Pricing PPT 2

Goals for the Unit

• Discuss pricing objectives.

• Identify factors influencing price setting.

• Explore various pricing strategies.

• Examine pricing considerations specific to the tourism industry.

Pricing Objectives & Strategies

• Building Profitability

• Boosting Volume

• Pricing Strategies:

  • Penetration Pricing

  • Every Day Low Pricing

  • High/Low Pricing

  • Loss Leader Strategy

  • Matching Competition

  • Prestige Pricing

Six Factors to Consider in Setting Pricing

• Costs

• Customers

• Positioning

• Competitors

• Profit

• Demand

Tourism Industry Considerations

Yield Management

• Essential due to limited inventory; focuses on maximizing profitability.

• Prices vary based on demand—higher when demand is high and lower when demand is low.

• Factors include seasonality, weekdays vs weekends.

Demand-Based Examples

• Airplane Seats:

  • 100% full at $100 each = $10,000

  • 90% full at $120 each = $10,800

  • 100% full at $110 each = $11,000

• Hotel Rooms:

  • Similar pricing strategies apply to hotel occupancy.

Seasonal Pricing

• Understand high and low season pricing dynamics.

• Avoid unnecessary discounts; discount only as needed to motivate sales.

• Weather and holiday periods significantly influence demand.

Activities & Discussions

Seasonal Pricing Activity

• Research a tourism business to compare seasonal prices.

• Discuss findings regarding visitation trends and influencing factors.

Demand/Dynamic Pricing

• Adjust prices based on current demand metrics.

• Requires analyzing sale trends and market conditions.

• Dynamic pricing fluctuates based on various factors including time and economic conditions.

Last-Minute Deals

• Utilized to fill remaining inventory slots.

• Considerations for pricing late bookings higher due to revenue loss from unsold inventory.

Tour Industry Pricing Strategies

• Establish retail prices in advance before approaching travel trade.

• Ensure profit margins allow for commissions.

• Plan with tour operators 12-18 months ahead.

Commission Structure Examples

• Example of Retail Pricing Structure:

  • Tour Operator: $80

  • Travel Agent: $90

  • Consumer Price: $100

Cross/Up-selling/Packaging

• Cross-selling includes promoting additional services (e.g., meals, activities).

• Upselling involves guiding customers to purchase higher-priced items.

• Packaging includes combining multiple services to cater to customer needs.