Cost-plus pricing

Cost-plus pricing is a pricing strategy where a company adds a fixed percentage to the total cost of making or buying a product or service. It’s used when expenses like labor, materials, and overhead can be anticipated. For example, in travel and hospitality, a tour operator or destination management company (DMC) might buy hotel stays and attraction tickets at a negotiated rate and then apply a fixed 20 percent markup.

This approach covers all costs and guarantees a consistent profit. However, unlike competitor-based or demand-based pricing, it doesn’t consider current market conditions, which can limit revenue potential during peak seasons.