Transcript Demand for Tours - rwwcoursecontent

Pricing the Tour
Learning Objectives
• To know how to price individual tour
element.
• To be able to allocate the mark-up.
• To understand the retail price of a tour.
Pricing the Tour
• Key requirement to get the price right
• Compared with the price of competitor’s
package tours
• Comparison with the price of other tours
offered by the company
Pricing the Tour
1) Pricing by the Specialist Tour Operator
• unique product may have more flexibility
• freedom to determine their prices based
on a cost price plus a mark up
• sufficient enough to cover overheads and
provide a satisfactory level of profit
Pricing the Tour
2) Pricing of Specialist Tour Package
tour packages that are of interest to a
group of travellers e.g. skydiving, water
rafting
Pricing the Tour
3) Pricing by the Mass Tour Operator
 Greater account of their competitors’
prices
 Demand for the package tour is priceelastic
 Tour packages offered in shoulder and
off seasons
Pricing the Tour
4) High Seasonality
• Demand will frequently exceed the
supply of seats to various destinations
• Scope to increase price, and hence
profits for the high season months of the
year is very competitive
Pricing the Tour
5) Low Seasonality
• Supply is likely to exceed the demand for
tour packages
• May set its prices so low that only
variable costs are covered and a small
contribution is made to the fixed costs in
order to fill up seats
Pricing the Tour
6) Discounting Strategies
• Discounts on published tour prices have
become a widely acceptable practice in
the industry
• Originally applied to late bookings, in
order to clear seat
• Rely on guarantees to early reservations
against any increase
Fixed vs. Variable Costs
• Fixed cost: Costs that do not change
with the change of number of
participants on the tour.
e.g. Coach, step-on guide, publicity
• Variable cost: cost that changes
according to how many people take the
tour.
e.g. attraction tickets, airline tickets, hotel
rooms, and meals.
• Load factor: ratio of actual number of
participants to the maximum capacity
expressed in percentage.
Pricing the Elements - Transportation
• Airfare:
– discounted net rate (net noncommissionable
rate) per person
– tax, fees per person
• Coach pricing:
– Motor coach cost + parking fees + tolls. The
sum is divided by a reasonable minimum
number of participants (break point).
Pricing the Elements -Lodging
• Noncommissionable rate times number of nights,
then, divided by number of occupancy.
• Tax per person.
• Lodging meal plans: meal cost per person.
• Luggage handling: number of times x average
charge.
• Room and meal costs (driver and escort, if
applicable) divided by a reasonable minimum
number of participants (break point).
Pricing the Elements - Meals
• Restaurant prices should always be quoted
inclusive of tax and tip.
• Be certain to determine what taxes apply and
the amount of taxes.
• Meal cost per person (incl.)
• Reception party, if applicable:
– Total cost divided by break point.
• Farewell party, if applicable:
– Total cost divided by break point.
• Meals for driver and escort (if not comp):
– Total cost divided by break point.
Pricing the Elements - Attraction,
Sightseeing and Guide Service
• Attraction admissions inclusive of tax per
person.
• Overall step-on guide service charge
divided by the break point.
• Other activities
– Boat ride: cost per person
– Cruise tour: cost per person
Total Cost of Sales
• Cost of Sale Per Person is the sum of the
cost of individual element based on perperson costing.
• Total Cost of Sales (a year) is the sum of:
number of tours x
average count x
total cost per person
Mark-up
• Expected net income
• Anticipated expenses
– Labour costs
– Administrative expenses
– Marketing/reservation expenses
– Repairs/maintenance
– Taxes
– Others ( inflationary increases, foreign
currency fluctuations, unanticipated costs
etc.)
Mark-up
• Total Revenue is:
Total Cost of Sales
+
Expected Income
+
Anticipated Expenses
• Average Cost Mark-up (by dollars) is:
(Expected Income + Anticipated Expenses) /
Total number of tours sold a year /
Average count
• Average Percent Cost Mark-up is:
(Expected Income + Anticipated Expenses) /
(Expected Income + Anticipated Expenses + Total
Cost of Sales)
Tour Price
• Tour Price is:
Cost of Sale Per Person +
Mark-up
Other Issues
Please refer to attachment for the following:
• Ways to reduce the price.
• Decision making based on costing
• Do’s and Don’ts in tour pricing
Reference:
• Chap 8, Essentials of Tour Management, Fay, Betsy
1992, Prentice Hall, G154.7 Fay
• Chap 9, Mancini, Marc, 1996, Conducting Tours, 2nd
ed. G154.7 Man