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TH1910

Tour Costing
For tour operators, the price that is charged for the package holiday is their main source of income. It is the
only element of the marketing mix that generates their turnover and, therefore, needs to attract clients as
well as provide sufficient profit for them. To understand how tour operators price their products, it is essential
to develop a good understanding of the costs involved in producing a package.
Costing is the process of determining the actual cost of a tour package by detailing its various components
(accommodation, transportation, tours, meal plans, tour guide, and tour coordinator services) and attaching
a specific cost represented by their contracted rates according to their corresponding method of costing.
Pricing, on the other hand, is the process of determining the selling price after a mark-up (the value that tour
operators add to the price of their products) or margins (measure of profitability) to the costs.

• Costing Ad Hoc and Regular Tour Packages


Before costing tour packages, tour operators identify first if air transportation must be involved. If air
transportation is part of the tour package, it may either be an inclusive tour package (domestic airfare
combined with the international airfare to be quoted altogether) or land arrangements (domestic airfare
and international airfare are quoted separately.) The following are the cardinal rules in costing tour
packages (Claravall, 2013):
1. Paying passenger brackets must be based on the maximum capacity of a tour vehicle (transfers or other
modes of transportation.) If the number of paying passengers exceeds the capacity of a tour vehicle,
tour operators must add another vehicle to accommodate the other passengers. Then, the cost of these
must be divided into the number of confirmed paying passengers.
2. Determine whether the cost of a component is under fixed costs (remain constant regardless of the
number of participants) or variable costs (determined by the number of participants availing of a travel
component.) The cost must be prorated if under variable costs.
3. All costs (paying passenger, free-of-charge [FOC], and tour guide) are calculated to a per pax basis. Thus,
a twin room rate, when divided by two (2) pax, becomes a twin-sharing rate (the price is calculated for
two [2] separate pax).
4. Free-of-charge (FOC) costs are calculated based on the inclusive number of meals (hotel and restaurant)
and packed meals, and entrance fees and non-land transfers/transportation costs (land
transfers/transportation and lodging costs are excluded in FOC cost.) However, accommodation must
be limited to four (4) beds only or two (2) twin rooms.
5. When a tour guide accompanies the clients to their destinations outside his/her place of residence, s/he
must act as a tour escort. Therefore, all board and lodging (single-room occupancy) costs, plus his/her
tour guide fees, are to be included in the tour guide costs.
6. When prorating the FOC costs by the number of paying passenger brackets, multiply the per FOC cost
by the number of FOC entitlements (rule: one tour guide per vehicle).
7. When prorating tour guide costs by the number of paying passenger brackets, the number of tour guides
needed to service each vehicle must be determined (rule: one tour guide per vehicle).
8. When calculating mark-up or margin, multiply the total cost by the desired mark-up percentage.
For example: The net cost is 𝑃𝑃𝑃𝑃𝑃𝑃26,031 𝑥𝑥 15% = 𝑃𝑃𝑃𝑃𝑃𝑃3,905 + 𝑃𝑃𝑃𝑃𝑃𝑃26,031 (𝑛𝑛𝑛𝑛𝑛𝑛 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) =
𝑃𝑃𝑃𝑃𝑃𝑃29,936 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜’𝑠𝑠 𝑛𝑛𝑛𝑛𝑛𝑛).
Note: It is up to the tour operator or travel agency whether they would have their own mark-up or
follow the recommended mark-ups.

