How best to price your trips

Today’s post is discussing how best to price your trips. We believe that the best pricing strategy is ‘mathematically’ with a dash of competitive research. 

It often gets over-complicated or articles about this stuff are not actually helpful (like this one) so since our community has been asking, we thought we’d share our 2-cents. 

This is not financial advice and you should review pricing with a professional if you’re unsure. Let’s get into it!

There is no one size that fits all when it comes to pricing

Pricing is ALWAYS extremely business-dependent. Circumstances, business type, geographical location, all play a variable role in trip pricing. In this post we will be focusing on inbound operators, companies who have a location, use gear and use these to deliver their services.

What is the most important thing to think about when it comes to pricing?

It’s important to make sure your trips are aligned with other people in the same industry and aligned with competition. For example, if you are providing the same trip on paper you can’t charge twice as much as the person doing the same thing. Yes, you could say you have better customer service but it will be difficult to attract customers that way. If they can’t see the value of it, you are going to have to adjust things.

As a business owner should I pay myself?

Yes! It’s extremely important for a business owner to pay yourself. We see this all too often with our clients and other people in the industry where it is either not happening or it is not happening consistently. 

You likely started your business so you could pursue a venture and industry that you love while (eventually) making money doing it. It takes some effort, and some creative accounting, but the rewards of paying yourself first are well worth it. 

Even if you’re still in the startup phase paying yourself from the beginning has advantages you can’t afford to miss.

• Paying yourself is an added work incentive.
• It feels great to get money in return for hard work, even if it’s a small amount.
• Paying yourself increases savings for you or the business.
• Investors view business owners who pay themselves as highly committed – so do banks and finance companies.

Can trip pricing influence or affect my tax? 

Everybody wants to minimize their tax burden and with tax increasing more and more each year it’s important to put things into place to reduce the amount of tax you pay. We are certainly not recommending not paying your taxes but minimizing your cost is always the end goal. This is something ALL wealthy individuals do.

How can I minimize my tax burden?

Talk to a small business accountant or a corporate tax accountant. They will help you see where you are missing potential opportunities for write-offs etc. For example, if you need a vehicle for your business to provide your trips you may be able to write this off. It is an expense your business should be paying for so you writing it off as an expense for your business is the way to go.

How does inflation affect my trip pricing? 

In the past, nobody used to pay attention to inflation. Although Inflation is always consistent, not in terms of the numbers but in terms of it always happening each year. Inflation in Canada at the moment is 4.5% this year which is the highest it’s been in 30 years. 

Inflation is often a hidden element. It’s important that your trips prices should be adjusted annually because every year prices increase. The mandate by our central banks wants to increase inflation by 2% every year so with that in mind you should be increasing your prices by 2% every year.  

This is something that will affect your cost of operation so you need to factor in those costs accordingly to still succeed and make a profit.

How do I factor in commission into my trip pricing? 

You need to ask yourself do you want to have the ability to offer people a commission to sell your trips and if you want to offer that flexibility within your pricing model. 

If you would like to do commission payments then this would shift the pricing of your bottom line. For example, you couldn’t increase your prices by 5% and then offer a commission payment of 5% that would be eating into your profit margin. Beforehand you would have to adjust the pricing of your trips to factor in the commission payments. 

Let’s look at an example

If you plan on having someone resell your trip you could increase your prices across the board by 2.5% and offer a 2.5% payment to the person reselling your trips. 

BUT 

Not everybody will come from the person reselling your trips so you will essentially still be making a profit regardless. Therefore it kinda averages out.

Why is including commission structures so important? 

We are living in an age of influencers. If you need to fill trips and you have a specific deadline, let’s say you are 90 days out and you don’t have the trip filled, what are you going to do? You have the ability to offer someone commission to promote your trips on their platform to their huge audience. 

Not only would this help sell your trips but you now have access and exposure to their large audience. It’s a win-win in our opinion!

What should be included in my fixed costs? 

The fixed costs are going to be things that are reoccurring annually or monthly. You need to have a good understanding of your fixed costs and they need to be updated regularly. These numbers are going to determine how much you are going to price your trips. 

Your fixed costs may include 

• Rent 
• Power 
• Insurance
• Employee Salaries
• Your Salary
• Maintenance costs
• Debt repayments
• Website subscriptions and software payments

Fixed costs are things that aren’t going to change. Regardless of if you sell trips, you are still going to have to pay rent this is why it is a fixed cost.

What are variable costs? 

Your variable costs are things that could change week to week, month to month or year to year. It will all depend on how many trips you are selling and how many products. Below is a list of things that will vary depending on the amount you are selling. 

• Food 
• Gear Rentals
• Power
• Accommodation 
• Gas

For example, if you are providing a day trip of people paddleboarding in the Saanich Peninsula you are going to be feeding those people and they will be using your gear but they won’t need accommodation so that wouldn’t be a cost you would need to be factored in.

Useful Resources 

We have drafted a working spreadsheet and YOUR feedback is going to help us make this better. Basically, we hope to provide this community with a trip pricing calculator. 

This is not set up to be a tiered pricing scheme, this is just per person which works best for things like hiking trips, day experiences, multiday trips you sell directly to customers etc. It’s based on an output of the retail price. 
Katie and Will recently did a Facebook Live session discussing this topic in more detail. They shared their screen to show you how Will created this trip pricing calculator so we definitely recommend you check that out.

An important thing to think about 

Trips are rarely at 100% capacity and if they are congrats!! We recommend working out how much a day trip and overnight trip would cost you at the capacity you expect along with your fixed costs and variable costs and making sure your trips are priced higher than this. 

For example – If you expect to run 90 trips per year with day trips at 60% occupancy and overnight trips at 80% occupancy how much is that going to cost you and what percentage of profit do you want to make on top of this?

Total trip revenue and profit

By now you should have worked out how much a trip is going to cost in total and per person. This is when you should start to do your competitor research and see how much other people are charging who are providing a similar service. 

For example – If a trip is going to cost you $2000 and you want to make a 10% profit then you should be charging $2200. This will be factored into what you charge people per person.

To Conclude 

Life is uncertain and unpredictable. We all have goals and things we want to accomplish within our chosen profession. It’s important to build in some kind of profit by the end of the year ALWAYS. This is essential in order for your business to grow and achieve your dreams. 

Money is one of those things that gives you flexibility. The more money you have the more flexible your life becomes. You can invest in your business in order to grow and expand things but this only happens once you have a solid grasp on your numbers in the beginning. 

We hope this helps and gives you the knowledge of the things you should be thinking about.

Join the Conversation

We would love for you to join our Business of Adventure Facebook group. This is a collaborative space for business owners or freelancers in the adventure travel and tourism space. The focus here is to share best practices and tips about online presence and digital marketing (front end) and online systems (backend) so you can establish a rock-solid foundation for your adventure business. If this is something you could benefit from, please join!