Like most travel industry professionals, you're undoubtedly already aware that dynamic pricing has long been an industry standard when it comes to booking accommodations and airline flights. It makes sense for that segment of the tourism industry because bookings for these are generally made fairly well in advance. On the other hand, tours and activities are usually booked within 72 hours of their real-time dates.
However, this doesn’t mean that dynamic pricing isn’t feasible for the tour and activity markets — it just requires a different way of connecting the dots. Many tour and activity operators first became familiar with dynamic pricing while navigating the rough waters the COVID pandemic. Travel professionals learned to think on their feet quickly as they struggled to stay afloat during difficult times.
Now that things are slowly getting back to normal and the general public is feeling confident about traveling again, dynamic pricing doesn’t have to recede into the background.
Here’s what you need to know about best practices for dynamic pricing in the tours and activities branch of the leisure market in a post-COVID world.
Dynamic pricing refers to the practice of adjusting the prices of goods and/or services based on variables affecting customer demand. These variables may include the time of year as well as the time of day. For instance, prices are higher throughout the tourism industry during holidays and the high seasons of individual locations, and early-bird specials are common as well.
Pricing strategy examples for tour and activity providers include offering attractive discounts during the shoulder seasons, early-bird promotions, and markdowns for group reservations.
For instance, if your tour or activity typically runs at 75% capacity during the first or last few weeks of the tourist season, you may be able to raise that percentage by offering a lower rate. Keep in mind that many shoulder season travelers are budget consumers who appreciate the chance to save money.
However, dynamic pricing isn’t only about providing good deals to budget-minded travelers. It’s also important to adjust costs accordingly during high-traffic times such as holidays and the middle of the season. For instance, if your activity is routinely booked up during certain months, days of the week, or even certain times of day, that may be an indication that you need to revisit your pricing structure.
Keeping an eye on hotel and airline prices will provide you with a fairly accurate template of when you should raise or lower your prices to meet customer demand. Don’t forget about school holidays such as spring break when demand for leisure services is high.
Following are several pricing strategy examples that work well for tours and activities.
The value of offering early bird discounts is that most people tend to book tours and activities within 72 hours of when they are to take place, and this approach can result in surprises that are often not in your favor. Offering early bird tickets and group discounts gives you a better handle on how many guests you’ll be dealing with so that you can be as prepared as possible.
You might even generate more bookings than usual using this strategy, resulting in greater overall profits.
Weather-based pricing has traditionally been overlooked by tour and activity operators for good reason — weather forecasts have historically been inaccurate. Thanks to advances in technology, however, today’s official weather predictions are remarkably precise. If you know that it’s going to rain at the end of the week, for instance, you can offer a rainy day discount with relative confidence.
Getting the word out about temporary discounts is another thing that modern technology has made easy, thanks to social media and email lists. Be sure to let your agent network know about any weather-related temporary price reductions as well.
Last-minute discounts are designed to fill in any empty spaces in your activity or tour so that you operating at full capacity or as close as possible to it. Like weather-based pricing, this is where digital tools such as social media pages and email lists come in handy to alert potential customers to available discounts.
With last-minute discounts, be sure that offering them actually serves your business well. If you just have one or two spots left, you’ll only reap marginal profits.
Your records can help you identify any recurring slow spots on your operations schedule so that you can adjust your prices accordingly. Perhaps you’re located in a port city that’s popular with cruise ships, for example, and there are one or two days per week with fewer ships in port than others. Or maybe you’re located in an area that’s popular with weekend road trippers that doesn’t get quite so busy during the middle of the week. No matter where you’re at, looking through your records is a great way to identify consistent patterns for slower times that might benefit from dynamic pricing.
Because seasoned tourists are acclimated to discounted prices, use dynamic pricing sparingly to avoid devaluing your service and making it problematic to actually charge your normal rate. Constantly fluctuating price points may also serve to confuse and frustrate consumers, particularly with instant comparisons available on review sites. No one appreciates discovering that they’ve paid significantly more for a service than their counterparts who participated in the same tour or activity the day before.
Another pricing strategies that you’re probably better off avoiding include offering discounts based on age, gender, or location. For instance, although offering a senior discount is considered almost standard in some industries, would it make sense if your target consumer group is comprised mostly of retirees? By the same token, would a student discount work well for tours and activities that cater to the tastes of the very young? Make sure your pricing strategies make sense for your target market.
Please don’t hesitate to contact Jungelbee for more information on developing a customized static pricing strategy that suits the individual needs of both your business and your customers.