How to cost a group tour the way tour operators do: fixed versus per-person costs, price bands by group size, single supplements, free places for leaders, and the margin check before you quote.
1. Fixed costs vs per-person costs
Split every cost into one of two kinds. Fixed costs are paid once for the whole group, whatever its size: the coach, the guide, a private boat. Per-person costs scale with each traveller: hotel beds, meals, entrance tickets.
Divide the fixed costs by the number of paying travellers and add the per-person costs. That is why a group of 10 costs more per person than a group of 30.
2. Price bands by group size
Because the price per person depends on group size, quote in bands, for example 10–14, 15–19 and 20–25 paying travellers, and price each band at its lowest number so a smaller group never loses you money.
| Paying travellers | Fixed costs ÷ travellers | Per-person costs | Cost per person |
|---|---|---|---|
| 10 | 4,000 ÷ 10 = 400 | 650 | 1,050 |
| 15 | 4,000 ÷ 15 = 267 | 650 | 917 |
| 20 | 4,000 ÷ 20 = 200 | 650 | 850 |
3. Rooms, singles and free places
Hotel rates are usually per room, so price per person sharing and add a single supplement for travellers who want their own room.
Groups often include free places for a tour leader or teacher, and suppliers sometimes offer free places at a set group size (for example one free place for every so many paying travellers; check each contract). Spread the cost of any free place you give across the paying travellers instead of absorbing it.
4. Add margin and check it
Apply your target margin to the cost per person in each band, then check the result against what the market will pay. Round to a clean selling price and recheck the margin after rounding and after any discount.
Selling price for the 15–19 band (example)
- 1Cost per person at 15 travellers: US$917
- 2Target margin 18%: 917 ÷ (1 − 0.18) = US$1,118
- 3Round to US$1,120 per person sharing
- 4Single supplement: the extra room cost for the trip plus the same margin
5. Common mistakes
These turn profitable-looking groups into losses.
Frequently Asked Questions
What is a free place (FOC) in group travel?
A free-of-charge place given to a tour leader or organiser. Some suppliers offer one at a certain group size; the terms are in each supplier's contract. Any free place you give clients should be costed into the price paid by the others.
How do I handle a group that gets smaller after booking?
Set a minimum number in your terms and price bands by group size. If the group falls into a smaller band, the per-person price moves to that band, as agreed in the quotation.