Planning When planning the itinerary of the tour package, the following information will assist in developing a package that is customer-focused. 1. Client profile – the more information about the travelers, especially as regards their travel motivators, the better and more suitable the tour package will be. 2. Destination requested or proposed – the market is matched with the destination 3. Duration – the duration will have to suit the client’s profile. 4. Category of accommodations – depends on the client’s budget and socio-economic status. 5. Meal plan – the number of meals to be included in the basic package is based on what is convenient at the destination and is always aligned with the sightseeing tours and activities included in the package. 6. Sightseeing or activities requested or suggested – these will depend on the destination characteristics, sites and sights, and activities. 7. Mode and class of transportation – dependent on the destination’s accessibility by the various modes of transportation and client’s budget and convenience. 8. Ancillary services – refer to needs outside the usual and extraordinary requirements, such as wheelchair or dietary requirements. 9. Guide and/or tour escort services – when requested, the costs of these are always prorated. 10. Number of free-of-charge (FOC) allowed or required Contracting • Contracting is the process of negotiating with suppliers for the most favorable rates, terms, and conditions. The following must be clearly spelled out in the agreement for contracted rates: class and /or type of service or category and/or type of room; taxes, insurance fees, and service charge; applicable concessions; the validity of contracted rates; booking and reservation procedures and conditions; cutoff period; deposit payments; and, form of payment/credit line. Costing • Costing refers to the process of determining the actual costs of a tour package by detailing the various components of the package, and attaching a specific cost represented by the contracted rate for each, according to the costing methods. • A tour package is best illustrated in an itinerary. The costs of the components of a tour package can either be fixed or variable. Fixed costs do not change and remain constant regardless of the number of participants. Variable costs depend on the number of projected or proposed participants. Other costs • Transportation costs by scheduled air, sea, or land transportation are always based on a per-person fare and therefore remain constant regardless of the number. • Transfer costs are almost always prorated. Sightseeing tours by scheduled transportation service is not advisable. • Entrance fees are always fixed. • Cost for entertainment activities may be fixed or variable. • Meals and snacks included in the package are always fixed and always include the FOC and the tour guide. • When hotel accommodations are included in the package, the rule is that two persons share a room. Hotel costs are always fixed. • Tour escort cost does not normally include the per diem or salary paid by the employer. Quotations and Proposals • A quotation is a sum total price of the services requested or proposed. • A firm quotation is the sum total price of the services, requested, reserved, and reconfirmed. A proposal is a form of a quotation indicating the category of accommodations, meal plan, included transfers, and tours, number of complimentary concessions, booking terms, and payment conditions. It is normally made up of a cover letter indicating the inclusions of the tour package, with an attached technical and/or descriptive itinerary. Reservations Once the client has accepted the proposal in writing, the processing of required reservations may commence. Reservations are advance requests for available space or services sometime in the future. A confirmation is a written advice by a supplier that a reservation has been accepted and will be honored, thus the term “confirmed reservation”. Field operations • cover the actual delivery of the services and all activities of the traveler from the moment of arrival to the time of departure. • Once the procedures of the office operations are completed, the focus of attention shifts to the field. • How well the preparations in the office have been done will definitely reflect the operation on the field. Accounting Accounting involves the collection of payments due from the clients, preferably prior to the arrival and the payment due to all suppliers. This includes the settling of ticketing, tour vouchers, and booking orders. • Evaluation Evaluation involves comparing performance of the organizations actual results: (a)financial results, through gain and (b)customer satisfaction by feedback from the clients. of the with the or loss, seeking TOUR OPERATION PROCESS • RESEARCH • PLANNING • COSTING • PRICING RESEARCH • The main object of tour packaging research is to analyze and understand the key elements associated with a particular tourist market and destination • Tour operator will research not only on the tours that seem to fit those areas of interest and specialization but, also on the potential market relating to those areas. Why research is important? • one should not enter the tour market but rather to stress the importance of undertaking marketing research prior to investing amount and time on a tour that the study would have shown to be unprofitable or unpromising. the following steps before entering the tourism market as such: • Identification of economic, political, social and climatic factors that influence the future development of package tours. • The target market, when the target market is small the tour operator must obtain a large percentage to make a tour successful, but if the market is large he tries to capture smaller percentage; • Making the tour to meet the exact needs of the target market; • Identification of key destinations and a comparative study of alternative destinations; • v. Approaching the suppliers; • vi. Making the policy decisions. What is a plan • A travel plan is a package of actions designed by a workplace, school or other organisation to encourage safe, healthy and sustainable travel options. PLANNING TYPE OF COST • Tour operation has two type of cost fixed and variable cost. • Variable costs change as per the number of people in package tour so they require meals , accommodation entrance fees per person • It includes the actual expenses (direct costs) of rooms, tickets, and other package components incurred with the sale of each package • Fixed cost is the cost occur for acquiring