Last-minute deals are good deals for you, for sure. You get what you want at cheaper price and you can save more for leisure use during the vacation. But why are travel agencies, airline companies, and hotels offer last-minute deals? You might to see deeper inside to find out.
1. Airline companies. They offer last-minute deals because there are vacant seats. Airlines are dominated by fixed costs, which mean their variable costs are relatively low compared to fixed costs. You can think of fixed cost as simply cost that doesnt change with level of sales, while variable cost does change with level of sales. Whether the seats are full or not, airlines companies still have to pay the fixed costs. They are such as: salaries of pilot and flight crews, fuel, gate/ticket takers, baggage handlers, airport charges, landing charges, maintenance cost, depreciation, and advertising cost. These costs are there, whether the seats are full or not. Therefore, full seats in every flight are really important to get more revenue and cover the costs. Fixed cost can be covered by quantity only. Any canceled book or empty seat in last minutes will better be offered at lower price to get the seat filled.
2. Hotels. The case is similar to airline companies. Hotels have rooms that are already there, bell-boys, receptionists, maintenance cost, depreciation cost, laundry facility, restaurant, swimming pool, TV-cable and Internet access, etc. Whether the rooms are fully employed or nor, the costs will still incur. Travelers who have booked but then canceled are lost revenues. Since theyre last minutes, there is small opportunity to offer the canceled or empty room at normal price. So rather than leaving it vacant, hotels will preferably offer at lower rate to travelers who are willing to stay there.
3. Travel agencies. Its more understandable at travel agencies. Canceled book will make the commission or profit goes away. So they make up the price to attract other travelers. This is not hard since airlines and hotels will likely to lower their prices as well.
So now you get it. Last-minute deals are mutual benefits for you and every stakeholder in the industry. Canceled/empty seats or hotel rooms are unavoidable risk in the business. By offering last-minute deal, they get part of the risk covered. You can search for last-minutes deal at some online database sites. Its now easier to find such deals; their popularity has increased over time.
1. Airline companies. They offer last-minute deals because there are vacant seats. Airlines are dominated by fixed costs, which mean their variable costs are relatively low compared to fixed costs. You can think of fixed cost as simply cost that doesnt change with level of sales, while variable cost does change with level of sales. Whether the seats are full or not, airlines companies still have to pay the fixed costs. They are such as: salaries of pilot and flight crews, fuel, gate/ticket takers, baggage handlers, airport charges, landing charges, maintenance cost, depreciation, and advertising cost. These costs are there, whether the seats are full or not. Therefore, full seats in every flight are really important to get more revenue and cover the costs. Fixed cost can be covered by quantity only. Any canceled book or empty seat in last minutes will better be offered at lower price to get the seat filled.
2. Hotels. The case is similar to airline companies. Hotels have rooms that are already there, bell-boys, receptionists, maintenance cost, depreciation cost, laundry facility, restaurant, swimming pool, TV-cable and Internet access, etc. Whether the rooms are fully employed or nor, the costs will still incur. Travelers who have booked but then canceled are lost revenues. Since theyre last minutes, there is small opportunity to offer the canceled or empty room at normal price. So rather than leaving it vacant, hotels will preferably offer at lower rate to travelers who are willing to stay there.
3. Travel agencies. Its more understandable at travel agencies. Canceled book will make the commission or profit goes away. So they make up the price to attract other travelers. This is not hard since airlines and hotels will likely to lower their prices as well.
So now you get it. Last-minute deals are mutual benefits for you and every stakeholder in the industry. Canceled/empty seats or hotel rooms are unavoidable risk in the business. By offering last-minute deal, they get part of the risk covered. You can search for last-minutes deal at some online database sites. Its now easier to find such deals; their popularity has increased over time.
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