It’s pretty surprising how different sets of people react to the pricing model we follow. While most customers who are just about discovering the intricacies of their holiday find themselves a little overwhelmed by the barrage of different price points while others who’ve been struggling to decipher why their holiday costs them as much as it does, are pretty amazed at the transparent break-up we provide. And almost everyone in the travel industry sees us either with suspicion or with cold indifference. The reason is not difficult to comprehend though.
Traditionally, two kinds of revenue models predominantly exist in our industry – the Merchant Model and the Agency Model. To understand the difference, consider a simple example of a hotel room which is being booked.
In the Merchant Model, the travel company buys the room night (1 room for 1 night) from the hotel for Rs 90. And thereafter it is at liberty to sell it at whatever cost it wants to sell it for. It may for example sell it for Rs 100, earning a profit of Rs 10 (effectively 10% on the sales price). Essentially in this model the hotel sets the cost price while the travel company sets the selling price. In the Agency Model, the hotel dictates the selling price as well as the commission it would provide to the travel company on sale of the room. It may for example dictate that the hotel room would be sold for Rs 100 and the travel company would be paid a commission of Rs 10 to sell the same (effectively 10% on the sales price).
Most holiday companies work on the Merchant Model which yields them enormous pricing power. The individual suppliers like hotels, airlines, etc. have little say in the selling price of the holiday package. Another factor which contributes to popularity of Merchant Model is the nature of the holiday product – it is an aggregation of other travel products like transport (airline), accommodation (hotel), transfers (land transport), etc. Hence no single supplier can set the sales price for a product which is created by the holiday company by aggregating and bundling different individual travel products from different suppliers and sources.
The Merchant Model also helps immensely in creating opaqueness, the super glue which helps Group Packages stick. And as a pleasant side effect (though fully intentional), it allows for fat profit margins to be built into and hidden in the cost of the holiday package. That is why no travel company worth its name will offer a transparent price break-up of the cost of the package and the various components it comprises of. And that is why I say Planning is in the details.
Why we are breaking away from it
Transparently un-bundling a bundled package flies in the face of everything holiday companies have stood for, no doubt. But we firmly believe a critical component of Holiday Planning is a transparent break-up of the price. And any which way, opaque pricing is going to get more and more difficult to defend and sustain, especially for customized holidays in an age where the average customer has all of mankind’s collective knowledge literally in his/her hand (look at your phone now!).
Why the flat fee
With a transparent break-up, our ability to earn any money also vanishes. We really can’t hide any margins anywhere. And hence the need to charge flat fee. As a pleasant side effect (again fully intentional), it allows us to be fully neutral in our recommendations and itinerary creation. We are not incentivized by percentage margins earned as a percent of the total package’s selling price or commissions from suppliers for selling their products. We are motivated to create a great holiday itinerary for you, so that you may feel generous to pay us our flat transparent fee.
Seems simple and logical in hindsight, no?