Tour costing and pricing

1
MTB 401 UNIT V

• Meaning and Concepts
• Components of Tour cost
• Category of Tour costing
• Factors Influencing Tour Costing
• Pricing of Tour package

Tour Costing and Pricing
MANAGEMENT OF TOURISM BUSINESS
1
2
Meaning of Tour costing

• Tour cost means the total cost incurred or
  attributed to a tour product or service. It is
  the sum total of costs incurred to create or
  formulate a tour package. Since tour is an
  assembled product, its costing involves bulk
  purchase. Therefore the cost of the tour packages
  is determined according to the client requirement
  or company strategy. As the quality of the
  product /service and the price of that product go
  side by side, hence in travel trade the cost unit
  is a package tour because a company sells a large
  number of packages.
• The identification of cost unit will help costing
  manager to separate the cost into smaller
  sub-divisions attributable to tourism industry.
• A tour package is a combination of various
  tourism services/ goods like transport,
  accommodation and other facilities en route and
  at the destination.

2
3
Components of tour cost

• Research and Development costs
• Travel Cost
• Accommodation cost
• Transfer cost
• Food and beverage cost
• Sightseeing and activity cost
• Marketing cost
• Administrative cost
• Miscellaneous costs

2
4
Category of Tour Costing
Fixed costs are changed when the number of
packages sold increases over time. Tour operators
include the cost of hiring buses and guides or
interpreters. Fixed costs are a 195 kind of
expenses incurred before any sales take place.
These costs often include rent of the building,
furniture and salary. Variable costs change
according to the increase and decrease in the
number of customers in the group. These include
meals, accommodation, admission fees, and other
costs charged according to a rate per person. The
cost of advertising, pamphlets and brochures are
also included in the variable costs. Furthermore,
variable costs include the actual expenses
(direct costs) of rooms, tickets, and other
package components incurred with the sale of each
package. The overhead and marketing costs are
considered proportionately for each tour package
based on the costs of developing and marketing
each package.
2
5
Continued.
Fixed, variable, and overhead costs vary between
60 per cent and 70 per cent. Three different
costs are added with a 1015 per cent mark-up to
get the final price tag for an individual tour
package. For example, Yatrik Travels plans to
offer a weekend winter sports package to Kashmir
during the professional skiing season. It
includes tickets, room charges, helicopter
services, two meals, executive hotel services,
skiing equipment, and refreshments
2
6
Factors Influencing Tour Costing
? Seasonality It may vary your price depending
on high or low season ? Operating Costs The
higher the operating costs, the more expensive
the prices will need to be so that it cover all
expenses. ? Competition There is no point
pricing the product out of the marketplace and
the company need to stay competitive or be able
to justify the high price. ? Demand People pay
more if there is a high demand in a region.
Similarly, they pay less if there is an abundance
of choice . ? Tour or Accommodation Details
Different tour types of rooms are reflected in
the package tours for the guests to know. ?
Daily Costs (Fixed) To determine the fixed costs
associated with operating business, such as fuel,
labour etc... ? Daily costs (Variable) To
determine the costs associated with taking
passengers on tour or letting out rooms, such as
meals, third party activities, linen and room
cleaning
2
7
Continued
? Annual Business Costs (Fixed) To calculate the
total costs associated with operating the
business, these costs occur whether the tours
operating or not, it remains to be fixed. For
example costs that are fixed include insurance,
marketing, lease payments, bank fees, accounting
fees and salaries. ? Average Capacity The
package tour business is based on factors such as
visitation to the region, competitor analysis and
customer feedback Accurate Forecasting is also
necessary for another reason. Yet another risk
can arise from the unexpected loss of popularity
of a country where the tour operator has
contracted heavily. ? Political or Security
Concerns or Natural Disasters Typhoons or
volcanoes, or currency movements or new aviation
or tourist taxes influence the cost of package
tours. There is a high level of price elasticity
between holiday markets.
2
8
Pricing/Costing of Tour packages
The next important thing after planning the
itinerary is to calculate the tour cost for the
itinerary planned. The following costs need to
included while calculating the tour
cost Hotel Meals Transportation Entrance
fees Miscellaneous fees Mark up
2
9
Continued
Example For the group of 12 students of SYDTT,
dormitory accommodation was provided at Hotel
Tourist Rome _at_ 175/- per student for a single
day. The 2 staff member were also charged the
same rate. The rate of the vehicle was Rs.14.00
per km. Since the itinerary was planned for 3
days the vehicle was finalized at the cost of
14.00/km with an average of 300 km per day. So
the total cost of the vehicle was Rs.12600/- for
3 days. (14.00 x 900 km Rs.12600/-) Meal
costing as per plan Tour Guide cost
Miscellaneous cost toll booth/ parking
expenses. Lastly the mark up which is one of
the main sources of income of the travel agency
has to be added to the per person cost of the
tour to get the final tour cost.
2
10
Continued
Item Details Total cost
1) Hotel Rs.175/- x 2 nights x 14 pax Rs.4900/-
2) Transportation 14.00 x 900 km Rs.12600/-
3) Guide Rs.3650/-
4) Entrance and other fees Rs.980/-
5) Toll taxes Rs.576/-
Total Tour Cost Rs.22706/-
Add mark up 30 on cost 22706 30 6811/-
Total price of package 227066811 29517
2
11
Thank You