in taking a trip to particular destinations, naturally, those destinations become the nucleus of a new ‘tour concept’.

(ii) Market Research

Since tour package is a complete tourism product, obviously, before formulating/designing this product, market research needs to be analyzed and assessed in a systematic manner. Market research provides us the answer to the following questions:

What is the size of the tourism market?
Who are the existing clients?
Where do they live?
Who will be their potential buyers?
Who are their competitors – their strategy and area of business leisure?
How many tourist ones want to cater?
What price will the clients accept?
What facilities are available and required?
What are the constraints viz., license, permission, finance, restrictions, taxes, and others?

Once we know the basic components of the package tour, distribution channels, market conditions, constraints in the tourism market, we can develop the marketing strategy. It enables the smooth functioning of the agency and also offers a clear picture of the tour programme. Practically, market research is conducted by the private tour companies/ private tourism enterprises in order to penetrate the market.

2. Itinerary Preparation

By itinerary one means the designing of a programme which one wants to sell and it includes destinations, stopping points, number of days and the travel services that are to be included in the programme. Whether it is a lean season or an offseason, escorted or not escorted, consumer-oriented or readymade tour programme, the itinerary is prepared to identify the origin, destinations, stopping points, accommodations, sightseeing and other travel services on travelers’ trip.

3. Handling Agency or Destination Company

The appointment of handling agency not only ensure excellent travel services to the tourist but also make the operation smooth and profitable. It is a matter of great significance as the success of travel business largely depends upon the clients are actually taken care of during the tour.

It is a positive match between the promised services and tourist’s actual experiences or feelings. Thus, the tour operator should consider the experience of the handling travel agency in the business, the area of operation, reputation, credibility, professional staff, credit facilities and the competitive price in appointing a handling agency.

4. Negotiation

It is another important management decision area in tour designing and planning. Once the decision has been made regarding the destination’s concerning their date, duration and number of clients to be carried during the trip, the tour management starts negotiations with the principals’ suppliers for a normal contract.

Negotiation means talk between the travel companies and the principal suppliers for the terms, conditions, and prices of the components of a tour package. When both parties are satisfied, it leads to a formal or informal contract between them. The tour company negotiates with the following tour vendors/suppliers:

Accommodation
Transport Operations- Rail and Road
Ground Operators
Cruise Companies
Car Rental Companies
The overseas representatives
Ancillary Service Organizations

5. Coasting and Pricing a Package Tour

The cost of a package tour encompasses the air ticket, the hotel room, car rental, entertainment charges, administrative costs, promotional costs, and other travel services. The confidential tariff helps the travel company in preparing the cost sheet which will enable the concern to determine its price strategy.

Tour pricing is a big factor in the success of the company’s tour programme. The price of a package tour is, whether it is an escorted, independent or hosted the tour, often lower than the combined costs of the same components purchased separately from the principals. However, the purchase price of a travel product is based on three factors: Cost, competition, and demand.

Every tour package sold by a vendor has a quantifiable cost. To produce profit the price paid by the tourists must be greater than the agency’s cost.

6. Tour Brochure

The tour package is an intangible product which has to be purchased by the tourists/clients without inspection and sometimes even without adequate knowledge. In these circumstances, the brochure becomes the principal instrument to perform the major tasks to inform the clients about the products and to pursue them to purchase it.

Designing, printing, and distributions of tour brochures require necessary skills and knowledge about the components of the tour package. Basically, in the era of specialization and intense competition, tour brochure creates awareness and provides the description of the holiday programme.

Thus, tour management should consider various pros and cons while preparing a tour brochure. A brochure should contain the following information:

Name of the Travel Company
Means of transport
Details about destinations
Accommodation, types, location, meals
Name of the overseas representative
Duration of each tour
Booking, reservation and cancellation conditions
Details of other services – insurance, currency, entertainmentTravel documents required
Details of price

7. Development of Reservation System

The next step in tour formulation process is reservation system. The agency management in order to put a package into operation must develop and implement a scientific reservation system. The system depends on whether the reservation is to be handled manually or with a computer working on the distribution method.

Whatever method the agency may adopt, the agency management should always keep in mind the sole objective of the reservation system.

8. Marketing of Tour Package

Once a tour package is ready, travel agency management has to make a careful decision regarding promotion and marketing of the particular package tour. The basic objective of management is to make a tour package widely known to make it more and more attractive.

To achieve these objectives, the management must consider the budget available, promotion mix, potential market, easiest and most effective media, campaigning through the international, regional or the public/private sector etc.

The promotion of a package tour means increasing its sales potential and creating an awareness of the existing and potential markets. The following methods are commonly used to promote package tours:

Middlemen – Retail Travel Agents, GSA, consolidators
Familiarization tours
Building Brand Loyalty
Encouraging Potential Buyers
Competitive Market

9. Tour Handling/Actual Tour Operation

After the successful marketing and achieving target sales, the next and final step in the process of tour designing is tour handling. It means an actual operation of tours, which generally includes administrative work and passenger handling like maintaining reservations, handling deposits, sending advice to ground operators, arranging travel representation, analyzing the feedback received from clients/escorts/ground operator and so on.

