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How do you determine the “right price” for tourism products?

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case study
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29 pages
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  1. Introduction
  2. What is the link between price management and the tourism industry?
  3. Some Reminders Regarding Price Management
  4. Some definitions
  5. Different pricing strategies, according to Simon, Jacquet and Brault
  6. The Tourism Industry
    1. Tourism today
    2. Actors
  7. The Relation Between Price Management and the Tourism Industry
  8. What tools are used for determining price?
  9. Airlines, Yield management and Price Management
    1. Case study: Air France
    2. Yield management and price management operations
    3. Implementation
    4. Why use it ?
  10. Yield Management Adapts to Hotels
    1. What differences exist between airlines and hotels?
    2. Case study: What price should I set?
  11. Tour Operators and Dynamic Pricing
    1. Case study: Marmara
    2. The importance of price optimization
    3. Risks of dynamic pricing
    4. How do you create efficient dynamic pricing?
  12. Conclusion

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.

[...] Thus, taking in consideration all of the data we have discussed above, dynamic pricing allows the tour operator to provide the best price according to demand. However, the implementation of dynamic pricing should not obscure significant risks. II.3.C/ Risks of dynamic pricing The first is related to the commoditization of products and the increasing importance of price with respect to the purchasing behaviour of customers, phenomena on which the whole industry seems to agree. Thus, people do not know what the "fair price" to pay is for their trip. [...]


[...] To start with, we will try to briefly go over how prices can be set for the aircraft. Firstly, a single element: plane seats (like hotel rooms) are perishable. That is to say that if the services are not purchased when they are available -in our case, air tickets -then they are lost forever. It should be understood that the higher the importance of the filling ratio, the lower the cost per passenger. Indeed, fixed costs (fuel, personnel, etc.) remain the same and airlines have to be paid by someone when planes are not full. [...]


[...] According to the United Nations, tourism can be defined as follows: Tourism is the act of leaving one's home for personal reasons, for a period exceeding 24 hours. This implies a consumption of a night in a hotel and the possibility of reserving a transport ticket. Tourism gave birth to a veritable industry when the middle classes in western countries (Europe and North America) were able to start travelling. General improvement of living standards allowed people to spend more time on leisure activities, including tourism, not to mention considerable progress in methods of transportation (ships and rail, but mostly aircraft). [...]

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