Interactive_Tourism Product_Pricing _Calculator

Tourism Product Pricing Calculator Setting correct prices for tourism product is vital to ensure: <> That sufficient profit margins are generated to allow business sustainability <> That correct commission allowances are made to enable products to be sold through all channels of distribution - retail, wholesale and inbound This chart will assist the correct calculation of prices for a number of tourism products for one business or organisation. By changing the data that is entered in this template it is possible to see the effect on profit margins and price calculations. There are 7 sections to complete to calculate the prices of up to three products. Work through each section which is then summarised at the end of the template which provides the final price. Input cells are green. Result cells are orange. 1. Fixed Costs Fixed costs are the overheads incurred by the business as a whole. Each of the products you offer must share the burden of your fixed costs. If you only sell one product, all overheads must be recouped. If you sell two or more products, then overheads must be weighted according to the volume of sales of each. This calculation will be made below in Section 6. Do not include GST in the amounts in this calculator. GST will be calculated later. NOTE: The following list of expenses may not cover all of the expenses that your business incurs. Add extra lines if necessary. Amount p.a. ExDescription Marketing Expenses Brochure production Internet development Advertising Raw cost of famils Other printing Sales staff labour Sales travel Marketing fees Brochure distribution etc etc etc TOTAL MARKETING EXP Operational Expenses Maintenance Fuel Travel Cleaning etc etc etc GST $ - TOTAL OPERATIONAL EXP Administrative Expenses Office labour Superannuation Workcover Insurance Stationary Postage Bank fees Govt fees Light and power Rates Communication Rent Travel Membership fees etc etc etc etc TOTAL ADMINISTRATIVE EXP TOTAL FIXED COSTS $ - $ $ - 2. Variable Costs Variable costs are the costs that are only incurred when you sell a product. For example: When someone stays in a room, a cleaning expense is incurred. Note: Adjustments will need to be made to cater for the difference between adult and child sales. Also, cleaning costs for accommodation may only occur once for a three night booking. Therefore provide an average cleaning cost per night. This also applies to laundry and consumables. Use the example that relates to your business. Complete ONLY secton 1, 2 or 3 below. Completing a combination of Tour, Accommodation or Attraction business sections will provide incorrect results in the final Summary at the end. Description 1. Tour Business Meals (per person) Drivers wages (per person) Entrance costs (per person) Vehicle cleaning (per person) Other (per person) Other (per person) TOTAL Variable Costs Product A Amount per sale Product B Product C ONE ONLY OF 1,2 O $ - $ - $ - ONE ONLY OF 1,2 OR 3. or Note: For bookings of longer than one night these costs need to be averaged. or 3. Attraction Business Attendant staff wages (p person) Cleaning? (per person) Other (per person) Other (per person) TOTAL Variable costs $ Product A Product B Product C 2. Accommodation Business Laundry (per room/night) Room cleaning (per room/night) Consumerbles (per room/night) Other (per room) TOTAL Variable Costs Product A Product B Product C $ - $ - $ - - $ - $ - 3. Expected Sales Volumes Your assumptions in this template will be based on what you expect to sell over the next 12 month period. It is very difficult to predict the future, so consider carefully what should be realistic expectations. You can experiment with different sales levels. Change the figures to experiment with 'worst case scenarios' and 'best case scenarios'. Expected Sales Volumes (per product) Product A Sales Volume (in units) units Product B units Product C units 4. Profit Margin Profit is the money that goes back to the investors. The investor may be the business owner, partners or shareholders. Once you have complete the entire template, you can vary the amount of Profit Margin to see the effect on your Price. Profit (dollars per product) Product A Profit margin ($) pp Product B pp Product C pp pa Based on your 'Expected Sales Volumes' from Section 3 above, you are budgeting to make a profit of: $ Is this reasonable? Will there be expenses that you have'nt included? Will this return a quality of life that you expect? Remember, without a unique competitive advantage, super profits are unlikely. 