pricing 1

• Costing


  The process of determining the actual cost of a tour package by detailing its various components (accommodation, transportation, tours, meal plans, tour guide, and tour coordinator services) and attaching a specific cost represented by their contracted rates according to their corresponding method of costing
• Pricing


  The process of determining the selling price after a mark-up (the value that tour operators add to the price of their products) or margins (measure of profitability) to the costs
• Costing tour packages


  1. Identify if air transportation must be involved

  2. Determine whether the cost of a component is under fixed costs or variable costs

  3. Calculate all costs (paying passenger, free-of-charge [FOC], and tour guide) on a per pax basis

  4. Calculate free-of-charge (FOC) costs based on inclusive number of meals, entrance fees, and non-land transfers/transportation costs

  5. Calculate tour guide costs including board, lodging, and tour guide fees

  6. Prorate FOC costs and tour guide costs by number of paying passenger brackets

  7. Calculate mark-up or margin by multiplying total cost by desired percentage

  8. Calculate government tax by dividing net to tour operator by 0.88 for 12% VAT

  9. Calculate travel agent/travel agency's commission by dividing total amount due by 0.9 for 10% commission
• Costing transportation components


  1. For scheduled air, sea, or land transportation, cost is based on per pax fare

  2. For group tour charters, total cost of vehicle must be divided by pre-determined number of passengers not exceeding capacity
• Costing transfer services


  1. Transfers cost may be prorated, except for regular airport shuttle service which is fixed per pax

  2. Private coach transfers can be arranged but with higher price by computing total passenger capacity divided by actual passengers
• Costing sightseeing tours


  1. Sightseeing tours include transportation, tour guide services, entrance fees, entertainment activities, and sometimes snacks and meals

  2. Transportation costs within destination are prorated by pre-determined number of participants not exceeding capacity

  3. Sightseeing tours by scheduled transportation may prevent clients from stopping at desired sites

  4. Hop-on, hop-off sightseeing tours use city's public transportation and are calculated based on published rate
• Tour guide service costing

  • Evening tour (PHP1,500) plus rest overnight (RON) (PHP2,500) = PHP4,000
  • Full-day tour (PHP2,000) plus RON (PHP2,500) x 4 days = PHP18,000
  • Half-day tour (PHP1,000) = PHP1,000
  • Total tour guide fee = PHP23,000
• Pricing of services always varies from one tour operator to another. This is just a representation as a guide in costing tour guide service fees.
• Entrance fees are always fixed. The rule is that no free concessions for entrance fees.
• The cost of entertainment activities may be fixed or may vary.
• Table 1. Costing tour guide services*
• Source: Travel and tour operations in the Philippines 3rd ed., 2013. p.286
• *Pricing of services always varies from one tour operator to another. This is just a representation as a guide in costing tour guide service fees.
• Costing tour guide services

  1. Cost of transportation and accommodation (single room basis) when operating outside the tour guide's place of residence is prorated by a predetermined number of participants

  2. One (1) tour guide must be assigned per vehicle
• Costing entertainment activities


  1. May be fixed or may vary

  2. Picnic hut's rental fee at a picnic camp is normally prorated

  3. Picnic camp's entrance fee is fixed

  4. Boat rental fee may be fixed per pax or prorated by the capacity of the boat or number of riders
• If meals and snacks are considered as inclusions, these are always fixed and would always include the FOC and the tour guide.
• Costing Seat-in-Coach (SIC) Sightseeing Tours


  1. The tour operator (TO) must determine the minimum number (ranges from two to six) of passengers required to make a profit

  2. The resulting cost plus the mark-up would turn out to be the tour fare
• Costing for Accommodations


  1. Two (2) pax must share a room (twin-sharing)

  2. Hotel costs are always fixed

  3. Room costs are prorated by the number of guests occupying it

  4. Single supplement charge represents the difference between a half-twin and a single room

  5. Triple reduction is the cost of a twin/double room plus an extra bed divided by three (3) guests

  6. Quad room rate is the cost of a twin/double room plus two extra beds divided by four (4) guests

  7. Dorm-type rooms are always rated on a per pax basis
• Meals in accommodation establishments are fixed costs, while meals taken outside the place of lodging are normally less expensive. However, the additional transportation cost going to and back from the restaurant may result in a higher cost than the same meal served at the place of lodging.
• Some hotels may have bigger room capacity that would fit bigger groups or families.
• Costing Tour Escort Services

