Core Product Essay Example

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The prices provided in brochures for a package holiday vary based on demand at different times and locations. Thomas Cook determines these prices with the goal of maximizing the use of aircraft seats and hotel beds.

Season Pricing

Package holidays are categorized into two main seasons: summer (May to October) and winter (November to April). Generally, August is a more popular time for vacations compared to May, potentially due to better weather and availability of time off from work and school.

In order to maintain sales during both seasons, tour operators need to adjust prices based on demand. The peak travel season is in the summer, as mentioned earlier. Prices must be increased during this time due to high demand from both UK and international travelers. This is because Thomas Cook guarantees accommodations and transportation for a 6-month period.

During the quieter months of May and the beginning of October, Thomas Cook often offers holidays at or below cost price to ensure that flights and hotels are filled.

Flight times

If travelers prefer to fly during the day, they can expect to pay more compared to those on night flights. This is because there is higher demand for day flights. To meet this demand, Thomas Cook increases the price for day flights. For instance, a holiday to Ibiza from Manchester staying at the same hotel on July 4th costs ?229 per person for an 08:00 departure flight.

The cost for a night flight departing at 00:15 on the same holiday is 189 per person.

Regional Departures

Thomas Cook aims to maximize aircraft occupancy by offering regional departures from

local airports. However, smaller airports may have additional costs. Gatwick and Birmingham are the cheapest airports for Thomas Cook flights, so other departure airports may have an additional fee.

In order to stay competitive with Thomson and other tour operators, Thomas Cook has recently reduced the cost of certain vacations. This includes getting rid of fuel supplements, which are not charged by Thomson. Additionally, Thomas Cook's agreements with hotels and apartments are based on a per room rate for accommodation expenses. However, their brochures show prices per person. For instance, if Thomas Cook purchases a 400 room that can accommodate two people, the brochure price would be 200 per person. Nevertheless, if an individual wants to stay alone in that room, they must pay the full 400. The allocation of rooms is determined by the size of the travel group.

If three people stay at a hotel that only accommodates two or four individuals, they will need to book the room for four and pay extra for the empty space.

Thomas Cook's Costs and Currency Conversion

A considerable part of Thomas Cook's costs involves foreign currencies. This includes expenses for lodging, transportation, airport fees, and other vacation-related expenses. Furthermore, aviation fuel is priced in US dollars ($).

The prices of holidays are advertised well in advance, before Thomas Cook has to make payment for these products. Consequently, the fluctuating exchange rates can significantly impact their profitability. Take, for instance, a ?500 holiday where ?300 must be paid in a foreign currency. Thomas Cook anticipates earning a profit of around 2-3%. However, if the exchange rate changes by just 5%, Thomas Cook will experience either a loss or a substantial increase

in profit, depending on whether the exchange rate rises or falls. Presented below are two comparison tables that illustrate the price disparities for short and long haul holidays among the four leading tour operators.