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Monday, August 08, 2011

A Travel Outlet is Born - Pricing and Commissions | THE BUSINESS OF LEISURE

The Business of Leisure with Tony Humphrey

Travel business operators, from the smallest b&b to grand lodges and from day tours to extended international tours all have to add their profit margins to the costs of their respective products and services. Most travel operators have a website or what we will call an ‘Outlet’…..

If the travel product is sold by third-party sellers such as wholesalers, inbound tour operators, retailers or even their local tourism or visitor centres a further amount will be added for sales commissions.

The direct (or outlet price) gives them their required margin of profit but all of the other intermediaries have to have their own mark-up before we reach the actual ‘brochure’ price.

Where can or where should the traveller buy the product? They can go directly to the Operator (Outlet)….they can try Wholesalers but not all will sell directly to consumer or go to Retail Agencies (online or bricks and mortar)…… where all mark-ups may be in place.

In the non-travel world we can visit Costco (if a member) where we expect better prices than from other retail outlets as we have paid a membership fee to buy at ‘wholesale’ prices. In most cases with consumer products we have to use a business that has bought the products from the manufacturer as it is not possible to buy ‘soup from the Knorr Factory’…with travel we can often go directly to the operators.

Travel operators may want or need their distribution system but if their distributors (wholesalers and retailers) cannot fill all of the available space it would seem to be a smart move to also sell directly from the website…..At Retail, Wholesale or Direct (Outlet) Price….that is the question?

As a tour operator I would not want to risk alienating my distributors so I would probably offer my product at retail. If I can sell at retail I will make more profit. If I do not sell that space before the sell-by date, an empty seat on a tour or an empty room is unrecoverable. I would therefore be prepared to discount my product early in the selling process to improve my sales potential. However, I would not want to show a discounted price on my site, unless for last minute deals, that may harm my distributor relationships.

Last minute deals can be created but it makes more sense to sell well ahead of the sell-by date to ensure that the ‘tour full’ or ‘no vacancy’ signs can be raised.

Coupons, droupons, soupons, loupons vouchers or whatever the latest daily deal site is called can and should be considered by travel operators if they allow for acceptable level of profit to be retained or will attract new and repeat business. This may not be possible if the commission on sales is taken from the direct / outlet price….this offer then becomes a loss leader to attract traffic and new clients or merely to recover costs but a contribution to costs may be more acceptable than no contribution at all.

A non-travel business has many options for distribution but travel operators are somewhat limited as their products and services have very critical sell-by dates. That is why, being in the Business of Leisure, we developed and, places where any travel business can offer direct booking savings for travellers that do not appear on their own websites. A website service is now available to them that operates in a similar way to Costco - Family Memberships that allow members to buy with direct booking discounts. Travel businesses get courtesy listings when offering direct booking savings for the members.

Tony Humphrey is the CEO / Top Hand at which offers its members significant discounts and savings on travel and shopping in over 100 countries. Sign up today for our exclusive 2 for 1 family membership package. Please Click Here.

For more information, please visit Tony's TNNWC Bio.

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