Every travel business would agree to the statement that “Pricing accuracy matters the most in the travel industry”. Even a small miscalculation in tax or markup can directly impact profit margin. Until now, most of the travel businesses, whether tour operators, DMC or other travel businesses, were adding markup either at cost or per person. These methods are simple, but they limit your accuracy when you are handling complex quotations.
Sembark Travel Management Software understood this problem of clients and therefore launched more detailed pricing strategies in the latest update – Component-Wise Markup & Taxation. This feature will provide more flexibility to our users (DMCs, tour operators, hotel consolidators or other travel businesses) to manage pricing across activities, transport, hotels, and flights more efficiently.
Let’s walk through more details as to why it is important and how it is beneficial.
Why does this update matter?
There are multiple components in every quotation you make, including transportation, activities, hotels, flights, etc. Before this update, tax and markup were applied to the total cost of the package. This limited the accuracy in managing costs for our users.
The major problem that our clients highlighted was that on different components, they have different tax rules & different profit margins. A single flat markup resulted in:
- Inaccuracy in component-wise profitability calculations
- Difficulty in communicating to explain the cost breakdown
Repetitive queries from our clients helped us in understanding the major problems scaling DMCs and travel businesses were facing.
Therefore, in version 1.160, Sembark has launched two new pricing strategies for solving this issue. Component-wise markup and per-component per-person strategy. This will give better control over component-level cost adjustment in the quotation to the travel businesses.
What’s new in this update?
There are several key changes made under this update :
1. Two new pricing strategies.- Per-Component and Per-Component Per-Person (markup and taxation adjustment)
2. More flexible taxation options– Now apply tax either on cost+markup or only on markup.
3. Advanced flight pricing– Apply tax on flights and auto-rounded flight prices.
4. Component-wise break-up in multi-option quotations– Now, travel businesses can share accurate markup distribution, whether 3-star, 4-star or 5-star options.
What is the pricing strategy?
Before understanding the details, here is a quick overview of all the available strategies of pricing in the Sembark travel management software:
- Overall pricing (existing): Where a single markup and tax are applied to the entire cost of the package.
- Per person (existing): Where tax is applicable on each person.
- Per component (new): Under this, each component, whether hotel, transport, activity, flight or more, has its own tax and markup.
- Per-Component Per-Person (new): Similar to per component, but in this strategy, final prizes are shown on a per-person basis.
Why is Component-Wise Markup a big change?
Sembark Travel Software introduced these new pricing strategies after closely evaluating the daily operations of travel businesses:
- It gives better control to the travel business as they can now apply different tax rates and markup on each component.
- Transparency and clarity in communication with clients, as users can now confidently share a detailed breakdown of the quotation.
- Easy profit tracking on each component, included in a tour quotation
- Bringing more accuracy to the travel teams since markup and tax are automatically calculated at the component level.
Taxation Options: Select what fits you best
Now we have two new methods of calculating tax while using the Component-Wise Markup feature introduced by Sembark travel management software:
A. Tax on Cost+Markup (Advanced)
Under this strategy, the tax is calculated on the total cost + markup.
For example:
As illustrated in the image under this strategy,
- First, the % of markup can be customised according to each component (Markup on Hotel 10% & on Transport 5%).
- Second, the tax on each component is calculated on the cost + markup.
This method works efficiently when the base supplier’s cost is before adding tax, as you require tax on the entire selling cost.
B. Tax on Only Markup (New)
Now, travel businesses can apply tax only on their profit portion and not on the basic cost.
For example:
As illustrated in the image under this strategy:
- Users can similarly customise the markup application for each component
- Apply tax only on the markup
C. Tax on both Cost+Markup & Only Markup
As illustrated in the image under this strategy:
- Under this, you can select which component will have tax on Cost+Markup & which one will have tax only on markup.
D. Discount on some components
As illustrated in the image under this strategy:
- Users can easily apply a discount to some components.
Conclusion
Pricing a package is a very strategic and important process for a travel business. As it directly affects your profit margins. Therefore, instead of limiting the options of calculation, Sembark Travel Software has made sure to make every possible use case scenario available for the users in the system.
Explore what more Sembark offers that transforms your process of building quotations to another level.
Not just automating the process with travel management software, but continuously evolving according to the global standards is important, according to Sembark. Therefore, continuous new updates are launched by our team.
See what’s new in Sembark and explore all the latest features- Learn More
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