Costing Travel Packages
1. Travel Cost Concept
Travel cost refers to the total amount of money required to organize or undertake a tour. It
includes all expenses related to transportation, accommodation, meals, attractions, guide
services, and other activities. Understanding travel costs helps in pricing packages accurately and
ensuring profitability.
2. Types of Travel Costs
Fixed Costs: Costs that remain constant regardless of the number of travelers (e.g.,
vehicle hire, guide fees).
Variable Costs: Costs that change with the number of travelers (e.g., meals, entrance
tickets).
Direct Costs: Expenses directly related to the tour (e.g., air tickets, hotel bookings).
Indirect Costs: Overhead expenses not linked to one specific tour (e.g., office rent,
marketing).
3. Elements of a Travel Cost
Transport (airfare, train, car rental)
Accommodation (hotels, lodges, hostels)
Meals and refreshments
Attraction and site entry fees
Tour guide/interpreter services
Travel insurance
Visa and passport fees
Communication and printing materials
Marketing and promotion
Contingency funds (emergency allowance)
4. Factors Determining Travel Cost
Destination type (local vs. international)
Travel season (peak or off-peak)
Duration of the trip
Mode and class of transport
Number of travelers (group vs. individual)
Type of accommodation
Type and number of activities
Currency exchange rates
Supplier and agency agreements
Applicable taxes and levies
5. Items to Be Included in Travel Costs
Transport and transfers
Accommodation charges
Meals and drinks (if stated)
Activity and excursion fees
Guide and staff fees
Booking and handling fees
Travel insurance
Applicable government taxes
Printing and documentation
6. Items Not Included in Travel Costs
Personal shopping
Alcoholic drinks (unless specified)
Optional tours not in the itinerary
Laundry services
Phone and internet costs
Tips and gratuities
Medical expenses not covered by insurance
Passport renewal or application fees
7. Conditions for Travel Payments
A deposit may be required upon booking
Full payment is often due before travel starts
Payment modes include cash, mobile money, bank transfer, credit/debit card
Refund policies depend on cancellation terms
Travelers should keep receipts and invoices
Late payments may attract penalties
All payment terms must be stated clearly in the contract or package agreement
Sample Costing Table
Here is an example of a simple costing table you might use to calculate the cost of a travel
package.
Unit Cost (per Number of Total
Cost Element
person) Travelers Cost
Transportation
Flight (Round-trip) $500 10 $5,000
Local Transport (Bus) $50 10 $500
Accommodation
3-Star Hotel (per
$100 10 $1,000
night)
Meals
Breakfast (per day) $10 10 $100
Lunch (per day) $15 10 $150
Dinner (per day) $20 10 $200
Excursions and
Activities
Guided City Tour $30 10 $300
Cultural Performance $40 10 $400
Additional Costs
Travel Insurance $25 10 $250
Visa Processing Fee $20 10 $200
Total Cost $7,600
Sample Costing Calculation Breakdown
For this package with 10 travelers:
Total transportation cost = $5,500 (including flight and local transport)
Total accommodation cost = $1,000
Total meals cost = $450
Total excursions and activities = $700
Total additional costs (insurance and visa) = $450
Total package cost per person = $7,600 / 10 = $760 per person
Assessment Questions on Costing Travel Packages
1. Define "travel cost" and explain its importance in tour package development.
2. List and explain the different types of travel costs. Give examples for each type.
3. Identify and explain at least 5 elements that contribute to the cost of a travel
package.
4. Discuss 5 factors that can affect the cost of a travel package.
5. What items should be included in the travel cost when preparing a tour package?
6. What items are typically not included in the cost of a travel package? Why is this
distinction important?
7. Explain the conditions under which payments for travel packages are made. What
are the consequences of late payments?
8. Using a given scenario (e.g., a 7-day trip to a destination), calculate the total travel
cost for a group of 12 travelers, including transportation, accommodation, meals,
excursions, and insurance.
9. How would seasonality (high season vs. low season) affect the cost of a travel
package? Explain with examples.
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