Pricing, rates and commissions
To make a profit in your business, you need to set the right price for your products and services.
Setting your price
Setting right price is important to attract your target customers and to help create sufficient profit margins, which will allow your business to grow.
Factoring in commission means your product can be sold through more channels of distribution.
The South Australian Tourism Commission (SATC) has produced a template that helps businesses set up a sustainable pricing structure. Download it here.
Why pay commission?
Commission is a type of payment for a service provided to your business. In tourism, the service is the introduction of a customer to your business that leads to a sale.
Travel agents, booking agents, some visitor centres, wholesale agents and inbound agents all charge a fee for the service they provide. They each play a different role and charge different levels of commission—usually up to 30 per cent.
An agent or online distribution channel’s role is to reach consumers and offer them products. Their goal is to generate sales, and their income comes from commissions from those sales.
As a tourism operator, you can generate your own sales. If your business is at full capacity all the time, there is no reason to use agents. That rarely happens, so many operators use agents who are specialists at selling to reach people to purchase their products.
How much commission do I have to pay?
As a rule, the following applies:
Retail travel agents (Flight Centre and Helloworld) = 10%
Wholesale agents (Qantas Holidays and Infinity) = 20%
Online travel agents (Expedia and Hotels.com) = 15–25%
Inbound agents (AOT and Goway Travel) = 25–30%
Pricing to incorporate commission
The price of your product is made up of the following cost components:
- fixed costs – your overheads, including utilities, marketing and wages
- variable costs – the costs associated with supplying the service, such as inclusions and cleaning
- profit margin – the amount that will contribute to your end-of-year profit
- average commission – an allowance for travel agents
- GST – if you operate in the GST system.
The total of all the above costs is your market, retail or gross price—the price that you charge the consumer and that’s listed on your marketing collateral. This rate should not differ whether you are selling directly to the consumer or through a wholesale distributor.
The amount excluding commission is the net price. This is the amount you receive after commission.
You can provide rate sheets to your distributing partners and third party sellers.
Download sample rate sheets for accommodation, attractions and tours here (coming soon).