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9. When calculating the government tax due, divide the net to tour operator by .88 for 12% value added
tax (VAT); (12% 𝑉𝑉𝑉𝑉𝑉𝑉 – 1.00 = .88).
10. When calculating the travel agent/travel agency’s commission, divide the total amount due by .9 for
10% commission (10% 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 – 1.00 = .9).
11. Rest Over Night (RON) would only be applicable in calculating for tour guide services if a tour guide
would have to stay overnight with the clients. The rate would depend on one company to another.
• Costing for Transportation Components
Transportation costs by scheduled air, sea, or land transportation are based on per pax fare. Therefore,
these remain constant regardless of the number of pax. However, for a group tour charters vehicle (air,
sea, or land), the total cost of the vehicle must be divided by a pre-determined number of passengers which
must not exceed its allowed capacity (within its break-even load factor of 50-60% of the total number of
seats for passengers); this formula is called prorated cost.
For example: X = total cost of the vehicle; Y = pre-determined number of passengers. X÷Y
• Costing Transfer Services
Transfers cost may be prorated, except, for a regular airport shuttle service, which would be fixed and is on
a per pax basis. Private coach transfers can also be arranged but with a higher price by computing the cost
of total passenger capacity to be divided into the actual number of passengers.
• Costing Sightseeing Tours
 Sightseeing tours are mini packages that include transportation, tour guide services, entrance fees,
entertainment activities, and sometimes snacks and meals. The transportation costs within a
destination to tourist attractions and sites of interest are prorated by a predetermined number of
participants not exceeding its allowed capacity (within its break-even load factor of at least 50-60% of
the total number of seats for passengers.)
 Sightseeing tours by scheduled transportation service may prevent clients from stopping in their
desired sites to shop and take pictures. However, most major urban cities have introduced the “hop-
on, hop-off” sightseeing tours, which use the city’s public transportation system to get from one site to
another. These tours may include or exclude the services of a tour guide and are calculated based on
the rate as published by the tour operator.
The following is a sample computation for a tour that covers a 6-day/5-night tour package requiring the
service of a tour guide:
Day Tour Guide Service Particulars Tour Guide Fee
1 Evening tour (PHP1,500) plus rest overnight (RON) (PHP2,500) PHP1,500 + PHP2,500 = PHP4,000
2-5 Full-day tour (PHP2,000) plus RON (PHP2,500) x 4 days PHP2,000 + PHP2,500 x 4 = PHP18,000
6 Half-day tour (PHP1,000) PHP1,000
Total Tour Guide Fee PHP23,000
Table 1. Costing tour guide services*
Source: Travel and tour operations in the Philippines 3rd ed., 2013. p.286
*Pricing of services always varies from one tour operator to another. This is just a representation as a guide in costing tour guide service fees.

 The sum of the cost of transportation and accommodation (single room basis) when operating outside
the tour guide’s place of residence is prorated by a predetermined number of participants. When
calculating the cost of the tour guide, one (1) tour guide must be assigned per vehicle.
 Entrance fees are always fixed. The rule is that no free concessions for entrance fees.