5. GST Goods and Services Tax is required for businesses that turn over more than $50000 p.a. Businesses that turn over less than $50000 can choose whether they wish to be in the GST tax system. If you operate within the GST system then you will need to fill in the tax chart below with '10%'. If you are not operating within the GST system, you will need to change the Tax Rate to '0%'. Note: There are GST implications if you are NOT in the GST system. Your agent will still need to collect GST on their commission and this will affect what you charge. See your accountant or TAX consultant for further information. Description GST Tax rate All products 10% 6. Commission Commission is the cost of having your products distributed (sold) through agent sales channels. If you make a sale through an agent, you must pay them for that service.This is called 'commission'. Distribution and its associated costs happen in all industries - food, cars, petrol, clothes etc. In tourism, there are established channels of distribution. They are retail, wholesale and inbound travel agents. The sales power of each is quite different and as such, the cost is different. When pricing your product, you will need to make allowance for the cost of distribution. The cost is an average of the different commission levels that you pay. Weight the proportion of sales that you expect to make through each of the different channels of distribution. For example: a new business may get most of its business direct from consumers and retail agents. Wholesale and Inbound bookings may come later. Contact SATC for assistance if you are unsure. Agent Product A Direct sale - 0% Retail 10% Wholesale 20% Inbound 25% Inbound 30% CHECK weightings = 100% Average commission 0% 0.0% Weighting Product B Product C Rates 0% 10% 20% 25% 30% 0% 0.0% 0% 0.0% In case you want to know - the formula to calculate Average Commission is: (weighting of direct sales x 0%)+(weighting of retail x 10%)+(weighting of wholesale x 20%)+(weighting of inbound x 25%)+(weighting of inbound x 30%) 7. Weighting of fixed costs for each of the different products If you are calculating the price of Product A only, then the 'Fixed Costs Weighting' will be 100% to that product. Default below. If you wish to calculate the price of two or three products in this template you must allocate your FIXED EXPENSES to each of the different products. For example, Product A may attract most of your marketing expenses, but Product B might attract most of your Operational Expenses. If you are calculating the cost of 2 or 3 products in this exercise, in the chart below, apportion overheads to each product. Fixed Expenses Product A Product B Product C CHECK - Must = 100% Weighting % Marketing Expenses 100% = = = = $ $ $ $ TOTAL Marketing Expense 100% Product A Product B Product C CHECK - Must = 100% Operational Expenses 100% = = = = $ $ $ $ TOTAL Operational Expense 100% Product A Product B Product C CHECK - Must = 100% Administrative Expenses 100% = = = = $ $ $ $ TOTAL Administration Expense 100% Weighted TOTAL Fixed Costs per product Product A $ Product B $ Product C $ TOTAL Business FIXED Costs $ Check = $0 (From Section 1 at top of template) 8. SUMMARY CHART This chart summarises all the above calculations. Note: The amount of Commission to add into this chart is higher than your Average Commission calculation. This is because when the agent takes off their commission it comes off the Gross Price which is higher than the Raw Price. The formula looks complex, but simply compensates for the extra margin of commission. The formula is: Raw Price/(1-(Average Commission/100))-Raw Price Pricing Summary Chart Product A Fixed Costs $ Divided by Sales Volume = Fixed cost per unit + Variable Costs per unit $ = RAW COST + Profit Margin $ = RAW PRICE $ 0 units #DIV/0! pp pp $ #DIV/0! pp #DIV/0! pp pp $ #DIV/0! Product B $ #DIV/0! 