January 25, 2022
Most tour operators undercharge by 15 to 25 percent. Not because they don't know their costs. Because they set their public price by looking at a competitor's website, shaving off five dollars to seem more competitive, and calling it done.
That's not pricing. That's just copying someone else's mistake.
I've sat down with enough operators across St. Maarten, Antigua, and the BVI to know the pattern. They're running a solid product - good captain, clean boat, real local knowledge - and charging $75 for a half-day snorkel while the cruise ship across the dock sells the same excursion for $130. The guests who didn't book the ship tour aren't hunting for the cheapest option. They're leaving $55 on the table per head, every run.
There are four prices in a tour business. Most operators get all four wrong. Let's go through them.
This is the number on your website. Your rack rate. The price a guest sees when they find you on Google at 11pm from their hotel room.
The mistake I see everywhere: operators set retail by anchoring to competitors. If the snorkel tour down the dock charges $85, they charge $80. And if that operator also set their price by looking at a neighbor, you've got a whole industry in a slow race to the bottom.
The guest's real anchor isn't the other local operator. It's the cruise ship excursion they almost booked. Those ship tours run $110 to $150 for a standard half-day. That's what the guest compared to when they decided to look for an independent operator. You are not competing with the shop next door. You are competing with a $130 bus tour sold by someone who doesn't know the island.
I know an operator in Philipsburg who raised his snorkel run from $85 to $105 on a Tuesday afternoon two seasons ago - just changed the number on the website, no new photos, no rebranding, nothing. He expected bookings to drop. They didn't move. Not that week. Not that month. That 20 percent increase was pure margin. He'd been running money out the door for years for no reason.
If you haven't raised your retail in the last 12 months, you're probably undercharging. Fuel is up. Crew wages are up. Dock fees didn't go down.
Hotel activity desks in the Caribbean typically want 15 to 20 percent on every guest they send your way. Standard, not going away. The problem isn't the commission. The problem is what most operators do with it.
The common version: operator sets retail at $85. Hotel concierge sends guests at $85 and keeps 18 percent. Operator nets $69.70. The crew still gets paid. The fuel still burns. The margin that was already thin just got thinner.
The right version: set your net first - the minimum per guest to run the trip and make money. Build retail up from there so the concierge's cut comes out of the space above your floor, not the floor itself. If you need $75 net and the concierge wants 20 percent, retail has to be $93.75. Not $85.
Most operators give too much because they've never done that arithmetic. They set retail low, carve out the commission, and wonder why the margins don't add up.
Viator, GetYourGuide, Booking.com Attractions - they want 20 to 25 percent. And the way most operators handle it: they list their regular retail price on the OTA, the OTA takes 20 to 25 percent, and the operator nets 75 to 80 cents on the dollar for every booking that comes through the channel.
That's backwards. What you should be doing is listing a price on the OTA that accounts for the commission so your net is the same as a direct booking. If your direct retail is $95 and Viator wants 25 percent, your OTA list price should be $127. Not $95.
Yes, the OTA price looks higher. That's fine. Guests will find you on the OTA, see the price, and book directly on your site where it's lower. You've just turned the OTA listing into a direct booking engine.
If the OTA has a rate-parity clause in the contract, read it carefully. Many are negotiable for smaller operators. Worth knowing before you accept it as fixed.
Private group bookings - full-boat charters, sunset cruises, families who want the trip to themselves - are a different product. Most operators treat them as a big-group discount and price per head. That almost always means undercharging.
When a group charters a boat, your fixed costs don't shrink. The fuel is the same. The crew is the same. The dock fee is the same. What changes is exclusivity - and exclusivity is worth real money to the right guest.
Price private charters by the vessel, not per person. A 4-hour private snorkel charter on a boat that normally runs 12 guests at $95 each doesn't cost $1,140. The right number accounts for the boat, the crew, the fuel, your target margin, and a meaningful premium for exclusive use. I'd say that's usually $1,400 to $1,800 for a typical half-day vessel in this market.
If someone asks for a private charter and your first instinct is to multiply per-head rate by expected headcount, you're leaving $300 to $600 on the dock before the conversation ends.
When operators raise prices, the fear is volume drops and they start discounting to get it back. Six months later they're back where they started, plus the overhead of running "deals."
The better tool is a deposit. When you require 25 to 30 percent upfront, you filter out guests who were never serious, protect your revenue on a no-show, and kill the pressure to discount last-minute spots. The guests who put money down show up. The ones who booked free because someone dropped a discount code on a forum often don't.
Raise retail. Add a deposit. That combination makes the price increase actually stick.
Check your public retail right now. Look at what the cruise ships in your port charge for a comparable excursion. If your retail is more than $20 below that, raise it. Not 5 percent. Raise it to within $10 to $15 of the ship tour price.
You don't need a new website. You need to correct a number that was probably set wrong from the start by someone looking at a competitor instead of their guest.
We built the Junglebee booking system partly because I kept watching good operators undersell themselves and then wonder why the math wasn't working. Fix the price first. Everything else is easier when the margin is actually there.
