Which pricing approach involves calculating all costs and expenses and adding the desired profit?

• A. Cost-plus pricing
• B. Demand
• C. Customized tour
• D. Demographics

Answer: (A)

Pricing that ensures every service covers its costs and includes a specific profit is cost-plus pricing. This approach starts by tallying all costs of delivering the service—labor, materials, and overhead—and then adds a set profit margin or markup on top of that total. The result is a price that guarantees profitability based on cost recovery, making it a straightforward, predictable method for setting prices in hospitality. It’s especially common when costs are well-understood and demand is uncertain, though it may not always align with what customers are willing to pay or with competitive pricing.

Demand-based pricing, in contrast, sets prices based on customer willingness to pay and market demand, while customized tour pricing depends on the specifics of what’s being offered and may involve negotiations. Demographics refers to the characteristics of the target market and isn’t itself a pricing method.