January 25, 2022
For tour and activity operators, pricing can be everything. Set the price of your tour too high, and people won’t book. Set it too low, and you could be losing money.
To ensure that customers keep coming back, your prices should be competitive when compared to other travel companies in the market. At the same time, you could be limiting your growth by setting prices too low. You also run the risk of appearing too cheap, and by extension, low quality.
So how do you compete in your local market without selling yourself short? To maximize your ROI, you’ll need a competitive pricing strategy.
In this guide, we'll explore everything you need to know about setting the perfect price for your tour and activity business.
There are a lot of factors to consider when pricing your tour and activity. It might take research — and even some trial and error — to land on the optimal price. Here are a few questions you should ask yourself before setting a price.
Depending on the kind of services you provide, customers might perceive the “value” you bring to the table differently. For example, a no-frills tour offers only the basics, while an all-inclusive tour might include free refreshments, photographs, and entry tickets.
It all comes down to what kind of value you provide and how it sets you apart from the competition. At the end of the day, does this value justify the amount you’re looking to charge?
When compared to similar tours and activities, what sets you apart? The more unique your services are, the more flexibility you’ll have when deciding your pricing.
If you’re facing similar competition in your area, you might need to more closely consider how your competitors are pricing. If you price higher than they do, you need to have the services, amenities, or value to justify it.
In some cases, it can be beneficial to set your prices lower than the competition, particularly if they’re more established in the industry. This will help you attract a higher volume of customers, boost your credibility through reviews and word-of-mouth recommendations, and establish yourself in the area. Over time, you can consider raising prices.
Take a look at your operating costs to figure out a reasonable range for your pricing. This means considering:
Once you’ve found your overall operating costs, it’s time to calculate the absolute minimum price in order to keep running your business. Then, calculate the minimum price in order to hit your profit goals.
Through market research or industry experience, you need to know what the demand is like for your offering. Knowing the size of your market will help you determine how many tourists are likely to book your tour for the price offered.
If you haven’t been in business long, this might take some time to figure out. It may also take some adjustment before you land on the perfect price.
Depending on how you’re marketing your tour or activity, the price can differ. For example, if you’re marketing your services for high-end, luxury travelers, the price is more likely to remain fixed. Prices can also range higher, although you’ll need to offer the luxury experience to justify those prices.
If you’re marketing towards the budget-friendly traveler, prices are more likely to fluctuate depending on the volume of bookings. These are also the travelers who will keep an eye out for pricing changes like seasonal deals or other discounts.
Within the tour and activity sector, many operators will change prices according to demand. Here are a few pricing strategies you can use to maximize ROI — even during slow months.
The mark up pricing strategy means pricing up your bookings before offering a significant discount. This makes the booking look like a significant discount, but it won’t harm on your bottom line.
Used most often during slower months, the mark down pricing strategy involves lowering prices in order to stay competitive. The goal is to generate more bookings than you would have without the discount, therefore keeping your business afloat.
For convenience and greater deals, many travelers are now using “packages” to plan their trips. A package includes different amenities — like hotel, airfare, tours, activities, restaurants, and more — in one, all-inclusive price.
Developing packages with your tourism partners is a great way to add value and bring in more bookings, without having to discount your prices.
Depending on the season, you can change your prices. During times with higher demand, like holidays, events, or busy vacation months, you can up your prices. During the slower months, you can lean on the mark down pricing strategy to keep your bookings high.
Some tour operators will try to fill last-minute openings in their tours and activities through last-minute pricing. If there are spots left or some travelers have dropped out, you can offer up discounted prices to promote on booking websites.
Especially in the aftermath of COVID-19, more and more travelers are looking to travel with tight-knit groups of family or friends. To encourage larger bookings, you can offer a discount for travelers booking as a group.
Determining your prices is an essential decision for all tour operators. Whether you’re setting prices for the first time or adjusting your prices to maximize your ROI, the right price can make or break your business.
While your prices rely on a wide variety of factors, it’s always safest to find a solid middle ground. Under-pricing your tour might lead to losses in profits, while over-pricing can limit your growth by deterring potential travelers. As long as you keep up to date with your market research, you can find a price that’s fair for both you and your customers.
Pricing your tour can be complicated, but your booking system shouldn’t have to be. Our booking software integrates seamlessly with your tour and activity website, making it easier than ever for your customers to go from checking out your page to booking a trip with you. Learn more about our booking software or sign up for a demo today!