All this is not an easy task. At every stage, one has to face different types of queries and problems due to lack of coordination and communication.

Significances of Tour Package

Tour package is beneficial to travel companies, travelers, destinations and other organizations which are directly or indirectly involved in the tourism business. The main benefits are:

Increase the seasonality of a destination cost/price
Earn foreign currency
Better quality of products professional services
Wide-variety of the tour package
Provide bulk business to organizers

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IMAGES

Tour Costing Sheet
Tour costing example. 5 Things to Consider When Costing and Pricing a
Tour costing
5 Cosas a Tener en Cuenta Al Calcular el Costo y el Precio de un Tour
Tour costing example. 5 Things to Consider When Costing and Pricing a
Tour costing

VIDEO

COSTING SHEET FOR PRODUCT COSTING FOR BEGINNERS
How To Say Tour Guide
SAP Product Costing configuration
Define Estimation #shorts
Twigaa.ai a detailed demonstration of the software
What is Marginal Costing?/Marginal Cost meaning/#marginal #marginalcosting #costing #shorts #ytshort

COMMENTS

5 Things to Consider When Costing and Pricing a Tour
There are essentially five ways that you can do that: Cost-plus pricing involves adding a certain percentage to the cost to fix the price. For example, if the cost of a wine experience is $150 per person. and the marketer expects 12% profit on costs, then the selling price will be $168.
How to Increase Revenue with Tour Costing and Pricing
The basic principles of pricing a tour package account for: fixed costs. variable costs. a markup or profit margin. You will calculate costs + expenses + profit + commission structure (which is usually a percentage based on the tour price including the total number of guests).
Tour Costing Sheet Sample: A Complete Guide To Efficiently Manage Your
A tour costing sheet is an invaluable tool for managing your travel expenses. By using it effectively, you can optimize your budget, avoid overspending, and make the most of your travel experience. Remember to plan your budget, record your expenses, review and analyze your spending, adjust your plans if needed, and stay disciplined throughout ...
What Is Tour Cost? Components, Types Of Tour Costs
It is the sum total of costs incurred to create or formulate a tour package. Since tour is an assembled product, its costing involves bulk purchase. Therefore the cost of the tour packages is determined according to the client requirement or company strategy. As the quality of the product /service and the price of that product go side by side ...
Tour Pricing 101: How To Do It And What To Consider
For example, say it costs you $100 per person per trip. Divide $100 by .80 and you get $125. $125 is your target price. 100/.8=$125. Or, if you want to make a 30% profit, take 100 and divide it by .7 (1-.30=.7). 100/.7 = $142.85. $142.85 would be your target price per person per trip. Here's the formula to do this equation on your own:
Demystifying the Art of Tour Package Costing: A Guide for Tour
As tour professionals, our pledge is to deliver exceptional experiences that resonate with both travelers and our industry peers. Through meticulous costing, we manifest the dream of wanderlust ...
How to Increase Revenue with Tour Costing and Pricing
What is tour costing. One method of tour costing and pricing involves a cost-plus pricing strategy where you input all of your expenses and anticipated revenue. From there, you'll add in profit and revenue targets. Packaged tours typically follow a structure with a designated amount of time for each activity.
How to Increase Revenue with Tour Costing and Pricing: 4 Best
Cost-plus pricing is the first one. This is when you set your price by adding a certain amount to your costs. It's a simple way to make sure that your price covers your costs and makes you money. For example, if the total cost of a tour is $1,000 and you want to add a 20% markup, you'll charge $1,200 for that tour.
Thoughtful pricing strategies for tour operators
4 key pricing considerations. Once you know your objectives, you need to consider the various factors that go into tour pricing. Here are some of the main things to focus on when setting prices for your tours and activities: 1. Know your costs. You simply can't consider pricing without considering operating costs.
Tour Budget Roadmap: A Step-by-Step Guide
The first step of creating a tour budget is to identify sources of revenue. Generally, this is going to come in the form of artist guarantees. An artist guarantee is the amount of money that is expected to be received for a performance. There are different ways that these deals can be structured.
Pricing Strategies for Tour Operators
Mark Down Pricing Strategy. A mark down pricing strategy requires tour operators to mark down their prices in order to remain competitive. It's ideal during slower months. If the cost for your offering is normally £400 per person, then you might mark down your prices to £299 per person to allow you to (hopefully) earn some profit on each ...
PDF UNIT 9 TOUR COSTING & PRICING Structure
9.2 Cost - Concept & Definition 9.3 Various types of Costs 9.4 Tour Package & Its Types 9.4.1 Cost components in case of tour package ... read and understand the tour package's costing and pricing in details. Once the destinations and attractions along with services are decided, the next part is to prepare a detailed travel
How To Price Tour and Vacation Packages
It will guide you through six essential steps in tour and vacation packages price formation and key factors in travel company's price formation. If not already, in the pricing guide we made for tour providers, you will get more information on a dynamic pricing model in tourism attractions. Download the guide and learn what it is and how to ...
Back to Basics: Components of a Tour
Tour operators can cut costs substantially by requiring tour participants to pay for their own meals or by adjusting the kind of meals offered. A tour operator that includes five dinners and five lunches is offering more than an operator that includes 10 breakfasts. A tour operator that permits an unlimited choice from the menu (à la carte) is ...
5 tips to find the right price for your tours and activities
Here are a few pricing strategies you could consider: 1. Seasonal pricing. It is common to charge customers a higher rate when demand is high and supply is unchanged or low. This usually means that tour and activity operators charge a higher price during high season and an even higher price during peak seasons.
PDF Chapter Six COSTING OF A TOUR PACKAGE
D.4 Tour Package Costing:- A tour operator generally purchases three main elements for creating an all inclusive tours: transport, accommodation and services (such as sightseeing, meals etc). Technical terminology which is related to costing and pricing of packages:- Mark Up: - It is the amount added to the cost price
PDF TOUR COSTING
The tour price is not solely determined in terms of the cost but on the basis of expected rate of return, market share and competitors' price. There are different approaches to fix the price of package tour such as total cost and marginal cost method, breakeven pricing, rate of return pricing, skimming, penetration, going rate, differential etc.
What Is Costing?
Costing also compares the respective costs of different methods, machines, and systems, and it helps in decision-making in this regard. Costing provides a tool for price fixation as well as price control. Costing can help the government make decisions about tariff protection, and it can also offer information relating to wage policy.
KPIs for Tour Operators: An Essential Tool for Maximizing Revenue
KPIs for Tour Operators: Customer Acquisition Cost (CAC) Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer and is calculated by dividing the total marketing and sales expenses by the number of new customers acquired in a given time period. As you can imagine, monitoring CAC allows companies to gauge the effectiveness ...
What Is Costing, Estimating and Pricing?
What are the differences between costing, estimating, and pricing? Costing refers to ascertaining the actual cost. Estimating, in contrast to costing, refers to ascertaining—in advance—the probable cost of manufacturing an article, completing a contract, or executing a process in the near future. Pricing means fixing the selling price of an ...
Automatic Tour Cost Calculation for Travel Agencies & DMCs
You paste all the components costing into an excel sheet or paper and You loosely calculate the total cost of Tour. You add your markup and GST on the total cost to get the Final tour costing. If you need to provide the per person costing then you calculate the cost of every component for every person. If a customer asks you for changes in Tour ...
Module 6
The total cost of a tour product service incurred or attributed to it The total cost of creating or developing a tour package. The total cost incurred or attributed to the various elements of a package tour. Total cost of booking services is incurred in order to design the FIT and GIT tour package. Tour operator does not own the primary ...
Tour Package
Wide-variety of the tour package. Provide bulk business to organizers. Tourism. Tour Package is a pre-arrangement, prepaid trip that combines two or more travel components like airfare, airport transfer, accommodation, and other services. Practically, to define the tour package concept is complex one rather understand.
Yung Gravy talks new song with Shania Twain, country album and 2024
He also gave us a hint on the fashion he'll be wearing on his 2024 "Grits and Gravy Tour." Watch the full video for more on the rapper entering his "country Gravy" era.

