Handout 8 Flashcards
Tour operators need to consider the costs of operating as a business, their expected profit margin, and the costs associated to the distribution of their products
Operating Costs
stay the same no matter how many passengers or consumers the company carries, such as the wages or salaries of the staff and office supplies.
fixed costs
vary according to how much tour operators earn as a business such as sales, trade events, and ad-hoc accommodations.
Variable costs
The distribution of the packages is how tour packages are made available to the clients.
Distribution Cost
The prices charged by competitors must be the benchmark of pricing the product.
Competition
The products offered by competitors are usually the ones on high demand, giving clients to have an abundance of choice.
Demand
It depends on the willingness of the target market to pay the proposed price.
Target market
It applies the law of supply and demand (a theory that explains the interaction between the sellers of a resource and the buyers for the resource and defines how the relationship between the availability of a product and the demand for that product has on its price).
Seasonality
can be developed for tour operators based on the tour packages offered, the target market, and the status of the brand in terms of product life cycle and their strategy
Pricing strategies
also known as “marginal pricing.” Adding the costs of the travel components and the percentage profit can be the simplest way of costing a tour package.
Cost plus pricing
defined as a process of setting prices of goods or services based on the current market conditions, such as estimating the prices that competitors will charge.
Market-based pricing
used for niche market products with upmarket images where high prices are expected to be paid.
Premium pricing
similar to discount pricing. Rather than offering low prices towards departure dates, promotional pricing is offered to customers or clients who purchase tour packages in advance
Promotional pricing
means that tour operators or travel agents can be supplied with on-screen prices that change by the hour depending on how well the packages are selling, especially the package holidays.
Fluid pricing
often applied during off-season. This pricing strategy has been commonly used by some tour operators to fill availability in inventory.
Discount pricing
