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Costing and Pricing Your Tourism Business1 PDF
Costing and Pricing Your Tourism Business1 PDF
TOURISM
BUSINESS
A PRACTICAL STEP BY STEP GUIDE TO
HELP YOU COMPLETE THE TOURISM
BOOST ONLINE PRICING TOOLS
INTRODUCTION
It is very important to price your tourism business correctly. Basing your pricing only on your
competitors prices and customer expectations is not enough. You also have to factor in all the
expenses you occur to run a tour or let out a room, as well as the costs associated with running your
business, such as marketing, licenses etc
And, lets not forget about profit! You would not have started a business unless you planned to
make money from it. Correctly pricing your tourism business will help you to cover all costs and
generate the hard earned profit that you deserve.
This step by step guide and the accompanying online tool will help you determine the point at which
your tourism business breaks even and the ideal retail price to make a profit that you wish to
achieve whilst factoring in all costs.
This booklet is designed to help you complete the Tourism BOOST ONLINE PRICING TOOL. Just fill in
all the blanks from step 1 through to step 6 and then transfer the information into the online tool.
The tool will then automatically calculate key figures for you such as your net rate, retail rack rate
and breakeven point.
To get you started we have developed a multi-choice a quiz; test your pricing knowledge on the next
page! This booklet also includes some activities along the way to help you get your pricing right.
QUICK QUIZ
1. FIXED COSTS ARE
a. Prices that are set in advance
b. Costs that need to be paid no matter how many tourists you carry or rooms you let
c. Costs that occur depending on the number of tourists carried or rooms let
8. IF YOU OPERATE THE BUSINESS SOLEY ON YOUR OWN WITH NO STAFF SHOULD YOU
FACTOR WAGE COSTS INTO YOUR PRICING?
a. Yes
b. No
YOUR SCORE
/8
NOTES
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STEP 1 - CAPACITY
To be able to effectively price your tourism product you need to identify some basic factors about
your business, such as how often you run a tour or how many rooms you have. Fill in your answers
to the questions below about the MAXIMUM CAPCITY for your business.
TOUR OPERATOR
How many different types of tour do you have available?
Names of different tours
MAXIMUM number of
passengers per tour
ACCOMMODATION PROVIDER
How many different types of rooms do you have available?
Names of different rooms
TOUR OPERATOR
If you have been trading for a number of years you should know your average capacity. If you are
new to the industry you will have to estimate your future capacity based on factors such as visitation
to the region, competitor analysis and customer feedback.
Names of different tours
AVERAGE number of
passengers per tour
ACCOMMODATION PROVIDER
If you have been trading for a number of years you should know your average occupancy rate. If you
are new to the industry it can be difficult to estimate your predicted occupancy. Use the Tourism WA
Quarterly Tourism Snapshots to get the average occupancy rates for your region
www.tourism.wa.gov.au
Names of business
Fixed
Variable
You will now need to determine your own fixed and variable costs. If you have been in business for a
while you should know your figures, if your business is new you will need to obtain quotes and give
rough estimates.
Use the tables on the next page to enter all your fixed and variable costs for each tour or room type
and then when you are ready enter the details into the Tourism BOOST online pricing tool to help
you determine your final pricing results.
FIXED COSTS
VARIABLE COSTS
Labour
Fuel
Other
Meals
Activities Other
Linen
cleaning
Room
cleaning
Amenities
Other
NOTES
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Amount
Depreciation
Employees' superannuation
Insurance
Taxes
Telephone/internet connection
Training
Other Expenses
$
Total operating expenses
Notes
Percentage
of business
100%
100%
Tours are my core business, but I also offer some other activities. What
percentage of your business are your tours?
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FMRC Net
Profit Average
Bus/coach transport
20%
22%
Gift shop
14%
23%
Motel/hotel operation
18%
Restaurant operation
14%
25%
Mark-up or profit is the most dynamic element of your pricing; you can return to this step later in
the online guide and alter the mark up percentage to see how it affects your pricing.
Based on the percentages listed above you should be calculating your figures using a mark-up of
somewhere between 14% to 25%.
NOTES
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STEP 6 - COMMISSION
Some tourism operators believe they save money by not paying commission to third-party sellers.
But, here's another way to look at it - what do you lose by not paying commission?
Average
commission
10% - 20 %
Tour wholesalers
25% - 30%
25% - 30%
Sales avenue
Direct to consumer
0%
Visitor Centre
Tour wholesalers/IOTs
Other
AVERAGE COMMISSION
To calculate your average commission
add up all the percentages listed above
and then divide by 5.
Note: This is not an exact calculation method, but it will assist you in pricing your product more
accurately.
RESULTS
The final page of the Tourism BOOST online pricing tool is the results page. To help you understand
your results use the glossary below.
Glossary
Meaning
Breakeven price
The price at which you cover all costs and breakeven. This
figure does not factor in any profit to you or commission
fees.
Net rate
The minimum selling price that covers all your costs and
makes you a profit. This price does not factor in
commission to third party sellers.
RevPar
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ANSWERS
QUICK QUIZ
Q. FIXED COSTS ARE
A. (b) Costs that need to be paid no matter how many tourists you carry or rooms you let
Q. VARIABLE COSTS ARE
A. (a) Costs that change depending on how many tourists you carry or rooms you let
Q. WHAT DOES AVERAGE CAPACITY MEAN IN RELATION TO TOURS?
A. (c) The average number of tourists carried or room let per tour
Q. WHAT DOES OCCUPANCY RATE MEAN IN RELATION TO ACCOMMODATION?
A. (c) The average number of rooms occupied each night
Q. WHEN PRICING YOUR TOURISM BUSINESS YOU SHOULD
A. (d) All of the above
Q. IS IT COMMON TO PAY COMMISSION IN THE TOURISM INDUSTRY
A. (a) Yes
Q. WHAT IS BREAKEVEN PRICE?
A. (b) The price at which you cover all costs
Q. IF YOU OPERATE THE BUSINESS SOLEY ON YOUR OWN WITH NO STAFF SHOULD YOU FACTOR
WAGE COSTS INTO YOUR PRICING?
A. (a) Yes
Fixed
Variable
Room cleaning
Vehicle registration
www.smallbusiness.wa.gov.au
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