Podcast
Questions and Answers
The main source of income for tour operators comes from package holiday and tour package charges.
The main source of income for tour operators comes from package holiday and tour package charges.
True (A)
Fixed costs are those that stay the same no matter how many passengers a company carries.
Fixed costs are those that stay the same no matter how many passengers a company carries.
True (A)
The distribution of the packages typically utilizes the services of travel agents.
The distribution of the packages typically utilizes the services of travel agents.
True (A)
Pricing strategies can be developed based on the target market and the product life cycle.
Pricing strategies can be developed based on the target market and the product life cycle.
Cost plus pricing does not take into account the customer's perception of the value of the tour package.
Cost plus pricing does not take into account the customer's perception of the value of the tour package.
Flashcards
Package Holiday Cost
Package Holiday Cost
The cost of operating a package holiday, including operating costs, distribution costs, and consideration of competitors' prices, demand, target market, and seasonality.
Operating Costs (Tourism)
Operating Costs (Tourism)
The ongoing expenses of running a tour operator's business, including fixed costs (staff salaries, supplies) and variable costs (sales, events, accommodations).
Distribution Costs (Tourism)
Distribution Costs (Tourism)
Expenses associated with making tour packages available to clients, often through intermediaries like travel agents who receive commissions.
Fixed Costs
Fixed Costs
Business expenses that remain constant regardless of sales volume (e.g., salaries, rent).
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Variable Costs
Variable Costs
Business expenses that change according to sales volume (e.g., marketing, accommodations).
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Competition (Pricing)
Competition (Pricing)
Analyzing competitors' prices to determine a competitive pricing strategy for tour packages.
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Demand (Pricing)
Demand (Pricing)
The level of consumer interest in a specific tour package, impacting pricing strategies.
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Target Market
Target Market
The specific group of customers a tour operator aims to attract, influencing pricing decisions.
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Seasonality
Seasonality
Fluctuations in demand for tour packages based on the time of year, affecting pricing.
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Cost-Plus Pricing
Cost-Plus Pricing
A pricing strategy that calculates prices by adding a markup percentage to the production costs (including operating, distribution).
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Market-Based Pricing
Market-Based Pricing
A pricing approach aligning prices with market conditions and competitor pricing.
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Premium Pricing
Premium Pricing
Charging a higher price for a tour package because of its quality, luxury, or uniqueness.
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Promotional Pricing
Promotional Pricing
Offering lower prices for a tour package to attract customers or encourage early bookings.
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Marginal Pricing
Marginal Pricing
Another term for cost-plus pricing in which costs and a profit margin are combined to establish tour prices
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Low Season
Low Season
A time of year with lower demand and associated lower prices for tour packages.
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High Season
High Season
A period with higher demand for services and associated higher prices that result from the law of supply and demand.
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Tour Operators' Revenue
Tour Operators' Revenue
The income earned by a tour operator from selling tour packages
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Profit Margin
Profit Margin
The difference between the cost and price of a product or service, often expressed as a percentage of the selling price
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Pricing Factors
- Establishing the right price for packages and managing revenue effectively is crucial for profitability.
- Package holidays/tours must be cost-effective.
- Tour operators' income comes from package prices.
- Cost-effective pricing increases mutual benefits for operators and customers.
- Packages are usually bought in advance, giving clients time to assess quality and accessibility.
- Understanding operating costs is essential for pricing.
Operating Costs
- Include fixed costs (e.g., wages, office supplies) and variable costs (e.g., sales, events, accommodation).
- Wages/salaries and office supplies are fixed costs.
- Variable costs change based on the number of passengers.
- Distribution costs include intermediaries like travel agents who earn commissions.
Distribution Costs
- Travel agents distribute packages.
- Commission rates vary based on agreements between operators and agents.
Other Pricing Considerations
- Competition: Competitors' prices should be a benchmark.
- Demand: High demand often leads to higher prices.
- Target market: Customers' willingness to pay impacts pricing.
- Seasonality: Supply and demand influence prices, with higher demand during peak seasons.
Pricing Decisions
- Strategies vary based on packages, target market, and brand position.
- Cost-plus (marginal) pricing: Adds production costs and profit percentage to price.
- Market-based pricing: Sets prices based on competitors' pricing.
- Premium pricing: High prices for exclusive products.
- Promotional pricing: Offers discounts to encourage early bookings.
- Fluid pricing: Prices change hourly based on demand.
- Discount pricing: Common during off-season to stimulate demand.
- Seasonal pricing: Adjusts prices throughout the year according to demand.
- Competitive pricing: Prices based on competitors' prices.
- Options pricing: Offers optional extras to increase revenue.
- Last-minute pricing: Prices change based on availability or special events.
Systems Used in a Travel Agency
- Computer Reservation Systems (CRS) and Central Reservation Systems (CRS) are computerized booking systems.
- CRS manage details for air tickets, hotels, and car rentals.
- Global Distribution Systems (GDS): Software for booking services.
- Popular GDS providers include Amadeus, Sabre, Abacus, and Galileo.
- These systems automate booking procedures and streamline processes for travel agencies.
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