  1. The cost of a tour escort's transportation, accommodation, and meals are prorated among the paying participants

  2. The suppliers' concessions are always applied to the tour escort, or the first FOC entitlement is given to him/her
• Costing Tour Guide Services

  1. When a tour guide accompanies an escorted tour group within a destination country, the tour guide costs are calculated by summing up the total of the tour guide's fees, the cost of transportation and accommodation (single room basis) and then prorating this amount among the number of paying participants

  2. Tour escort costs are reduced by applying all possible suppliers' concessions

  3. Divide the tour guide's service to the lowest number for each passenger bracket
• Rate Sheet


  A list of products and services of a tour operator with corresponding prices, usually posted on the websites of tour operators that can be viewed by potential clients or tourists
• Rate Sheet


  • It is considered as a sales tool wherein the prices are rounded-off for gross (before any deductions) sales with the commission of travel agents
  • It may also be seen in printed travel brochures of tour operators
• Transfer services


  Transport clients from point "A" to point "B" within the destination and with no sightseeing or entertainment en route
• Sightseeing tours


  Day tour packages (with no overnight stays) that entail visiting various attractions and destinations within a specific area
• Rate sheet


  A sales tool wherein the prices are rounded-off for gross (before any deductions) sales with the commission of travel agents
• Transfer services


  1. Transport clients from point "A" to point "B" within the destination

  2. No sightseeing or entertainment en route

  3. Meeting and assisting clients at the gateway (airport/pier/bus station)

  4. Moving them to the lodging establishment or send-off assistance and moving them from the lodging establishment to the exit point

  5. Arrival/departure transfer would also include the services of a tour guide
• Sightseeing tours


  1. Day tour packages (with no overnight stays)

  2. Transportation to the attractions and the sites of interest in the locality

  3. Services of a tour guide to provide pertinent commentaries

  4. Walking visits or tours and/or entertainment

  5. May include participatory activities such as kayaking
• Tour packages (package holidays)

  Consist of two (2) or more travel components
• Websites and online booking facilities of accommodation establishments have made the Accommodations and Meals section redundant especially for free and independent travelers (FIT) as they directly book with hotels, while, group inclusive tours (GIT) would be treated as ad hoc tour arrangements
• Rate sheet costing


  Negotiate for the best available contracted rate from the suppliers
• The products and services featured in confidential tariffs and rate sheets are always based on FIT rather than GIT because GITs would always opt for ad hoc services
• Tour packages that are featured, would be based on regular tour packages (pre-packaged that feature well-known attractions or activities with high demand)
• Sample costing for transfer service

  • Car
  • Van
  • Mini Bus
  • Bus
• Transfer service costing


  • No FOC concession is granted
  • Transportation costs are prorated (divided by the lowest number in passenger bracket)
  • General rule is that the tour guide's services are required for private transfers
  • Tour coordinator's costs are based on a minimum of one (1) hour (PHP100/hour) depending on usage
  • 20% mark-up varies from TO to another depending on the company's overheads and desired profits
  • 12% VAT is mandatory and is calculated by dividing the net to TO by .88 (1.00 - .12 = .88)
  • Selling is the rounded-off figure wherein the retailer can add its mark-up
• Sample costing for a full day guided sightseeing tour

  • Car
  • Van
  • Mini Bus
  • Bus
• Full day guided sightseeing tour costing

  • Transportation costs are prorated (divided by the lowest number in the passenger bracket)
  • For brackets 25-29 a full-size bus is used for costing
  • Tour guide fee would vary from TO to another
  • FOC cost consists of meals and the boat ride
  • 20% mark-up varies from TO to another depending on the company's overheads and desired profits
  • 12% VAT is mandatory and is calculated by dividing the net to TO by .88 (1.00 - .12 = .88)
  • Selling is the rounded-off figure wherein the retailer can add its mark-up
• Passenger brackets


  Vary from one tour operator to another, normally limited to the maximum capacity of the equipment being used
• Transportation costs


  Prorated (divided by the lowest number in the passenger bracket)