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 The cost of entertainment activities may be fixed or may vary. For instance, a picnic hut’s rental fee at
a picnic camp is normally prorated, while the picnic camp’s entrance fee is fixed. A boat rental fee may
be fixed per pax or prorated by the capacity of the boat or number of riders.
 If meals and snacks are considered as inclusions, these are always fixed and would always include the
FOC and the tour guide.
 Scheduled sightseeing tours are referred to as “Seat-in-Coach” sightseeing (the computation would be
shown on the next subtopic “Rate Sheet.” The tour guide cost is calculated by adding up the total cost
of the tour guide’s fees.
 For Seat-in-Coach (SIC) Sightseeing Tours, the tour operator (TO) must determine the minimum
number (ranges from two to six) of passengers required to make a profit. The resulting cost plus the
mark-up would turn out to be the tour fare.
• Costing for Accommodations
 When hotel accommodations are included in the tour package, the rule is that two (2) pax must share
a room (twin-sharing.) Hotel costs are always fixed. For room costs, the rule is to prorate the cost of
the room by the number of guests occupying it. The room is shared may either be a twin room with
two (2) beds, or a double room with one (1) matrimonial bed, a triple room, a quad room, or a dorm-
type room.
For example, The twin/double room of ABC Hotel is priced at PHP3,000.00 per night. Since there
would be two (2) guests staying in a twin/double room, the rate is to be divided by the number of
guests checked-in in that room; 𝑃𝑃𝑃𝑃𝑃𝑃3,000 (𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) ÷ 2 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 = 𝑃𝑃𝑃𝑃𝑃𝑃1,500 per
guest (half-twin rate.)
 If a guest does not wish to share the room with another guest, there is a single supplement charge
(calculated as single room rate minus half-twin rate = single room supplement) representing the
difference between a half-twin and a single room.
For example: The single room rate of ABC Hotel is priced at PHP2,500 with PHP1,000 (single room
supplement charge); 𝑃𝑃𝑃𝑃𝑃𝑃2,500 (𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) – 𝑃𝑃𝑃𝑃𝑃𝑃1,500 (ℎ𝑎𝑎𝑎𝑎𝑎𝑎 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) =
𝑃𝑃𝑃𝑃𝑃𝑃1,000 (single room supplement); 𝑃𝑃𝑃𝑃𝑃𝑃2,500 + 𝑃𝑃𝑃𝑃𝑃𝑃1,000 = 𝑃𝑃𝑃𝑃𝑃𝑃3,500 (amount to be added
on guest’s account)
 If three (3) guests wish to share one (1) room, then there is triple reduction. The triple rate is the cost
of a twin/double room plus an extra bed divided by three (3) guests.
For example: The extra bed cost of ABC Hotel is PHP500, twin/double rate is PHP3,000; to calculate
for the triple room rate (𝑃𝑃𝑃𝑃𝑃𝑃500 + 𝑃𝑃𝑃𝑃𝑃𝑃3,000 = 𝑃𝑃𝑃𝑃𝑃𝑃3,500)
𝑃𝑃𝑃𝑃𝑃𝑃3,500 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) ÷ 𝑡𝑡ℎ𝑟𝑟𝑟𝑟𝑟𝑟 (3) 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 = 𝑃𝑃𝑃𝑃𝑃𝑃1,167 (triple-share cost)
𝑃𝑃𝑃𝑃𝑃𝑃1,167 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 − 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) – 𝑃𝑃𝑃𝑃𝑃𝑃1,500 (ℎ𝑎𝑎𝑎𝑎𝑎𝑎 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) = 𝑃𝑃𝑃𝑃𝑃𝑃333 (triple-share
reduction)
Disclaimer: Some tour operators quote a triple-share rate instead of a triple-share reduction. In this
case, the triple rate would be equal to the triple-share rate (PHP1,167)
𝑃𝑃𝑃𝑃𝑃𝑃3,000 (𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) + 𝑃𝑃𝑃𝑃𝑃𝑃500 (𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑏𝑏𝑏𝑏𝑏𝑏 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) = 𝑃𝑃𝐻𝐻𝑃𝑃3,500 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
𝑃𝑃𝑃𝑃𝑃𝑃3,500 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) ÷ 3 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 = 𝑃𝑃𝑃𝑃𝑃𝑃1,167

