Partner with travel suppliers in your destination to create a unique one-of-kind package for your tour and activity business.
5 Tips to starting a successful tours and activity travel business. This is a series of 5 articles to help tours and activity entrepreneurs start a new business. I’ll post one new article each week here at T4.
Tip #2: Partner with other travel suppliers in your destination to create a unique one-of-kind package for your tour and activity business.
At the Travel Business Academy we teach entrepreneurs how to build online travel businesses including tour operators, destination activity providers and individual guiding businesses. Packaging is the product that trip and tour operators sell to travelers. If you’re an activity provider or a guide and only provide one type of activity you can easily partner with other activity providers and or hotels and lodging providers to create new packages in addition to your core activity or tour product.
Packaging for Profits
Packaging in the travel and tourism business is all about leverage. To understand the true power of packaging and how it can make your business more profitable, I use leverage as an analogy to help you really understand how packaging works and how it can make your business more profitable. Leverage is simply to borrow to improve your capacity to increase the rate of return.
I define packages as two or more travel products combined to create a third unique product. Most travel packages include a lodging component and an activity component.
In the tours and activity business you can earn greater profits or increase your rate of return for your business through packaging. In its purest sense you borrow other businesses travel products to increase your economic gain.
Let’s look at the numbers and see how packaging works when a lodging property partners with an activity provider. In the mid 1990’s in my early 20’s, my wife and I bought a house in Pennsylvania and created a bed and breakfast named the Yellow Breeches House, next to a famous fly-fishing river. We sold two travel products. Lodging (B&B) and Fly-Fishing guided packages (B&B + guided fly-fishing). Our rooms ranged from $99-$175 per night in season. Our Fly-Fishing Getaway packages were $395 per person and included 2 nights lodging, 1-½ days of guided fly-fishing, 2-dinners and 2-breakfasts. Either a couple or 2 guys purchased the Fly-Fishing packages.
At the height of the business we had up to three Fly-Fishing guides. We paid the guides $200 for 1 ½ days of guided work. We paid two restaurants $20 for each dinner and we served our own breakfasts at the B&B.
Let’s analyze the numbers and compare selling a room vs. selling a package with 2 people per room on a 2-night weekend stay. A room only with 2 people would gross $350 in our most expensive room, $175 a night. A weekend Fly-Fishing Package with 2 people grosses $790, $345 a night. The package expenses were 1 guide $200, 4 dinners $80, net profit is $510. We made $160 more on the weekend or $80 more per night when we sold a package into this room. That same room is now worth $255 per night. Multiply this by more than one room and you can see how the business became more profitable quickly.
As a tour and activity provider you most likely don’t own a lodging property but in your destination you can probably find at least a dozen potential lodging partners. Create a sample package with lodging as your major expense and see if by selling a package can you earn more profit on your tour or activity by selling it as a package. If yes, it’s worth trying to add at least 1 package to your tour or activity product line. It’s just a matter of finding a few lodging partners.
Geoffrey Warner a master furniture designer and creator of the famous Owl Stool in Stonington, Maine, offer’s vacationers to Maine a handmade Owl Stool workshop as an experiential destination activity. Maine is renowned for handmade products. Vacationers take a 1-day workshop at his studio and go home from their vacation with an Owl Stool, made with their own hands. This year Geoffrey plans on selling a package to vacationers that includes 1 night lodging at a local B&B and the 1-day Owl Stool workshop.
The power of packaging is that you borrow other travel supplier’s products and unlike financial leverage you have no or limited expenses to borrow as you are just forming partnerships with other travel and tourism businesses in your destination.
An increased profit is the core strength of packaging. Other benefits include the following; the client buying a package is less likely to cancel a trip, your business fosters new business relationships within your community and you create win-win deals for others. Creating packages enables you to quickly move with trends and fads in the travel and tourism industry. If something is “hot” this season you can create a package for it.
As part of your overall start up strategy to build new business, look to create a package that increases the profit of your core tour or activity product by partnering with one or more travel suppliers in your destination.
Matt Zito is a veteran travel industry entrepreneur, consultant and founder of the world’s first ever, Travel Business Academy, a professional member-based, home-study program that teaches entrepreneurs globally, how to start and run a travel business. To learn more visit the Travel Business Academy or email matt@travelbusinessacademy.com
