Packaging your product
Packaging involves combining a number of products together to form a holiday experience for the consumer.
Consumers (either through trade or directly contacting the airline or wholesaler) can tailor their own holiday experience by selecting products of their choice either online or offline.
As a tourism operator, before you can develop a package or packages, it’s important to do some research and determine your target market/s and the types of experiences that appeal to them.
The benefits of developing a package include:
- A package includes components such as flights, accommodation, car hire and event/theatre tickets. For example, you may be a regional accommodation supplier who wishes to encourage visitors to your area to stay for 1 or 2 nights – your package might include a local tour, a meal at a local restaurant and suggestions as to what visitors can do and see in your area.
- Developing packages often makes your product more appealing for wholesalers and travel agents to book your product and region, particularly if you're a single attraction or accommodation provider with a small number of rooms.
- A central booking number for the package makes it attractive for the travel industry, as it only means one call is required to secure all elements of the package.
- Packages can also assist in driving business to your product during low seasons or off-peak periods. Attractive pricing can drive consumers to book packages during these times.
- Packages can help drive new markets by offering products that appeal to a new market segment. When developing a package, you'll need to factor in administration costs if you’re looking after the administration of the entire package. This will include those elements not provided by you, for example entrance to attractions, tours and meals.
Wholesalers are companies that promote and on-sell your product directly to consumers via the domestic and international retail distribution network. They source flights, accommodation, transport, car hire, event tickets, tours and attractions, negotiate rates and promote their destination product range online or offline through the use of brochures, advertising or campaigns.
Wholesalers also select individual product elements and then link them with other complementary products to form packages. They communicate these packages via their website, in their brochure and frequently through their marketing communications channels. For this service, suppliers pay a commission.
The standard domestic wholesale commission is 20-25%, 10% of which is passed on to the travel agent if that is where the booking originated. The remaining 10-15% is retained by the wholesaler to help cover the costs of:
- central reservations system, including product loading and maintenance
- telephone /email communication
- collateral (brochures and flyers)
- marketing, including advertising and distribution
- online booking system.
If you wish to work with wholesalers, it’s important to consider your ability to offer an allotment (more relevant to accommodation and tours), and/or free sale reservations, with a negotiated release back for unsold product.
Increasingly, wholesalers also require a participation fee for products to be loaded into their central reservations system (CRS) and to be featured in their brochure/website.
Overseas wholesalers often use inbound tour operators (ITO), who are Australian-based and act as the conduit for overseas wholesalers as they are based in Australia. There is an extra level of commission when doing business with an ITO.
Overseas wholesalers sometimes deal directly with operators in Australia and in this case the extra commission does not apply.
Travel agents are an important part of the distribution chain as they attract customers via their shop fronts as well as via their highly visited online websites.
Travel agency groups work cooperatively with wholesale and airline partners to develop tactical marketing campaigns. Domestic bookings are an important part of a travel agents’ business in Australia.
Retail travel agents are paid a commission, approximately 10%, for bookings.
You must be prepared to pay a level of commission if you are intending to work with:
- domestic travel industry partners or booking systems
- travel agents
- booking offices
- airline partners
- online booking sites
- inbound tour operators.
It should be documented as a fee payable to any intermediary that on-sells your product.
The level of commission you will be expected to pay will vary depending on the markets you’re selling in (such as domestic versus international), and the trade partners or bookings systems you’re working with. As a general rule, allow up to 20% in the domestic markets and 30% in international markets.
It's important to know you only pay commissions when you get a booking via the travel industry. All businesses need to make sure commissions are built in to rack or retail rates. You can't add them onto your normal rates, as this disadvantages the consumer and travel industry partners.
The cost of covering commissions on top of operating costs may seem daunting to some operators, but it’s important to remember a commission is only paid when the booking has been made through the wholesaler or travel agent.
Packages make it easier for travel agents and wholesalers to sell and earn commission. Packages distributed through the travel trade will need to be fully commissionable.
The cost of covering commissions on top of operating costs may seem daunting to some operators. However again, it's important to remember that a commission is only paid when the booking has been made through the wholesaler or travel agent.