Pricing your Product

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Pricing your Product

Commissions

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It's very expensive for a tour operator to put your product in a color brochure and to print and distribute sometimes hundreds of thousands of copies of that brochure. Therefore, the operator must be able to make some money for marketing, distributing, and selling your product. The standard commissionable product in the market worldwide includes at least 20% for a tour operator. If the product is sold, the tour operator gets at least 10% of that, and the selling agent the remainder. The tour operator pays the agent.

The following is a formula for determining your net rate and pricing it for a tour operator. It is essential that the rack rate be the same rate being quoted domestically to consumers. *The $100.00 per night net rate is only an example figure.*

1. Determine your Net Rate - this should include overhead, print, promotion and profit, and should be the lowest rate you can live with. $100.00 per night
2. To add in a 25% commission, divide $100 by .75. $133.33 is your rack rate
3. Add local and state taxes for the total rate. Commissions should not be paid on tax.

Tips of the Travel Trade

• Know the difference between a wholesaler, tour operator and travel agent. See our glossary.
• Print up seperate rate cards if necessary.
• If you're in a bind, offer local rate to locals.
• Have prices available a year to a year and a half, in advance.
• Work with your local receptive tour operators.
• Recognize that tour operators and receptives are your sales force, not people who want to take 25-30% of your revenue.
• Recognize that the commission is paid only when the sale has been made at no cost to, or effort from, you.
• Realize that his is the way that the world does business.