0 units #DIV/0! pp pp $ #DIV/0! pp pp pp $ #DIV/0! Product C 0 units pp pp #DIV/0! pp pp pp (Average commission) + Marked-Up Avge Commission = GROSS PRICE EX TAX + GST GROSS PRICE INCL TAX Round up PRICE Budgeted net profit $ $ 0.0% #DIV/0! #DIV/0! #DIV/0! #DIV/0! pp #DIV/0! #DIV/0! #DIV/0! #DIV/0! $ 0.0% pp #DIV/0! #DIV/0! #DIV/0! #DIV/0! $ 0.0% pp pp pp - pp pp pp pp 9. How to provide rates to agents The above Gross Price is the price that consumers pay - no matter where they purchase the product. Wholesale and Inbound Agents will want 'NETT' rates from you. NETT Rates are your Gross Price (above) less the commission you agree to pay to that agent. The following Rate Sheet becomes a 'contract' between you and your Agent. The Agent will will hold you to it! (If nothing appears in the chart below, you have not entered a Round Up Price in the above green section.) XYZ Tourism Business (A4, letterhead) Wholesale Rate Sheet (20%) Gross Incl GST (from chart above) A$ Product A Product B Product C $ $ $ $ $ NETT incl GST $A #VALUE! - Disclaimer ??? XYZ Tourism Business (A4, letterhead) Inbound Rate Sheet (25%) Gross Incl GST (from chart above) $A NETT incl GST A$ Product A Product B $ $ $ #VALUE! - Product C $ - $ - Tourism Product Pricing Calculator EXAMPLE DATA © 2002 South Australian Tourism Commission This sample is based on a new single-room accommodation business. All figures are ficticious and should not be used as a benchm Setting correct prices for tourism product is vital to ensure: <> That sufficient profit margins are generated to allow business sustainability <> That correct commission allowances are made to enable products to be sold through all channels of distribution - retail, wholesa This chart will assist the correct calculation of prices for a number of tourism products for one business or organisation. By changing the data that is entered in this template it is possible to see the effect on profit margins and price calculations. There are 7 sections to complete to calculate the prices of up to three products. Work through each section which is then summaris end of the template which provides the final price. Input cells are green cells. Result cells are orange. 1. Fixed Costs Fixed costs are the overheads incurred by the business as a whole. Each of the products you offer must share the burden of your fixed costs. If you only sell one product, all overheads must be recouped. If you sell two or more products, then overheads must be weighted according to the volume of sales of each. This calculation will be made below in Section 6. If you are reg for GST pls include GST no GST should be included. NOTE: The following list of expenses may not cover all of the expenses that your business incurs. Add lines if necessary. Amount p.a. ExDescription Marketing Expenses Brochure production Internet development Advertising Raw cost of famils Other printing Sales staff labour Sales travel Marketing fees Brochure distribution etc etc etc TOTAL MARKETING EXP Operational Expenses Maintenance Fuel Travel Cleaning etc etc etc GST $ $ $ $ $ $ $ $ 2,000.00 1,500.00 1,000.00 200.00 400.00 500.00 500.00 200.00 $ 6,300.00 $ 1,500.00 EXAMPLE DATA TOTAL OPERATIONAL EXP $ 1,500.00 Administrative Expenses Office labour Superannuation Workcover Insurance Stationary Postage Bank fees Govt fees Light and power Rates Communication Rent Travel Membership fees etc etc etc etc TOTAL ADMINISTRATIVE EXP TOTAL FIXED COSTS $ $ $ $ $ $ 3,000.00 2,000.00 500.00 2,000.00 1,200.00 1,500.00 EXAMPLE DATA $ $ 10,200.00 18,000.00 2. Variable Costs Variable costs are the costs that are only incurred when you sell a product. For example: When someone stays in a room, a cleanin Note: Adjustments will need to be made to cater for the difference between adult and child sales. Use the example that relates to your business. Complete ONLY secton 1, 2 or 3 below. Completing a combination of Tour, Accom Attraction business sections will provide incorrect results in the final Summary at the end. Description 1. Tour Business Meals (per person) Drivers wages (per person) Entrance costs (per person) Vehicle cleaning (per person) Other (per person) Other (per person) TOTAL Variable Costs or 2. Accommodation Business Laundry (per room) Room cleaning (per room) Consumerbles (per room) Other (per room) TOTAL Variable Costs or 3. Attraction Business Attendant staff wages (p person) Cleaning? (per person) Product A $ $ $ $ Product A 10.00 25.00 5.00 40.00 Product A