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 If four (4) guests wish to share one room, the computation would be as follows:
For example: 𝑃𝑃𝑃𝑃𝑃𝑃3,000 (𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑒𝑒) + 2 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 (𝑃𝑃𝑃𝑃𝑃𝑃1,000) =
𝑃𝑃𝑃𝑃𝑃𝑃4,000 (𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
𝑃𝑃𝑃𝑃𝑃𝑃4,000 (𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) ÷ 4 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 = 𝑃𝑃𝑃𝑃𝑃𝑃1,000 (𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 − 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
𝑃𝑃𝑃𝑃𝑃𝑃1,000 (𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 − 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) – 𝑃𝑃𝑃𝑃𝑃𝑃1,500 (ℎ𝑎𝑎𝑎𝑎𝑎𝑎 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
= 𝑃𝑃𝑃𝑃𝑃𝑃500 (𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 − 𝑠𝑠ℎ𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
 Dorm-type rooms are always rated on a per pax basis. Most lodging establishments require payment
based on the number of beds in the room, while some based on the number of occupied beds. These
rooms may also accommodate more than the usual number of occupants but would require them to
use common shared areas such as bathrooms and lounges.
 Meals in accommodation establishments are fixed costs, while meals taken outside the place of lodging
are normally less expensive. However, the additional transportation cost going to and back from the
restaurant may result in a higher cost than the same meal served at the place of lodging.
 Some hotels may have bigger room capacity that would fit bigger groups or families.
• Costing Tour Escort Services
 The cost of a tour escort’s transportation, accommodation, and meals are prorated among the paying
participants. As a rule, the suppliers’ concessions are always applied to the tour escort, or the first FOC
entitlement is given to him/her. These costs do not include the salary paid by his/her employer.
 When a tour guide accompanies an escorted tour group within a destination country, the tour guide
costs are calculated by summing up the total of the tour guide’s fees, the cost of transportation and
accommodation (single room basis) and then prorating this amount among the number of paying
participants; tour escort costs, on the other hand, are reduced by applying all possible suppliers’
concessions.
 When calculating for tour guide’s service, divide the tour guide’s service to the lowest number for
each passenger bracket. For example: 𝑃𝑃𝑃𝑃𝑃𝑃450 ÷ 2 (𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 2 − 3) =
𝑃𝑃𝑃𝑃𝑃𝑃225 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔’𝑠𝑠 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑓𝑓𝑓𝑓𝑓𝑓 𝑏𝑏𝑟𝑟𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 2 − 3). Please note that there must be one (1) tour
guide for every vehicle unit.
Rate Sheet
Rate sheet is a list of products and services of a tour operator with corresponding prices. It is usually posted
on the websites of tour operators that can be viewed by potential clients or tourists. The rate sheet is
considered as a sales tool wherein the prices are rounded-off for gross (before any deductions) sales with the
commission of travel agents. This may also be seen in printed travel brochures of tour operators. The following
are the sections of a rate sheet:
• Transfer services transport clients from point “A” to point “B” within the destination and with no
sightseeing or entertainment en route. The general usage of the term involves meeting and assisting clients
at the gateway (airport/pier/bus station) and moving them to the lodging establishment or send-off
assistance and moving them from the lodging establishment to the exit point. Aside from the
transformation components, an arrival/departure transfer would also include the services of a tour guide.
Transfers can also be used between a lodging establishment and a restaurant, and vice-versa, however, this
may be part of an evening tour with dinner.
• Sightseeing tours are day tour packages (with no overnight stays) that entail transportation to the
attractions and the sites of interest in the locality, the services of a tour guide to provide pertinent
commentaries, and walking visits or tours and/or entertainment. These may include participatory activities
such as kayaking.

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• Tour packages (package holidays) consist of two (2) or more travel components.
Before, there was the Accommodations and Meals section where the accommodation establishments with
the applicable room rates for twin/double room, single room, triple room, extra bed, and meal prices can be
seen. However, the websites and online booking facilities of accommodation establishments have made this
section redundant especially for free and independent travelers (FIT) as they directly book with hotels, while,
group inclusive tours (GIT) would be treated as ad hoc tour arrangements.
Rate Sheet Costing
When costing a rate sheet, the golden rule is to “negotiate for the best available contracted rate” from the
suppliers. In other words, the most competitive rate without compromising the quality of the supplier’s
products and services. For instance, some accommodation establishments may give a lower room rate but
comes with fewer room amenities.
The products and services featured in confidential tariffs (a booklet containing the wholesale prices of hotel
rooms and tours exclusively for tour operator’s use as basis in pricing) and rate sheets are always based on FIT
rather than GIT because GITs would always opt for ad hoc services. While, tour packages that are featured,
would be based on regular tour packages (pre-packaged that feature well-known attractions or activities with
high demand.) The following are sample costing for transfers, guided sightseeing tours, and tour packages
expressed in Philippine pesos (PHP), rounded off to the nearest zero (decimal is not reflected.) The basis of
the service rates would vary per establishment, company, or organization. The following table shows a sample
costing for transfer service:

