Pricing is one of the most talked about issues among tour operators. Whether you are an established operator who is launching a new product, or a new operator just getting out the gate, calculating pricing is critical to the success of any business, especially in tourism.
The pricing roundtable generated a lot of discussion related to margins, competitors, and marketing. Some great highlights came out of this lively discussion.
Undervalue. It’s true, we undervalue our products and what we do. We don’t believe people will pay what we really think the tour is worth. You put in a lot of sweat equity building that experience, it’s worth something. Include your costs of marketing, any hard goods (food, swag, etc.) and most importantly, your time.
Variety of priced tours. If you are a seasoned tour company, then chances are you have multiple tours. Offer them at different price points. On your website, position the most expensive at the top, and add a shout out or note that it is the “most popular.” People tend to not scroll too long, and if your best and brightest is at the top, chances are higher they will book it.
Cancellation fees. Many operators shared concerns of last-minute cancellations and being on the hook for food costs, or tour guides’ wages. Update your cancelation policy to include a non-refundable amount to cover these costs. Put it in writing. Guests will appreciate knowing the parameters, and you will appreciate not going into debt.
Margins. Margins are relative to your company and market, but overall, most operators are about 40% – 50%. If it is less than 40%, evaluate why. Are you including your time and any intrinsic costs? Add those in. Don’t be afraid to raise your prices to meet your needs.
Commission. The dreaded commission rate. “I’m giving up 20% of my earnings!” is a common concern. Reframe your thinking. A commission is a marketing investment. It’s opening your tours to others to sell for you. They are doing all the work. And the best part? You don’t even pay the commission until a tour actually sells! Don’t miss out on growing your business because you’re afraid of losing money. Raise your prices to include this marketing investment and opportunity.
Higher prices on OTAs. This can be stressful to many operators when they go onto an OTA and see that their tour priced at $99 and is only $79 on their own website. Match them! If for some reason a savvy customer hops off the OTA and goes to your website, they’ll see the same price. Don’t leave money on the table.
Pricing is and will continue to be one of the most talked about issues between tour operators. Allowing yourself the flexibility of a strategic pricing model will help you alleviate some concerns. The biggest take away from our chat was don’t undervalue what you do. You do amazing work, and people love it. Set your prices accordingly. You’re worth it!
Let’s stay connected,
Midgi & Lauren