Knowing how to price a tour package comes down to three questions. What does the trip really cost you? What margin do you need? What will the right guest pay for it? Answer them in that order, and check the last one against the market.
List every cost
- Per person costs: rooms, meals, entrance fees and activities.
- Group costs: vehicle, driver, guide, parking and fuel. Divide these by the number of guests.
- Selling costs: card fees, commission to agents and your marketing.
- Overheads: a fair share of office, software and your own time.
- A buffer for exchange rates and price changes.
Margin and mark-up are different
A mark-up is added to the cost. A margin is a share of the selling price. If a trip costs 800 and you want a 25% margin, the selling price is 800 ÷ 0.75, about 1,067. A 25% mark-up gives only 1,000, which is a 20% margin. Pick one way of working and use it everywhere.
A worked example
These figures are made up to show the sums. Take a seven-day private trip for two guests. Per person costs are 700 each, so 1,400 in total. The vehicle and driver are 600 for the trip. Total cost is 2,000, or 1,000 per person. For a 25% margin, the selling price is 1,000 ÷ 0.75, about 1,333 per person. Now check the small costs: if card fees take 4% of the 2,666 total, that is about 107, so your margin is lower than you planned, unless the fee is in your costs.
Test the group sizes
Group costs fall per person as a group grows. Calculate the price for two, four and six guests, and show the difference, or set a minimum number for fixed departures so that a small group doesn’t lose money.
Check the market, then decide
Look at what similar trips sell for, but don’t just copy the lowest price. Compare what is included. If you are more expensive, show why: smaller groups, a private guide or better hotels. Round the final figure to something simple.
Write down the terms
A price is only clear together with its terms. State what is included and what isn’t, how long the price is valid, the deposit and the cancellation rules. Then review prices at least once a year, or when a major supplier cost changes.
Why tour package pricing goes wrong
Most pricing mistakes come from things that were forgotten rather than from bad sums. The cost of a free day for the guide, a child rate that doesn’t apply, a supplier’s high-season surcharge or the hours spent on a tailor-made proposal can quietly remove your profit. That’s why it helps to work from the same checklist every time, even for a trip you think you know well.
Seasonal pricing
Hotels, flights and vehicles rarely cost the same throughout the year, and neither does demand. Calculate at least two price levels, high and low season, and check each supplier’s dates, because they don’t always match. Holidays such as Christmas may have their own rates and minimum stays. When a trip crosses from one season to another, price each night separately, and don’t apply one rate to the whole stay.
Pricing for agents and direct guests
If you sell through agents, they need room for their own commission or mark-up. Decide on your net rate first, then calculate the public price so that an agent’s commission doesn’t come out of your margin. Keep your direct price in line with what agents sell at, if your agreements require it. Otherwise, a partner may find you undercutting them, which is hard to repair.
Deposits and payment dates
A deposit secures the booking and covers the money you pay out early. Set it high enough to cover your non-refundable costs, and set the balance date before you must pay suppliers in full. Say clearly what happens if a guest cancels at each stage. Then check your terms against your suppliers’ own cancellation rules, so that you aren’t left paying for rooms when the guest has already been refunded.
What to do when the price feels too high
- Check what the guest really values, and remove what they don’t.
- Change a hotel category, or shift the trip to a quieter month.
- Shorten the route to reduce driving days.
- Explain the value clearly, instead of lowering the price at once.
- Decide your lowest acceptable margin in advance, and keep to it.
A one-page pricing checklist
- Have you included every night, meal, entrance and transfer?
- Have you counted guide and driver costs on non-tour days?
- Is the season right for each night?
- Are card fees and commission included?
- Have you added a currency buffer?
- Have you calculated the margin, not only the mark-up?
- Does the proposal state what is excluded and how long the price is valid?
Tip: Keep this in one spreadsheet per trip, with the costs on one sheet. When a hotel raises its rate, you change one cell.