Tour pricing can make or break an outdoor guide business. Price your services too high and you won't get enough customers to cover your costs or make a profit. Set prices for your services very low and your costs will exceed your profits.
Maybe you want to start at outdoor guiding work Because this is your passion, hobbies and lifestyle. Sure, it might be great to make money with side routing, but if you really want to start a full-fledged tour process, you need to make a profit, not just break-even, but to make money so your business stays, well, in business.
Find out the costs of running your mentorship business
Before you can start pricing your tours, you need to know your costs. Typically, tour operators can expect to pay for the following:
- Equipment maintenance (buses, ropes, helmets, gears, etc.)
- Guides and Staff Salary
- What training courses will you provide to your employees?
- Distributor commission (business partners, online travel agencies, marketplaces, etc.)
- Internet, cell phone, electricity, rent and other bills
- State and federal taxes
- Marketing costs (ads, website, social media, print, etc.)
pay yourself
Another thing to consider when setting your rates is how much you want to pay yourself. Start by adding the time you spend on your work. Then, to determine your time price, determine the hourly rate you want to earn from your business, and then divide it by the number of rounds you can sell at that time.
timing
Since outdoor guided tours are a service, not a product, you also need to consider how much time one excursion takes out of your day. If a single flight takes 4 hours, you need to factor that into your costs. If you pay yourself $50 an hour, you need to earn at least $200 toward your salary for that trip. Then consider other costs as well.
seasonal
Also, do not forget about seasonality. Will you work all year or just parts of the year? You need to make sure to take this into account while pricing your flights to offset the declines in profits over the course of the year.
variable vs. Fixed price
Finally, another element to determining your costs is to look at variable and fixed costs. Variable costs are things that change in prices from week to week or month to month, such as gas, food, and electricity. Fixed costs are costs that don't change often, such as your internet and cell phone bill, rent, and employee salaries.
Next, determine your profit margin for flight pricing
You have a good idea of how much it will cost to run your tourism business. Next, you need to figure out how much money you want to make on top of that, aka profit margin, aka how you'll stay in business and not have to work on the side job(s) to maintain your passion. .
What you need to equalize
Find out how many rounds you need to make in order to break even (by week or by month). Start with your monthly costs, then work backwards.
For simplicity's sake, let's say your monthly costs are $1,000 a month. To find the weekly breakdown, divide $1,000 by 4.3 (the average number of weeks in a month). This equals $232.55 (rounded to $233). To break even, you have to earn $233 per week from your spins.
codec ratio
Next, you need to select your markup percentage to make a profit. Markup is how much your ride is "marked up" before you sell it. If online travel companies are charging 10-30% commission, it is safe to assume that 10-30% is within industry standards.
Let's say you want to make 20% profit from your rock climbing trips. Take your costs per trip and divide it by one minus 0.2 which gives us 0.80. For example, let's say it costs you $100 per person per trip. Divide $100 by .80 and you get $125. $125 is the target price.
100 / .8 = $125
Or, if you want to make 30% profit, take 100 and divide it by .7 (1-.30 = .7).
100 / .7 = 142.85 USD
$142.85 would be the target price per person per trip.
Here's the formula for doing this equation yourself:
Target price = (Variable cost per product) / (1 - Required profit margin as a decimal)
assembled:
Know your monthly costs and find the weekly breakdown of that cost. Then figure out the cost per person so you can correctly code the cost per person to make a profit. Don't forget to keep seasonality in mind there too!
Cost analysis of your tour pricing strategy
Let's say you decide to charge $143 per person for a 4-hour rock climbing trip and have a 4:1 client-to-guide ratio. This means that you will earn $572 if you sell all 4 seats on this flight. But is this something people are willing to pay for?
Compare with competitors
Look at other guide companies in your area or in nearby cities that offer tours similar to yours for their prices. For example, we searched for rock climbing guides in Phoenix, Arizona and on a four-hour climbing trip for a group of four, we saw $155, $145, $145, and $175 from four different companies.
Don't automatically go for the lowest price
Don't just go for the lowest price if your rides are unique and offer something different from your competition (which they should).
You should already know what kind of trips you want to offer and how you will differentiate yourself from other tour operators in your area, so price your trips to reflect that (and don't automatically go for the lowest price). As you can see, there is a $30 difference between the lowest and highest prices for rock climbing guides in Phoenix, Arizona.
If you stick to the $143 price tag, it will be less expensive than your competitors, even if it's by $2. And you still have room to grow. If that price still allows you to pay all the costs needed to run your flights and make a profit, this could be a good starting point.
If you realize that you are not providing enough value for your flights for the cost, consider adding specific services that do not add much to your cost, but are highly valued by customers such as simple meals or snacks, bottled water, photos, etc.
Test and set your own prices
Test and adjust as soon as you live. If you realize no one has booked with you and they mentioned the price, consider dropping it with a touch (make sure you still make a profit). If you're getting a lot of clients, but losing money, you'll need to increase your rates so you can continue to operate.
As seen in our example of rock climbing guides in Phoenix, Arizona, you are more likely to fall in the last position (cost > price) since you have the cheapest tours. Fortunately, you still have plenty of room to increase your rates before they get too pricey.
Make your tour pricing on your website the lowest price
Your website is the best place for customers to book flights, so you want it to be the easiest and cheapest way to do it (psst...be sure to use Simplified online reservation program So your website is actually the easiest place to book a ride with you).
Phone reservation fee
Some outdoor tour operators charge to book over the phone, which we think is genius. Sure, you want to help customers and answer their questions. And some customers need to get a lot of information before they feel comfortable booking a flight with you.
The problem with this is that you may end up spending a lot of time on the phone answering their questions and booking the trip for them when you can drive the trips yourself or advertise your business.
You want to earn $50 an hour, right? How much money do you lose when you spend on phone booking customers when they can easily do it on your website?
Describe your travels to sellers
If you work with a distributor or Online travel agency (OTA) such as Expedia, TripAdvisor/Viator, GetYourGuide, and Klook make your rates higher on those sites than on your own. OTA charges commissions anywhere from 10-30% of the cost of your trip, so raise it to offset the commission cost.
By charging a reservation fee over the phone and coding your rates on OTA websites, you are incentivizing people to book on your website because it is the cheapest option.
Adjust your tour pricing for inflation
Pricing is not a "set it and forget it" strategy. Things are always changing. You need to be flexible and change with the economy. And adjusting your tour pricing for inflation is a necessary evil.
Nobody likes what inflation rates do, which is raise prices. Unfortunately, you are not immune to an increase in the rate of inflation. Additionally, you don't want your costs to be more than what you charge because then you are setting yourself up to run out of money to run your business.
As of this writing (October 2022), inflation is 8.26%, which means your prices should reflect that since you're paying more for gas, food, etc. as an operator. If you charge $143 per person per flight, the 8.26% increase is an additional $11.81, bringing that to $154.81.
With this price adjustment to account for inflation, I'm still actually competitive pricing. What you can do is what we mentioned earlier: add more services to your trips that don't add much to your operating costs, but make customers feel that your trips are more valuable compared to others.
By showing your customers the value of your trips and the experience they'll have by booking with you first, when they finally see the price, they'll know what they're getting for that cost. They will be able to assess whether your trip is worth it for themselves. If you do a good job of explaining everything you have to offer, they will have no doubt in their mind that you are their guide.
Note: Use this article as a starting point, but hire an accountant so you can get an expert opinion on what you should charge for your tours not just to cover costs, but to make a profit.
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