How to Structure a Marketing Budget? First, Understand Tour Industry Costs
The travel industry typically has relatively low-profit margins, a common challenge faced by businesses worldwide. While the barriers to entry in the travel industry are low, competition is fierce, and profit margins are limited.
Without precise planning, businesses may face losses or even the risk of closure. Therefore, cost management is crucial. Every expense, from tour guide salaries and driver fees to catering, equipment maintenance, and insurance, needs careful calculation. These expenses, though seemingly small, can significantly impact a business's profitability when accumulated.
For example, a travel agency operating city sightseeing day tours needs to consider costs such as vehicle rentals, tour guide salaries, and venue fees. Outdoor adventure activity providers must invest in equipment maintenance, insurance, coach salaries, and more. These varying cost structures directly affect a business's marketing budget and determine how much resource can be invested in attracting new customers and enhancing brand loyalty.
Cost Analysis for Travel Businesses
Let’s analyze the cost distribution and profit margins for travel tour operators and outdoor adventure activity providers as examples.
Example 1: Tour Agencies (City Tours, Day Trips)
Revenue per traveler: $100
Fixed costs (vehicle rental, venue fees): $30
Variable costs (guide wages, driver fees, meals): $25
Remaining budget: $45 (for marketing and profit)
Example 2: Outdoor Adventure Providers (Canoeing, Paragliding, Scuba Diving)
Revenue per participant: $80
Fixed costs (equipment maintenance, rental): $25
Variable costs (instructor wages, insurance): $30
Remaining budget: $25 (for marketing and profit)
Marketing Budget Allocation: OTA vs. Direct Sales
Once businesses understand their marketing budget, the next key step is how to allocate resources, as budget allocation will directly impact business growth and profitability models.
Comparison of OTA and Direct Sales: Pros and Cons
Here are the pros and cons of OTA and direct sales marketing to help you determine which approach better fits your business needs:
📌 Related Topics: How to Reduce Reliance on OTAs
How to Create the Right Marketing Strategy?
Depending on business growth stages, marketing budget allocation can follow different strategies:
📌 For Startup Businesses (Brand Exposure Stage)
70% on OTAs to quickly attract customers.
30% on direct marketing, such as website SEO and social media.
📌 For Growing Businesses (Market Expansion Stage)
50% on OTAs to maintain steady bookings.
50% on direct marketing to strengthen brand loyalty.
📌 For Mature Brands (Brand Stability Stage)
30% on OTAs to retain visibility.
70% on direct marketing to increase customer acquisition efficiency and maximize profits.
3 Key Marketing Strategies to Increase Profitability
To balance OTA and direct sales marketing and maximize revenue, travel businesses should focus on these three strategies:
1. Not Just Competing on Price
Instead of getting caught in price wars, focus on creating unique and valuable experiences. This could include offering VIP services like personalized tours or custom itineraries. High-end travel brands often attract customers willing to pay a premium by providing exclusive activities, such as unique dining experiences or cultural workshops.
2. Focus on Customer Lifetime Value (LTV)
Travel operators should not only focus on single transactions but also on building long-term customer relationships and increasing repeat bookings. Loyalty programs, exclusive coupons, and personalized email marketing with tailored recommendations can all contribute to higher customer retention.
3. Optimize Order Conversion Rates
A smooth and efficient booking process is key to increasing revenue. Make sure your website is easy to navigate and your checkout process is simple and user-friendly. Consider using real-time customer service to assist customers and automated booking systems to reduce errors and provide instant confirmation.
📌 Related Topic: How to Optimize Order Conversion Rates
Best Marketing Budget Allocation Strategy
Regardless of the strategy chosen, the key is to continuously analyze cost structures and marketing effectiveness to optimize resource allocation. Marketing budget allocation has no fixed standard and should be flexibly adjusted according to the business stage.
📌 Want to quickly increase orders in the short term? Focus on OTAs to ensure a stable customer base.
📌 Want to reduce customer acquisition costs in the medium term? Increase investment in direct sales, such as SEO, advertising, and remarketing.
📌 Long-term goal is brand building? Focus on direct sales, enhance repeat purchases through membership management and social media marketing.
Ready to boost your bookings? Let our experts help you optimize your strategy and increase direct sales. Cut OTA fees and grow your revenue with a smart booking system!