Component Vehicle Unit Cost Number of Passengers’ Brackets


Type 1 2-3 4-9 10-14 15-18 19-24 FOC
Transportation (2 hours) Car 2,000 2,000 1,000
Van 3,000 750
Mini Bus 5,000 500 334
Bus 10,000 526
Tour Guide’s Service 450 450 225 113 45 30 24
Tour Coordinator 200 200 100 50 20 13 11
Total Cost 2,650 1,325 913 565 377 561
Pro Rate FOC Costs
ADD 20% Mark-up 530 265 183 113 76 113
Net to Tour Operator 3,180 1,590 1,096 678 453 674
ADD 12% VAT 434 217 149 92 62 92
Total Amount Due 3,614 1,807 1,245 770 515 766
Selling 3,615 1,810 1,245 770 515 770
Table 2. Costing transfer service
Source: Travel and tour operations in the Philippines 3rd ed., 2013, p.297

Explanatory notes in Table 2 are as follows:


1. The number of passenger brackets varies from TO (tour operator) to another. Normally, brackets are limited to
the maximum capacity of the equipment being used;
2. No FOC concession is granted. Therefore, no FOC cost is calculated;
3. Transportation costs are prorated (divided by the lowest number in passenger bracket); PHP10,000 for a bus
unit with at least 19 passengers (bracket 19-24); to get the amount per pax, the unit cost must be divided by
the lowest number of passengers on each passenger bracket; 𝑃𝑃𝑃𝑃𝑃𝑃10,000 (𝑏𝑏𝑏𝑏𝑏𝑏 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) ÷
19 (𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 19 − 24) = 𝑃𝑃𝑃𝑃𝑃𝑃526 (𝑏𝑏𝑏𝑏𝑏𝑏 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑝𝑝𝑝𝑝𝑝𝑝 𝑝𝑝𝑝𝑝𝑝𝑝)

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4. The general rule is that the tour guide’s services are required for private transfers;
5. The tour coordinator’s costs are based on a minimum of one (1) hour (PHP100/hour) depending on usage. Some
tour operators base this cost on the average daily wage;
6. The 20% mark-up varies from TO to another depending on the company’s overheads (non-labor expenses
required to operate the business) and desired profits;
7. The 12% VAT is mandatory and is calculated by dividing the net to TO by .88 (1.00 − .12 = .88)
8. The tax due is added to the net to TO which turns out to be the total amount due; and
9. Selling is the rounded-off figure wherein the retailer can add its mark-up.
10. Rounding off per item is discretion of the TO. They may round off to the next higher number or retain the actual
number without the decimal point.

The following represents costing for a full day guided sightseeing tour:

Component Vehicle Type Unit Number of Passengers’ Brackets


Cost 1 2-3 4-9 10-14 15-18 19-24 FOC
Transportation (12 hours) Car 5,000 5,000 2,500
Van 7,000 1,750
Mini Bus 15,000 1,500 1,000
Bus 20,000 1,053
Entrance Fees 50 50 50 50 50 50 50
Restaurant Lunch 280 280 280 280 280 280 280 280
Boat Ride (2pax/boat) 800 800 800 800 800 800 800 800
Tour Guide Fee 1,800 1,800 900 450 180 120 95
Total Cost 7,930 4,530 3,330 2,810 2,250 2,278 1,080
Pro Rate FOC Costs 72 59
ADD 20% Mark-up 1,586 906 666 562 465 468
Net to Tour Operator 9,516 5,436 3,996 3,372 2,787 2,805
ADD 12% VAT 1,298 741 545 460 380 383
Total Amount Due 10,814 6,177 4,541 3,832 3,167 3,188
Selling 10,815 6,180 4,545 3,835 3,170 3,190
Table 3. Costing a full-day guided sightseeing tour
Source: Travel and tour operations in the Philippines 3rd ed., 2013, p.298

Explanatory notes in Table 3 are as follows:


1. Number of passenger brackets varies from TO to another. Normally, brackets are limited to the maximum
capacity of the equipment being used.
2. Transportation costs are prorated (divided by the lowest number in the passenger bracket); (see explanatory
notes in Table 2)
3. For brackets 25-29 a full-size bus is used for costing;
4. The tour guide fee would vary from TO to another;
5. FOC cost consists of meals and the boat ride;
6. The 20% mark-up varies from TO to another depending on the company’s overheads and desired profits;
7. The 12% VAT is mandatory and is calculated by dividing the net to TO by . 88 (1.00 − .12 = .88);
8. The tax due is added to the net to TO which turns out to be the total amount due; and
9. Selling is the rounded-off figure wherein the retailer can add its mark-up.
10. Rounding off per item is discretion of the TO. They may round off to the next higher number or retain the actual
number without the decimal point.

