Pricing Components

Your pricing strategy may be made up of the following components:

Rack Rates

All tourism businesses should have a rack rate – this is your “full rate” before any discounts are applied and typically is what is provided to wholesalers and printed on brochures for the season ahead. For activity and attraction operators, their full rate is more likely to be charged all the time without any day to day discounting, however, accommodation operators – particularly those in the middle of the market will be changing pricing almost daily for the month or 2 months ahead to fill gaps.

Seasonal Pricing

Using a mix of pricing throughout the year to cover low, high, and shoulder seasons is a standard way for tourism businesses to cater for differing levels of demand due to the time of year. Typically these will be the same date periods each year but may also apply for school holiday dates and for local events where the dates vary each year.

Last-Minute Pricing

A common method for accommodation suppliers to fill those last-minute gaps in inventory availability, last-minute pricing is basically discounting daily prices according to forward bookings and promoted on last-minute booking websites.

Common Pricing Types

Per Person pricing: A set price per person e.g Adult and Children prices. Commonly used by activity/attraction and transport operators or backpacker accommodation and campsites. Options may include an adult, child and senior citizen price.

Per Unit pricing: – A set price for 1 unit of the product e.g. Price per night, this is the standard way to price accommodation, usually the advertised price is for 2 people so if the accommodation fits more than 2 guests it can have a mix of the per person pricing with extra adult and extra child rates.

Single or double occupancy – common for B&B’s there is a single rate and a double rate (which is not double that of the single rate).

Discounting

While discounting has its place, and often unavoidable in a competitive market such as tourism, be very wary about continually discounting your prices to stimulate demand – it can become a rocky road to reducing profitability or even missing that vital break-even point. Be selective with last-minute pricing deals – don’t make every day reduced, just select those where you really do need extra bookings. Consider adding conditions to a discounted price like a minimum stay or number of travellers in the booking. While a booking is better than no booking at all, customers do become used to a certain price level and you, therefore, run the risk of not only making it hard for you to charge your normal rack rates, but it will also devalue your product – remember perception is everything in tourism!

Package Deals

Developing packages with complimentary tourism partners in your area or with value-added components is a good way to stimulate demand without having to discount. Strike up deals with local businesses to provide a full package and share business with each other – you should be able to get their products or services at a “net” rate so the package pricing is better than if they had purchased each component separately. Packaging can also be used to target niche markets effectively e.g golf weekends, food and wine tours, pampering packages etc.

Commissions

Many bookings will come via some sort of third party who will charge you a commission such as a retail travel agent, wholesaler, inbound tour operator or online travel agent (OTA). Many tourism operators are tempted to add the value of the commission to the pricing for these providers but this should actually be considered in the setting of your rack rates anyway – if you have different pricing across different distribution channels it just confuses both travellers and can jeopardise industry relationships, so keep it simple.