Amount per sale Product B $ - $ Product B - $ Product B - Other (per person) Other (per person) TOTAL Variable costs $ - $ - 3. Expected Sales Volumes Your assumptions in this template will be based on what you expect to sell over the next 12 month period. It is very difficult to predict the future, so consider carefully what should be realistic expectations. You can experiment with different sales levels. Change the figures to experiment with 'worst case scenarios' and 'best case scenario Expected Sales Volumes (per product) Product A Sales Volume (in units) 75 units Product B 4. Profit Margin Profit is the money that goes back to the investors. The investor may be the business owner, partners or shareholders. Once you have complete the entire template, you can vary the amount of Profit Margin to see the effect on your Price. Note: Per person or per room Profit margin ($) $ Product A 40.00 Profit (dollars per product) Product B pp Based on your 'Expected Sales Volumes' from Section 3 above, you are budgeting to make a profit of: Is this reasonable? Will there be expenses that you have'nt included? Will this return a quality of life that you expect? Remember, without a unique competitive advantage, super profits are unlikely. 5. GST Goods and Services Tax is required for businesses that turn over more than $50000 p.a. Businesses that turn over less than $50000 can choose whether they wish to be in the GST tax system. The Australian Tax Office (ATO) can provide full details on your tax responsibilities. If you operate within the GST system then you will need to fill in the tax chart below. If you are not operating within the GST system, you will need to change the Tax Rate to '0%'. Description Tax rate GST All products 10% 6. Commission Commission is the cost of having your products distributed (sold) through agent sales channels. If you make a sale through an agent, you must pay them for that service.This is called 'commission'. Distribution and its associated costs happen in all industries - food, cars, petrol, clothes etc. In tourism, there are established channels of distribution. They are retail, wholesale and inbound travel agents. The sales power of each is quite different and as such, the cost is different. When pricing your product, you will need to make allowance for the cost of distribution. The cost is an average of the different comm Weight the proportion of sales that you expect to make through each of the different channels of distribution. Contact SATC for assi Agent Product A Weighting Product B Direct sale - 0% Retail 10% Wholesale 20% Inbound 25% Inbound 30% CHECK weightings = 100% Average commission 60% 40% 100% 4.0% 0% 0.0% In case you want to know - the formula to calculate Average Commission is: (weighting of direct sales x 0%)+(weighting of retail x 10%)+(weighting of wholesale x 20%)+(weighting of inbound x 25%)+(weightin 7. Weighting of fixed costs for each of the different products If you wish to calculate the price of two or three products in this template you must allocate your FIXED EXPENSES to each of the d For example, Product A may attract most of your marketing expenses, but Product B might attract most of your Operational Expens If you are calculating the cost of 2 or 3 products in this exercise, in the chart below, make assumptions about which products attract of your fixed expenses (overheads). Fixed Expenses Product A Product B Product C CHECK - Must = 100% Weighting % Marketing Expenses 100% = = = = $ $ $ $ 6,300.00 6,300.00 100% Product A Product B Product C CHECK - Must = 100% Operational Expenses 100% = = = = $ $ $ $ 1,500.00 1,500.00 100% Product A Product B Product C CHECK - Must = 100% Administrative Expenses 100% = = = = $ $ $ $ 10,200.00 10,200.00 100% Weighted TOTAL Fixed Costs per product Product A $ 18,000.00 Product B $ Product C $ - TOTAL Business FIXED Costs $ 18,000.00 Check = 8. SUMMARY CHART This chart summarises all the above calculations. Note: The amount of Commission to add into this chart is higher than your Average Commission calculation. This is because when the agent takes off their commission it comes off the Gross Price which is higher than the Raw Price. The formula looks complex, but simply compensates for the extra margin of commission. The formula: Raw Price/(1-(Average Comm Pricing Summary Chart Fixed Costs Divided by Sales Volume = Fixed cost per unit + Variable Costs = RAW COST $ $ $ $ Product A 18,000.00 75 240.00 40.00 280.00 Product B $ units pp pp $ pp $ #DIV/0! 