I recently started a travel supplier with two partners. We created the itineraries for the tours together; organized the layout, identified the hotels, restaurants, activities, etc...for each tour. We have now divided the the responsibilities of our operation. I am meant to market and get clients, whereas the other two will take the roll of administration, organizing each tour group, making reservations, contracting guides, etc. Because the contacts are already there the administration of the tours should only take a couple of hours and primarily involves making reservations and payments to our pre-established contacts. What I would like to know therefore, is:
1) what percent of the profit should I get for doing the marketing, getting in touch with the customers and selling the tour, and what percent should go to my partner that is then receiving the client and administering the tour? and
2) If one of the administrators makes the first contact with the client and sells the tour, I handle the transactions of the client to then book the tour, and someone else receives the client and adminsters the tour, what percent or incentive should go to the person who 'caught' the client in the first place?
Lastly 3) How much of the profit from each tour should be set aside for the company?
I appreciate any advice on the matter, unfortunately my background is not in business or administration, so this is all new to me! Cheers,
As you mentioned "hotels" I am going to assume you are selling a multi-day tour. These tend to be quite difficult to market (as first you have to find the client, secondly you have to do all the pricing up of the individual quote)
Assuming the business is on say 20%, and it costs 5% to receive the money, and to send money to suppliers (i.e. payment gateway fees, bank fees) this leaves 15%.
Assume 5% of the marketing (finding the customer), 5% of the sales (as for multi-day, every single booking will have multiple customer contacts, 1:1, before conversion), and 5% for the operations.
Or reduce down to 3 / 3 / 3 if you need some of the business
Frankly, I am not as convinced by the concept of splitting jobs and splitting revenue as you sound.... I forsee it being a point of contention and argument.
Thank you. We are based in Galápagos, Ecuador and add 33% from our base price onto our tour as profit. Tour are 7 to 12 days. Splitting jobs is the most convenient and advantageous for us because of our skills, location and connections. I am the American contact based in the states, and my partners are locals, so I am doing the marketing primarily focused on American clients, and they are administering the tours from the time clients arrive to Ecuador. I'm not wuite sure I understand your response, are you suggesting 5 percent should go to operations? Say we have 10 clients, and have a profit of $300 per client, which is a total os $3,000. What percent of that should then go to me as marketing manager, what percent to the person handling operations and what percent to business? I understand it should be an agreement amongst the partners as well, but in order to start negotiating I thought I would get some opinions from people who have been in similar positions. Thank you!
A multi-day travel agent will take 15-20% of the overall payment. For that they
- do the marketing
- build a website / print brochures
- create the tour (e.g. price it up, communicate with customer about their specific needs)
- take the payment (including say a 3% fee from the bank)
- in some situations, take responsibility for insurances in the source market (e.g. in your case, the US)
So that would leave say 10 % margins for your ground staff - which may be another way of looking at it
I don't think they should be getting any 'profits'.
The clients belong to you, so whatever is left after costs is yours. These costs comprise:
* your costs (website, payment handling)
* guide costs, food, equipment hire, accommodation (these should be fixed, e.g., the guide gets $100 per day), etc.
* management costs for making the local arrangements - you need to come up with an agreement here, e.g., $10/day/guest, or you could agree a monthly fee (though I think this is not such a good idea, because business is seasonal).
Although your partner has provided you with expertise to make the itineraries, the reality is that you hold the cards and can just walk off to someone else, so there isn't any particular consideration due for that.
So agree an appropriate fee for the trip, and bank the rest.
If your local manager is unhappy with his fee, then he should ask for a higher one.
On some occasions you will make more money, e.g., if your tour costs $2000 plus $500 per head, and you are selling at $1,500/head then if you sell 2 at $1,500 you make nothing, or even lose money, and if you sell 6, then you make $4,000 - that's your good fortune.
Am also a marketer of augur tours, a travel company based in Uganda. If you don't mind can we in some way get in touch