Seasonality…it’s the nature of the travel industry. For some tour operators it manifests as extreme peaks and troughs, and for others, it’s less severe. Regardless of where you find yourself on the spectrum, the ups and downs of travel shouldn’t have to affect your business’s bottom line.
Careful planning, thoughtful strategy, and establishing flexible processes can help your tour operator business maintain profitability throughout the low seasons. This blog will walk you through a few ways you can maintain your business’s profitability between seasons.
1.Manage your expenses in the off-season
The first step in managing your business’s profitability is taking time to understand your expenses and think of ways you can minimise them when things get quieter.
If you have a physical store think about decreasing your open hours during the off-season. Marketing and advertising budgets can also be something that you can toggle up and down to suit, however, it’s also important to think about the time in which people may be making purchase decisions. Just because a family may travel in January they may begin their tour operator search (and therefore be more receptive to your advertisements) much earlier in the year when things are a little bit quieter.
When you’re assessing your expenses it’s wise to also assess the cost involved in switching off and then restarting an activity or service. For example, switching off services that are less critical during this time may save you in the short term, but the cost to re-connect them may actually cost you more overall.
2.Maximise your profitability during peak seasons
It’s important to remember that your business’s profitability is measured at the end of your financial year when the wash-up is complete. Your less profitable months will be offset by your high season months – taking time to remember this can help reduce day-to-day stress when you’re in the thick of running your business.
To ensure that you have the best chance of those busy months offsetting your low months you should take time to plan and develop a strategy that maximises your high season profitability.
Creating easier upselling opportunities, establishing a referral programme, or introducing different pricing tiers can help maximise the profitability of your existing customers and encourage new customers to purchase.
Taking a serious look at your sales processes and pinpointing the bottlenecks will show you where you’re losing money. Establish where the most customers are dropping-off during the buying process and understand why they’re dropping off. If it’s cost, it may be worth crunching the numbers and seeing if dropping your prices will ultimately help more money come in the door. If it’s something else that’s causing your potential customers to leave it’s up to you to find out as fast as possible and work to remove the issue.
Another area where bottlenecks can occur is in your internal processes. Perhaps your travel agents are spending hours creating quotes, tailoring itineraries in Word, or manually double- checking Excel for errors. These ones are less obvious as they won’t explicitly appear in your end of year financial statements however a quick calculation will show you just how much these activities are actually costing – you’ll be itching to make a change in no time.
Good tour operator software should manage your back office processes and your personalized itinerary creation, and do it much faster and more efficiently than someone doing the same processes manually. Meaning what was once an internal business bottleneck, is now a free-flowing, well-oiled business process, costing you less overall AND likely alleviating stress that was once weighing heavy on your team.
4.Manage your staffing costs
For most businesses, the largest expense you will encounter is staffing. 2016 statistics from ATTA (Adventure Travel Trade Association) shows that on average Tour Operators spend a minimum of 28% of their revenue on staffing costs. That’s more than any other business expense.
Automating document creation and streamlining tasks through a tour operator software reduces those bottlenecks we talked about earlier and ultimately minimizes your staffing costs. You will always need people in your business – it’s the nature of what you do and what makes you special. But, by being a bit more careful about how you invest your team’s time, you can direct more energy into getting more prospects and supporting your customer (and who would say no to that, right?!)
With the right inbound tour operator software, each staff member should be averaging at least US$500,000 annual revenue.
5. Explore new revenue streams
Your off-season may, in fact, be a gold mine of new business opportunities just waiting for you to tap into them. Exploring new revenue streams is a fantastic way for you to establish a more consistent cash-flow throughout the entire year.
Perhaps you have valuable equipment that can be leased out in your off-season to another industry, or maybe there are other tours that you can craft that appeal to travelers during your slower months. Exploring new target markets is another excellent way to broaden your reach throughout the year. Targeting groups that travel in more ongoing patterns (like corporate) or special interest groups that travel during the months that your current market tends to be less active in.
At the end of the day, not all tour operators are the same. Some will find all of these profitability maximizing tips useful, others will find only one or two of these strategies helpful. Our recommendation is to take some time out during your next quiet spell and work with your team to decide which strategy fits you and your business best.
5. Take a look at the stats
You might not have access to revenue data from a whole lot of global tour operators, but we do. We’ve taken care of the hard work for you, collecting and analysing business statistics from tour operators in order to gain an idea of the profitability of the industry as a whole. Take a look at the Tour Operator Profitability Report, 2020.
- Explore stats from over 6000 tour operators in our 2020 profitability report
- Learn how Your Safari used Tourwriter to cut down on itinerary creation time and reinvest it in marketing activities
- Learn how See Italy Travel streamlined their internal processes with tour operator software
- How to make powerful itineraries that your customers will thank you for