7 Easy Steps to Maximize Revenue for Tour Operators: Part 1 – Price optimization
Today’s digital marketing landscape is increasingly complex – and everyday it feels like there are only more tools to learn, use, and optimize. If you feel like there’s too much to do, with too little time, you’re not alone. Luckily, tour operators are entrepreneurs – you’re used to drowning out the noise and making big, highly effective moves!
TOMIS is going to temporarily toss out the endless digital marketing “to-do list” and narrow the focus to 7 easy steps that can add tens of thousands of dollars to your 2019 revenue and beyond! Part 1 will cover price optimization for tour operators.
GENERAL PRICING THEORIES WE SUPPORT
- The “rule of 9’s”: any time your price is at or near a whole number (for example, $100), reduce it to the nearest price that ends in a “9” (for example, $99). While most rational people agree that this is silly, human beings are wired to respond to the “rule of 9’s”
- List trips in each section of your website in descending order by price. This allows potential customers to “anchor” at the highest price first, which makes each lower-priced trip (psychologically) relatively cheaper
- Create some add-ons to include in your booking portal, such as t-shirts, mugs, koozies, and perhaps a slightly discounted add-on + trip bundle. Then, list your add-ons in descending price order in the booking portal (anchoring again)
- Create an add-on for tour guide gratuity in your booking portal
- Offer a 10% (or similar) discount for those customers who book during your lowest booking days of the month/year
Forward Looking Demand-Based Pricing
Why is this important?
Tour operator demand varies tremendously.
- By season
- By day of week
- By time of day
- By product
Despite this complexity, many tour operators pick their price using one of two methods:
- They pull it out of thin air
- They copy somebody else who pulled it out of thin air
The good news is that even slightly optimizing your pricing represents one of the easiest opportunities to add revenue to a tour company!
How do you do this?
Implement demand-based pricing! This is a fancy way of saying that your pricing should vary based on how busy you are. Your customers do not book in evenly distributed or uniform fashion. Therefore, selling the same tour at the same price all the time means you are probably leaving money on the table!
Beginner: Take a look at your booking volume for different days of the week and times of the year. Increase your prices slightly during your busy days/weeks/seasons. Test increasing prices during busy periods by about $2 – $4 per person to start. You can also try leveraging tour prices as a means to incentivize advanced bookings or fill that last minute perishable inventory.
Advanced: Analyze your entire historical data set including past pricing changes and coupon usage / effects while also taking a look at competitor prices and public data sources like national weather records and AirBnB occupancy rates. Most tour companies can benefit from their own “Uber Surge” effect due to sporting events, holidays, conference, music festivals, and other events that lead to higher than normal demand.
Then, use a concept from economics called “price elasticity of demand” to create data-informed recommendations for what your optimal price should be for a given day / week / season. Adjust your pricing accordingly, knowing you’re doing so safely – and while taking into account your competitive and market landscape. If this sounds like a lot of work, let us know – TOMIS’ Data Science PhDs do these analyses regularly!
Reservation System Functioniality
Depending on which reservation system you are using, there are advanced pricing settings to help maximize your profits. For example, with Peek Pro you can configure your pricing to vary depending on how booked out your tour is.
TOMIS did a full pricing and demand analysis that revealed a strong opportunity to increase the price for two specific tours from $39 per person to $39.99 on weekdays and $43.99 on weekends. Nashville Pedal Tavern’s 2018 revenue for these two tours increased by over $300,000, based on these two subtle price changes alone!
Stay tuned as part 2 will cover on site cross-promotion!