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TH1910

Below is a sample of costing for a 2-day/1-night tour package:

Component Item Unit Number of Passengers’ Brackets Guide FOC


Cost Costs
1 2-3 4-9 10-14 15-18
Transportation Car 25,000 25,000 12,500
(36 hours)
Van 28,000 7,000
Mini Bus 35,000 3,500 2,334
Restaurant Lunch Tarlac 280 280 280 280 280 280 280 280
En-route
Hotel Set Dinner 675 675 675 675 675 675 675 675
RON Baguio Twin room with 4,050 2,025 2,025 2,025 2,025
Country Club private facilities
such as: two (2) bed,
or two (2) single
beds or one single
bed plus a double
bed (TWB)
Single room with 3,600 3,600 3,600
private facilities
regardless of the
number of beds in
the room (SWB)
Hotel American 450 450 450 450 450 450 450 450
Breakfast
Baguio City 50 50 50 50 50 50
Entrance Fees
Baguio 300 300 300 300 300 300 300 300
Restaurant Lunch
Restaurant Tarlac 280 280 280 280 280 280 280 280
Dinner En-route
Tour Guide Fees (Full Day x 2 + RON = 5,850 5,850 2,925 1,463 585 390
5,850)
Sub-Total 36,485 19,485 12,523 8,145 6,784 5,585 1,985
Prorate Tour 5,585 2,793 1,397 559 373
Guide Costs
Prorate FOC 133
Costs
Total Cost 42,070 22,278 13,920 8,704 7,290
ADD 20% Mark- 8,414 4,456 2,784 1,741 1,458
up
Net to Tour 50,484 26,734 16,704 10,445 8,748
Operator
ADD 12% VAT 6,885 3,646 2,278 1,425 1,193
Total amount 57,369 30,380 18,982 11,870 9,941
due
Selling 57,370 30,380 18,985 11,870 9,945
Table 4. Costing a 2days/1night tour package
Source: Travel and tour operations in the Philippines 3rd ed., 2013, p.299

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Explanatory notes in Table 4 are as follows:


