This was one of our most popular blog posts last year at my business consulting website MattZito.com so I thought I would publish it here at the Academy as well. In the Travel Business Academy we teach entrepreneurs how to build online trip/tour operator businesses. Packaging is the product that trip and tour operators sell to travelers.
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 tourism 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 leverage works in the tourism business. 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 three Fly-Fishing guides . We paid $200 for 1 ½ day of guided work. We paid two restaurants $20 for each dinner and we served our own breakfasts.
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. A Fly-Fishing Package with 2 people grosses $790. Expenses are 1 guide $200, 4 dinners $80, net profit is $510. You make $160 more on the weekend or $80 more per night when you sell a package into this room. That same room now is worth $255 per night. Multiply this by more than one room and you can see how your business becomes more profitable very quickly.
The power of packaging is that you borrow other travel suppliers 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 community or area.
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.
Packaging can be implemented and sold by not only lodging properties but by tour guides and individual businesses engaged in the travel and tourism business.
Geoffrey Warner a master furniture designer and creator of the famous “Owl Stool” in Stonington, Maine, offers local Bed & Breakfasts his handmade Owl Stool workshop. Innkeepers are packaging the workshops with their lodging. Guests of the Inns take a half-day workshop at his studio and go home from their vacation with an Owl Stool, made with their own hands. This is another example of packaging. Next year Geoffrey plans on selling his own packages directly to his clients in addition to the B&Bs selling and leveraging his areas B&B rooms.