Cost management is about more than pinching pennies. Understanding your costs helps you understand the true value of each customer. Getting your costs under control helps you capture more of that value.
Cost management is a lever of profitability that’s easier to control than revenue.
Earlier in our revenue management series, we talked about cost analysis and how operators can take the financial pulse of their business and identify areas for improvement. In this series, we’re going to cover the basics of cost management and look at how these principles apply to the tours and attractions space.
Here’s a quick overview of the series.
From rent and utilities to salaries and insurance, fixed costs are an unavoidable part of your operations. While many of these costs can’t be eliminated, it is possible to manage these expenses without compromising service quality or customer satisfaction.
The important thing to remember about fixed costs is in the name. These expenses are “fixed,” remaining the same regardless of how many tours you’re running.
This is where businesses should start with cost management because it’s money you’re spending anyway to keep the lights on, literally.
Our second post will focus on variable costs.
These fluctuating expenses can make or break the profitability of your business.
Variable costs include things like per-tour cost, OTA fees, online advertising, or maintenance and fuel (in the case of vehicle-based tours).
Cost Management 101
In the final post of this series, we’ll tie everything together by showing you how to balance these costs and truly realize the value of your offers.
We’ll share practical tips on how to evaluate your services, use dynamic pricing to capture more value per tour and per customer, and ultimately approach cost management more competitively.
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