As your customers begin to travel again, you want to make sure your tour company is ready to make up for lost time and revenue.
Tour pricing will play a big role in travel’s comeback. It’s what determines whether your company makes a profit or simply breaks even. Yet a lot has changed following pandemic-related travel restrictions, and there are more factors at play now when it comes to tour pricing.
On the one hand, money-sensitive travelers will always be looking for a good deal. Yet, on the other hand, guests looking for high-quality, more personalized experiences will be willing to pay a little extra — especially after spending so much time at home.
In this post, we’ll help you optimize your pricing strategy and increase your revenue through both private and public tour bookings.
What is a tour pricing strategy?
Your tour pricing strategy refers to the method you use to price your tours and how that price stands against your operating costs. When it comes to tour pricing strategies, the two most common options are markup or markdown pricing.
- Markup pricing strategy: The markup approach involves setting your tour prices so that each booking generates a profit. To achieve this, you first need to calculate how much it costs to run your tours. Then, you’ll markup that number so that every tour booking not only covers those costs but also brings in a profit.
- Markdown pricing strategy: The markdown approach does quite the opposite. Instead of marking up your prices, you’re actually going to lower them to attract price-sensitive customers and increase your booking volume. You can use the markdown strategy to make your tour or attraction more desirable than your competitors.
- Dynamic pricing: Also known as surge pricing, dynamic pricing is a strategy in which prices continuously fluctuate based on real-time supply and demand.
Whichever strategy you choose, it’s always important to fully understand the costs associated with running each tour. Even when taking the markdown approach, you want to ensure you’re not losing money on your bookings.
Why is it important?
Your pricing strategy can set you apart from your competitors. This is because your prices affect your positioning and perceived value in the market.
A company that charges a high price or a premium rate for its tours may be viewed as a luxury experience, for instance. Meanwhile, tours and experiences with lower prices will attract a different audience, including price-sensitive customers.
Neither approach is right or wrong, but it’s important to be cognizant of the pricing strategy you choose.
At the end of the day, tour pricing matters most because it determines how profitable your company will be.
Even if you’re closing more bookings than your competitors, if your pricing is off, you might still be losing money on each booking. A company whose tour prices don’t at least cover its operating costs will have a hard time staying afloat.
What to consider when setting tour prices
Before pricing a tour, you’ll want to evaluate your revenue and expenses.
Revenue describes the income you earn from selling your tours and experiences. However, you’re not pocketing all of that revenue. A portion of it is being used to offset your expenses.
Your expenses consist of both fixed and variable operating costs, such as the monthly rent for your office space or the gas needed to fuel your tour vehicles.
Fixed costs are the ones that remain the same regardless of the number of tours booked (your rent) while variable costs can fluctuate based on your booking volume (the gas).
A few of the most common expenses for tour businesses are tour guide salaries, equipment, a website, marketing, and booking software.
Whatever your expenses are, it’s important to add them up before pricing your tours. This will help you determine your breakeven point, or how much is needed to fully cover the costs of running your tours.
Remember that the goal behind strategic tour pricing is so that your revenue always covers your expenses.
Public vs. Private Tours: What to consider when setting prices
When you start pricing your tours, you also need to consider the type of tour you’re going to offer. Offering both public and private tours allows you to cater to a larger audience.
The couple looking for a romantic, more personalized experience, for example, might prefer a private tour. It’s not just couples: The ongoing pandemic has made private tours more attractive for everyone.
That’s good news for the companies that offer them. Private tours are typically customizable and offer a more intimate experience than a group tour, which also makes them more expensive. For a tour company, this means you can make more money off a single tour if it’s private.
Here are five things to consider when pricing a private tour versus a public tour.
One of the reasons people don’t mind paying more for a private tour is because they get a more personalized experience. If a mother and daughter book a private walking tour in New York City, they’re going to have an experience that’s more tailored to their likes and preferences. The tour guide will have room to get to know them, ask about their interests, and even show them places that aren’t on the typical public tour. This makes the tour more valuable than a public tour, and therefore, allows a tour business to charge more for the experience.
Demand and seasonality
Now is a great time to check the demand for private tours for your company. As people start to travel again, some are still thinking twice about group tours and activities. If there’s high demand for your private tours, you can factor that into your pricing.
Seasonality should be taken into consideration for both private and public tours. A whitewater rafting company is probably busiest in the summer months, meaning they have an opportunity to mark up prices during that time.
A private tour will have different capacity needs than a private tour, and that can impact how you price it. Private tours are typically smaller than public tours (unless it’s a large group event). This means you may need to sell twice as many two-person private tours to reach your full capacity. With that in mind, you may want to price your private tours higher than your regular tours so that you’re still making a profit, even when you have fewer people going on a tour.
Your variable costs will fluctuate depending on the number of private or public tours you offer. If you’re running multiple private tours at once, for instance, you might need to hire additional guides. Your fixed costs — like rent and marketing — will remain the same regardless of the kind of tours you’re running. It’s important to identify all of your operating costs before pricing both your public and private tours.
Keep in mind that setting your tour prices is an ongoing process. As your business evolves and customer demand changes, so should your pricing strategy.
Whether you’re offering public tours, private tours, or a combination of both, use this guide to find the best pricing strategy for your tour business.