PRICING IN TOURISM

Price is the amount that the customer pays for

the products; the amount of money exchanged
for something of value

Price
Sales – total amount that a company gets based on
quantity sold multiplied with selling price.

Revenue – total income/ profit that the company

keeps after all expenses have been paid for.

Fixed Cost – cost incurred due to the operations of

the business; do not fluctuate with volume of sales.

Key Concepts Relevant

to Pricing
Profit Margin – level of income that is desired
by he company.

Variable Costs - costs that vary based on

volume or quantity.

Break-even Point – the point wherein total cost

is equal to total revenue.

Key Concepts Relevant

to Pricing
a. Costs
The setting of prices should incorporate a
calculation of how much it costs the
organization to produce the product or the
service.

Key Factors Affecting

Price
b. Organizational and Marketing Objectives
Companies get into business for survival, profit
maximization, high rate of return of investment,
brand equity growth, and an adequate share of
the market.

c. Other Marketing Mix

Price is affected by the interplay of the variables
in the marketing mix.

Key Factors Affecting

Price
d. Buyer Perceptions of Value and Price
Buyers have different perceptions of product
quality and value based on branding and image.

e. Competition
Knowing what competition offers is an
important factor in the success of a business.

Key Factors Affecting

Price
f. Government Regulations and Taxes
Some government regulations and taxes can
either cause a company to maintain its low
prices or increase its prices.

g. Nature of the Market and Demand

Tourism caters to a highly segmented market
place.

Key Factors Affecting

Price
h. Pricing in Different Markets
Different markets have a different level; of
price sensitivity.

i. Price Elasticity of Demand

Price increases or decreases normally have an
effect on the level of sales of the product.

Key Factors Affecting

Price
j. Other Environmental Factors
Other environmental factors that may be
beyond the company’s control can affect
pricing.

Key Factors Affecting

Price
1. Survival. A company may be experiencing a
deep crisis that the most basic reason for its
marketing efforts is merely to survive.
2. Current Profit Maximization. Some companies
seek to use marketing for short term financial
gains.
3. Market Share Leadership. Some companies
build on marketing strategies that will help the
company gain a huge market share and become
a market leader in its product category.

Price and Its Relationship to

Marketing Objectives
4. Brand Equity Growth. Establishing a positive
brand image leads to high awareness and
perception of quality.
5. Product- Quality Leadership. Some
companies want their brands to be associated
with high quality.

Price and Its Relationship to

Marketing Objectives
1. Cost-based Pricing. Cost-based pricing is an
approach that aims to cover costs and make
a profit.
2. Break-even Analysis and Target Profit
Pricing. This kind of approach is when price
determined using a break-even price and
projecting a target profit.

General Pricing Approaches

3. Buyer-based Pricing (Value-based). Some
companies base their process on the value as
perceived by the consumers.
4. Competition-based pricing. This approach
looks at what price competitors are putting on
their products and services.

General Pricing Approaches

Prestige Pricing is used when the product or service
is positioned to be luxurious and elegant.

Market Skimming Pricing is when the market is price

insensitive.

Market Penetration Pricing is used when setting a

low initial selling price to penetrate the market
quickly and to attract many buyers for a large market
share.

Pricing Strategies
Product Bundling Pricing is a strategy used to
attract buyers to purchase because of the
reduced rate of the bundle compared to the
total cost of the items if purchased individually.

Volume Discounts are rates given to frequent or

high volume users to attract them to put
purchase the products.

Pricing Strategies
Discounts Based on Time of Purchase. This
strategy addresses the seasonality aspect of the
tourism product.

Discriminatory Pricing as the segmentation of

the market and pricing differences based on
price elasticity characteristics of the segments.

Pricing Strategies
Psychological Pricing. Psychological aspects
like prestige, reference prices, round figures,
and ignoring end figures.

Promotional Pricing offers discounts and short-

term incentives especially during the
introductory stage of the product or during
special activities such as anniversaries or
festivals.

Pricing Strategies
Revenue Management is a systematic approach
demand for services with an appropriate supply
in order to maximize revenues.

Revenue Management
It is a form of discriminatory pricing wherein
some of the market segments pay higher or
lower prices than the other tourist for the same
tourism products and services in order to ensure
optimal yield from the available inventory.

Yield Management
A hotel has a fixed number of rooms per day and
a variety of market segments with different
price ranges. Let us demonstrate in simple terms
how yield is calculated.

Calculating Yield