How to Increase Revenue with Tour Costing and Pricing

What goes into tour costing and pricing

When pricing a tour package, consider these questions:

How to price a tour package

Example fixed costs for your tour business

Sample variable costs

Methods for setting the price of a tour

Ask yourself these questions to address when pricing a tour:

1. Tour type

3. Duration

4. Upselling

5. Seasonality

6. Operating expenses

Why profit isn’t a dirty word

What goes into pricing private tours

How to increase margins and reduce expenses

Final thoughts

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Tour Costing Sheet Sample: A Complete Guide To Efficiently Manage Your Travel Expenses

Introduction

Why Use a Tour Costing Sheet?

Components of a Tour Costing Sheet

Sample Tour Costing Sheet

How to Use the Tour Costing Sheet

1. Plan Your Budget

2. Record Your Expenses

3. Review and Analyze

4. Adjust Your Plans if Needed

5. Stay Disciplined

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Figure Out The Costs Of Running Your Guiding Business

Pay Yourself

Seasonality

Variable vs. Fixed Costs

Next, Determine Your Profit Margin For Tour Pricing

What You Need To Make To Break Even

Markup Percentage

Putting it together:

Cost Analysis For Your Tour Pricing Strategy

Compare With Competitors

Don’t Automatically Go With Lowest Price

Test And Adjust Your Prices

Make Your Tour Pricing On Your Website The Lowest Price

Charge Phone Booking Fees

Markup Your Trips For Resellers

Adjust Your Tour Pricing For Inflation

Get Started with Origin​

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How to Increase Revenue with Tour Costing and Pricing

What goes into tour costing and pricing

When pricing a tour package, consider these questions:

How to price a tour package

Example fixed costs for your tour business

Sample variable costs

Methods for setting the price of a tour

Ask yourself these questions to address when pricing a tour:

1. Tour type

3. Duration

4. Upselling

5. Seasonality

6. Operating expenses

Get Started with Origin