Yesterday I received the email and attached outline below from my friend Kurt Kutay from Wildlands Adventures. I thought you might be interesting in an insiders view of pricing issues in todays environment and got Kurts permission to share it with you.
I have definite views on the subject, but rather than start out by influencing the discussion, I think it would be more interested to get your comments first and then address them in a future post.
By way of disclosure Costa Rica Expeditions operates trips for Wilderness Travel and Geographic Expeditions, but does not operate for Wildlands Adventures.
Changing the subject, I appreciate all the very thoughtful and enlightening comments on last weeks post about Trip Advisor. I have decided to do some research on Trip Advisor. I will reveal what I find and coment on the comments in a future post.
Allie, Ray (of Wilderness Travel) and I are leading a Collaborative Learning Session on “Pricing in a Climate of Discounting” at the ATTA Summit.
Attached is an outline I have crafted based on ATTA regional meetings that were held around the country last year and some additional thoughts and considerations of mine, Allie’s and from Jim Sano of Geographic Expeditions.
If you have a moment, I invite you to take a look at the attached and let me know if you have any further experiences and ideas you would like to share and I can express on your behalf as to what you have observed in the market and what you have done to manage pricing and sales in this increasingly competitive and discount-oriented market.
Pricing pressures, intense competition, disintermediation, transparency of the Web and more are forcing operators to look at new pricing models, whether straight discounting, variable pricing, making special offers or others. In the current business climate, consumer’s value expectations have risen and they’re likely to intensify.
We’ll explore the realities of the market and how it affects pricing, including the fact that pricing is now virtually visible to all, and then explore pricing strategies and solutions. Participants will share insights into possible models to investigate and specific tactics to implement, and explore their pros and cons.
What’s creating the climate of discounting?
1. The economic downturn
- Lower spending
- Smaller market
- Demographic impacts (ie. over 60 downturn, portfolio losses)
- Web information access—over 70% of travelers use web for research
- Media shift in listing inbound suppliers, hoteliers
3. Disintermediation – shifting channels of travel distribution
- DMCs, inbounds and hoteliers selling direct
- Full service hoteliers with tour operations
4. Fluctuating currency rates creates widespread pricing variability
5. Consumer requests for price breakdowns and discounting expectations
6. Pressures on agents/operators to make sales
Tactics to deal with the situation
1. Creating travel incentives
- Early sign up discounts, last minute sign up discounts
- Online booking discounts
- US Park Service free entrance days created record visitation
2. Added value proposition
- Selling experiences, knowledge and service vs selling a “product”
3. Managing inventory and group size to achieve critical mass and profitability
- Variable pricing—clients pay different rates gaining acceptance (ie. early booking discounts)
4. Yield management pricing: cruises and hotels have occupancy requirements
5. Achieving lower price points
- Shorter itineraries, downgrading hotels, etc.
- Negotiating better rates with downstream suppliers especially w/ volume
6. Special niche pricing
- Kids discounts to encourage family travel
- Accommodating singles (negotiate discounts, budget single costs)
7. Currency risk management
8. Disintermediation goes both ways
- Inbounds can sell direct to consumers
- Outbounds go direct to lower chain suppliers
- Outbounds favor inbounds that only wholesale, set prices and offer generous commissions
9. Competitive price analysis
- Know your competition, know your strengths and how to differentiate
- F.U.D. – Fear, Uncertainty and Doubt
Benefits of home company: Safety, financial security, communication, pre-departure services, save time, customer-oriented.
So what do you think? Does this interest you?