0.0% #DIV/0! #DIV/0! #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! 0 + Profit Margin $ = RAW PRICE $ (Average commission) + Marked-Up Avge Commission $ = GROSS PRICE EX TAX $ + GST $ GROSS PRICE INCL TAX $ Round up PRICE $ 40.00 pp 320.00 pp 4.0% 13.33 333.33 pp 33.33 366.67 pp 369.00 pp 9. How to provide rates to agents The above Gross Price is the price that consumers pay - no matter where they purchase the product. Wholesale and Inbound Agent will want 'NETT' rates from you. NETT Rates are your Gross Price (above) less the commission you agree to pay to that agent. The following Rate Sheet becomes a 'contract' between you and your Agent. The Agent will will hold you to it! XYZ Tourism Business (A4, letterhead) Wholesale Rate Sheet (20%) Gross Incl GST (from chart above) $ 369.00 $ $ GST $ $ $ 36.90 - Product A Product B Product C Disclaimer ??? XYZ Tourism Business (A4, letterhead) Inbound Rate Sheet (25%) Gross Incl GST (from chart above) $ 369.00 $ $ GST $ $ $ 36.90 - Product A Product B Product C Disclaimer ??? Further Information For further information or assistance on how to complete this template, contact: South Australian Tourism Commission Industry Development Unit Phone: 8463 4573 Email: gill.mark@saugov.sa.gov.au Disclaimer: While the South Australian Tourism Commission and the authors believe that this template will be of assistance to intending or existing tourism operators, it should not be relied upon as a substitute for obtaining professional advice on particular matters. The accuracy of each statement is not guaranteed, and accordingly, the South Australian Tourism Commission and the authors disclaim any liability for errors, ommissions or other consequences which may arise from any person relying on any information in this template. It should be noted that the examples given in this template are fictitious for the purposes of illustrating the activities that can be undertaken. Details contained within this template should not be relied upon as actual content for a business. It is recommended that you consult your accountant or business advisor in the business planning process. © 2002 South Australian Tourism Commission end 02 South Australian Tourism Commission e ficticious and should not be used as a benchmark for real assumptions. ough all channels of distribution - retail, wholesale and inbound ts for one business or organisation. n profit margins and price calculations. k through each section which is then summarised at the products, then overheads must be weighted siness incurs. Add lines if necessary. EXAMPLE DATA EXAMPLE DATA mple: When someone stays in a room, a cleaning expense is incurred. low. Completing a combination of Tour, Accommodation or Amount per sale Product C ONE ONLY OF 1,2 OR 3. $ Product C - EXAMPLE DATA $ Product C - $ - h 'worst case scenarios' and 'best case scenarios'. Sales Volumes (per product) Product C units units s owner, partners or shareholders. gin to see the effect on your Price. EXAMPLE DATA pp 3,000.00 pa t (dollars per product) Product C pp $ a quality of life that you expect? EXAMPLE DATA and inbound travel agents. on. The cost is an average of the different commission levels that you pay. channels of distribution. Contact SATC for assistance if you are unsure. Weighting Product C Rates 0% 10% 20% 25% 30% 0% 0.0% x 20%)+(weighting of inbound x 25%)+(weighting of inbound x 30%) locate your FIXED EXPENSES to each of the different products. might attract most of your Operational Expenses. make assumptions about which products attract different proportions EXAMPLE DATA TOTAL Marketing Expense TOTAL Operational Expense TOTAL Administration Expense Check = $18,000 (From Section 1 at top of template) Commission calculation. This is because er than the Raw Price. sion. The formula: Raw Price/(1-(Average Commission/100))-Raw Price Product C $ units pp pp $ pp pp pp $ #DIV/0! 0.0% pp #DIV/0! #DIV/0! #DIV/0! #DIV/0! $ pp #DIV/0! 0 units pp pp #DIV/0! pp pp pp EXAMPLE DATA pp pp pp pp ent will will hold you to it! $ $ $ NETT incl GST 295.20 - EXAMPLE DATA EXAMPLE DATA $ $ $ NETT incl GST 276.75 -