services for package tour • These costs often include advertising, pamphlets, brochures, salary, interest on loan and advances • These cost incurred to hire guides or interpreters COST SHEET • Cost sheet tells about the cost incurred in each tour package. • In a tour package cost occur and these will be put in direct and indirect cost. Direct cost will be salary , training ,telephone and internet promotion • Indirect cost will be advertising ,sales and promotion and publicity Type of cost Component % Direct cost Accommodation and food 25 Airline ticket 20 Sightseeing and excursion 15 Agent commission 10 total 70 Indirect cost Total 09 Marketing and Sales Promotion 05 Miscellaneous ( medical, incentive travel, get together, etc) 01 15 Net profit/Income Administrative (salary, perks, recruitment, selection, allowances, employee insurance, etc.) and maintenance ( rent, electricity & telephone bill, software, etc) 15 Components of Tour Cost • • • • • • • • Research and product development Travel cost Accommodation Transfer Food and beverage Marketing and sales promotion Advertising and investment Other cost • Research and Product Development: The expenditure on market research is used to conduct study on the travel behaviour and motivations of customers. It incurs cost to prepare a survey report. The cost for development of new packages includes the process of planning and exploring new places of tourist interests. • Travelling and Transfer: International and domestic air fares, rail travel, transfer and departure tariffs are also included in the cost component of package tour. • Accommodation: The cost of booking rooms constitutes one third of total cost of package tour. Tour operators get best possible room rate after negotiations. • Sightseeing & Activity: Tour operators arrange several value-added activities in sightseeing. • Administrative and Technical Cost: This cost is incurred towards the payment of salary, • Training and Development: • The cost of training staff is indirectly included in total cost. Tour operators hire the trainers for in-house training or send the staff and senior managers to professional institutes. • Marketing and Sales Promotion: Marketing cost includes advertising and sales promotion. and customers. • Printing and Publicity: The cost of printing tour brochures is included in total tour costing. The cost of foreign promotional tour is included in total cost of package tour. • Payment of Interest: Tour operators incur the cost of payment of interest to the banks on the investment of capital to run the business. • Depreciation of Assets: Tour operators incur depreciation cost in the long run due to the obsolete nature of software and hardware, and electronic gadgets. • Miscellaneous Cost: This cost includes porterage charges at airports and railway stations, tips at hotels or airports, entrance fees, insurance premiums, gifts and welcome dinners. PRICING • After ascertaining the cost of a tour package, tour operator analyses exchange rates, estimates future selling price and finalises the price of a particular package. • The tour price is not solely determined in terms of the cost but on the basis of expected rate of return, market share and competitors’ price. • There are different approaches to fix the price of package tour such as total cost and marginal cost method, breakeven pricing, rate of return pricing, skimming, penetration, going rate, differential etc Factors Influencing Tour Costing The average price to sell the product for can vary, some of the factors that influence pricing are:• 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 • 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 TYPE OF PRICING • • • • • • • • • • • Geographical pricing Price discounts and allowances Promotional pricing Discriminatory pricing Product-mix pricing Penetration pricing Skimming pricing Competition pricing Psychological pricing Premium pricing Optional pricing Geographical Pricing • In geographical pricing, the company decides how to price its products to different customers in different locations and countries. • For example, should the tour operating company working in inbound, outbound and domestic market segments decide the same price to customers irrespective of country of origin distant or different? Or set a lower price to gain additional business? Price Discounts and Allowances • Most companies adjust the list price and give discounts and allowances for early payment, sales volumes and off-season buying • Examples cash discount is a price reduction to buyers who pay their bills promptly Quantity Discounts A quantity discount is a price reduction to those buyers who buy large volumes. Functional Discounts Functional discounts (also called trade discounts) are offered by a Wholesaler to trade-channel members if they will perform certain functions, such as selling, and record keeping. Seasonal Discounts A seasonal discount is a price reduction to buyers who buy services out of season. Ski resort will offer seasonal discounts to retailers in the spring and summer to encourage early ordering. Hotels, motels, and airlines will offer seasonal discounts in slow selling periods PROMOTIONAL PRICING • Companies go for promotional pricing techniques to stimulate early purchase. • For example, SOTC World Famous Tour, Outbound Division of Kuoni India Private Limited cuts the price of selected Group Inclusive Tour (GIT) packages to attract customs. • Similarly, Club -7 holidays offers special prices on Holiday packages during special events. An airline company lowers the price of ticket and advertises it as psychological pricing was ` 10,000. It is now ` 9,999. PRODUCT MIX PRICING • Pricing strategy must be modified when the product is part of a product mix. • For instance, tour package is mixed with hotel, transportation and attractions. In this case, tour operator searches for a set of prices for maximizing profits on the total mix PENETRATION PRICING • The organization sets a low price to increase sales and market share. SKIMMING PRICING • The organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. • The objective is to skim profits of the market layer by layer COMPETITION PRICING • It is a strategy to set a price in comparison with competitors PSYCHOLOGICAL PRICING • The sellers here consider the psychology of price and the positioning of price within the market place. PREMIUM PRICING • The price is set high to reflect the exclusiveness of the product OPTIONAL PRICING • The organization sells optional extras along with the product to maximize its turnover.