1. Number of passenger brackets varies from a TO to another. Normally, brackets are limited to the maximum
capacity of the equipment being used;
2. Transportation costs vary from a transportation service provider to another. However, these are prorated
(divided by the lowest number in the passenger bracket); (see explanatory notes in Table 2)
3. For bracket 10-14 and up (bracket 15-24) a mini-size bus is used for costing;
4. Hotel accommodations are based on the Baguio Country Club and would vary depending on seasonality and
timeline;
5. The tour guide fees already include the tour guide/s’ RON and assumed at PHP1,125 per day;
6. Prorate tour guide costs would be the sum of the total guide costs (transportation costs, meals costs, and
accommodation costs and the rest of the figures under the Guide Costs’ column); 𝑃𝑃𝑃𝑃𝑃𝑃280 + 𝑃𝑃𝑃𝑃𝑃𝑃675 +
𝑃𝑃𝑃𝑃𝑃𝑃3,600 + 𝑃𝑃𝑃𝑃𝑃𝑃450 + 𝑃𝑃𝑃𝑃𝑃𝑃300 + 𝑃𝑃𝑃𝑃𝑃𝑃280 =
𝑃𝑃𝑃𝑃𝑃𝑃5,585 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐); 𝑤𝑤ℎ𝑖𝑖𝑖𝑖ℎ 𝑠𝑠ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑏𝑏𝑏𝑏 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑏𝑏𝑦𝑦 𝑡𝑡ℎ𝑒𝑒 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑝𝑝𝑝𝑝𝑝𝑝 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝’ 𝑏𝑏𝑏𝑏
2 (𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 2 − 3) = 𝑃𝑃𝑃𝑃𝑃𝑃2,793
7. FOC cost is the sum of all meals involved;
8. The prorate FOC costs consist of all meals and are divided by the last lowest bracket number;
𝑃𝑃𝑃𝑃𝑃𝑃1,985 (𝐹𝐹𝐹𝐹𝐹𝐹 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶) ÷ 15 (𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 15 − 18) = 𝑃𝑃𝑃𝑃𝑃𝑃133 (𝐹𝐹𝐹𝐹𝐹𝐹 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐)
9. To calculate for the Sub-Total per passengers’ bracket, add all the components (excluding Prorate tour guide
costs and prorate FOC costs) under the same column depending on the lowest number of participants for each
passengers’ bracket; 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 1: 𝑃𝑃𝑃𝑃𝑃𝑃25,000 + 𝑃𝑃𝑃𝑃𝑃𝑃280 + 𝑃𝑃𝑃𝑃𝑃𝑃675 + 𝑃𝑃𝑃𝑃𝑃𝑃3,600 + 𝑃𝑃𝑃𝑃𝑃𝑃450 +
𝑃𝑃𝑃𝑃𝑃𝑃50 + 𝑃𝑃𝑃𝑃𝑃𝑃300 + 𝑃𝑃𝑃𝑃𝑃𝑃280 + 𝑃𝑃𝑃𝑃𝑃𝑃5,850 = 𝑃𝑃𝑃𝑃𝑃𝑃36,485 (𝑠𝑠𝑠𝑠𝑠𝑠 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡);
10. To calculate for the Total Cost per passengers’ bracket, add the sub-total cost and the sum of prorate tour
guide costs and prorate FOC costs, 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 1: 𝑃𝑃𝑃𝑃𝑃𝑃36,485 (𝑠𝑠𝑠𝑠𝑠𝑠 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) +
𝑃𝑃𝑃𝑃𝑃𝑃5,585 (𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) + 𝑃𝑃𝑃𝑃𝑃𝑃0 (𝑛𝑛𝑛𝑛 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝐹𝐹𝐹𝐹𝐹𝐹 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐) = 𝑃𝑃𝑃𝑃𝑃𝑃42,070 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐)
11. The 20% mark-up varies from a TO to another, depending on the company’s overheads and desired profits;
12. The 12% VAT is mandatory and is calculated by dividing the net to TO by .88 then subtract the difference to the
net to TO to get the 12% VAT of net to TO (1.00 - .12 = .88); 𝑃𝑃𝑃𝑃𝑃𝑃50,484 ÷ .88 =
𝑃𝑃𝑃𝑃𝑃𝑃57,368 – 𝑃𝑃𝑃𝑃𝑃𝑃50,484 = 𝑃𝑃𝑃𝑃𝑃𝑃6,884 (12%𝑉𝑉𝑉𝑉𝑉𝑉 𝑜𝑜𝑜𝑜 𝑛𝑛𝑛𝑛𝑛𝑛 𝑡𝑡𝑡𝑡 𝑇𝑇𝑇𝑇);
13. Selling is the rounded-off figure, for the retailer to add a mark-up. For instance, in the case of bracket 1 with total
amount due = PHP57,368, the TO opted to round-off the figure to PHP57,370. This would depend on the TO’s
discretion on how to price the tour package that may be more pleasing to the market.

In the event that an involuntary single (someone from a tour group had been left out for purchasing a tour
package on twin-sharing basis, with no one to share the room with or share the room with the opposite gender
who are not related or married as a couple) takes place, the TO will have to pay for the single supplement.

References:
Camilleri, M. A. (2018). Travel marketing, tourism economics and the airline product: an introduction to theory and
practice. Cham, Switzerland: Springer
Claravall, B. G. (2013). Travel and tour operations in the Philippines 3rd ed. Sampaloc, Manila: Accumiro I.T. Solutions.
Robinson, P., et al. (2016). Operations management in the travel industry (2nd ed.). Boston, MA: CABI.

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