How do you determine the "right price" for tourism products?

Résumé du document

The tourism industry currently is a rapidly changing sector. I saw it last year when I worked for a small tour operator in South Africa, African Eagle. Although the organization was quite small and rather upscale, we were looking for providers on a daily basis who offered their services at the lowest prices in order to be able to offer trips at attractive prices.
Although we will mainly discuss the issue of "sell out" during the course of this paper, this example demonstrates that finding the "right price" is now an essential element in the tourism industry.

This sector represents 12% of the global GDP and is now everyone's focus. The actors are extremely numerous, and the Internet revolution widely hit the industry. Price comparison sites give new power to the consumer, who is also becoming more demanding where prices are concerned. Tourism professionals must therefore offer the right price at the right time in order to attract customers.

Extraits

[...] How does it work? Yield Management is a technique invented in the United States in the late 70s in the context of the highly competitive airline deregulation. Its shorter definition is: the optimization of sales management capabilities. Tourism is also faced with another concern for size, what Varadajan and Parasuraman (1988) call the "perishability problem": "The service is intangible. It is not storable. The direct consequence is the synchronization required between production and consumption. So many services are not consumed when they are available and are then lost forever." Yield management is therefore crucial with respect to the decision to fix prices. [...]

[...] In terms of unit prices: mainly the levers of tariff quota management, trading and business contracts and management packages have an impact on the unit price, and they can increase substantially during periods of high demand. II.2 Yield Management Adapts to Hotels II.2.A / What differences exist between airlines and hotels? Can the techniques we have previously discussed be applied in other areas? We shall see them with regards to hotels. Hotels are a very special case, and therefore use the yield management a little differently. [...]

[...] How do you determine the “right price” for tourism products? INTRODUCTION WHAT IS THE LINK BETWEEN PRICE MANAGEMENT AND THE TOURISM INDUSTRY? I.1/ Some Reminders Regarding Price Management I.1.A/ Some definitions I.1.B/ Different pricing strategies, according to Simon, Jacquet and Brault I.2/ The Tourism Industry I.2.A/ Tourism today I.2.B/ Actors I.3/ The Relation Between Price Management and the Tourism Industry II/ WHAT TOOLS ARE USED FOR DETERMINGING PRICE? II.1/ Airlines, Yield management and Price Management II.1.A/ Case study: Air France II.1.B/ Yield management and price management operations II.1.C/ Implementation II.1.D/ Why use it ? [...]

[...] Where there is a market leader or market price, some companies are often required to position their prices and can choose either to sell more expensive (branding) or undercut (war price). The practice of differential pricing Companies sometimes offer different prices for the same product depending on the quantities ordered, the type of clients (merchants, individuals), sales regions (France, export), etc. In the area of services, there may be more subtle criteria such as the selling period (hotels, transport, cinemas, etc.), client class (cinema) or even buying behaviour (rental cars). The boundaries of these practices are commercial and legal. Commercially, paying less at the expense of other is not allowed. [...]

[...] It is important to understand how prices are set for each room. As we did with the airlines, we will now provide an example of a hotel. Again, this example is from the book by Louis Dupont. Orkin (1988) introduced the basic formula of yield management in hotels. This formula is as follows Consider that a hotel with a capacity of 200 rooms offers a maximum tariff of 150 for a room rooms were sold at an average price of per room. [...]