Is Overseas Adventure Travel Profitable in 2021? A Financial Analysis
Travel, in general, took a hit in 2020 due to the COVID-19 pandemic. Many people postponed or canceled their travel plans due to travel restrictions and safety concerns. However, with the rollout of vaccines and the easing of restrictions in many countries, travel is slowly but surely resuming. Adventure travel, in particular, is gaining popularity because of its unique and off-the-beaten-path experiences. But is overseas adventure travel profitable in 2021? Let’s do a financial analysis.
The Market for Overseas Adventure Travel
The market for overseas adventure travel is growing. According to the Adventure Travel Trade Association (ATTA), adventure tourism is a $682 billion market, growing at a rate of 18.8% per year. Adventure travel operators are catering to a growing number of travelers who seek authentic experiences and are willing to pay for them. However, the COVID-19 pandemic has significantly impacted the market. ATTA reports that the global adventure travel market contracted by 42%.
The Costs of Overseas Adventure Travel
Overseas adventure travel can be expensive. Adventure travelers typically seek unique experiences that require specialized equipment, guides, and permits, which can drive up travel costs. For example, a trek to Mount Everest Base Camp can cost around $1,500- $2,500 per person, excluding international airfare. The costs of overseas adventure travel can be even higher if you factor in transportation, lodging, food, and activities.
The Profitability of Overseas Adventure Travel
The profitability of overseas adventure travel depends on various factors such as the cost of goods sold (COGS), marketing and overhead expenses, and competition. Some adventure travel operators may offer lower prices to attract budget-conscious travelers, while others may cater to luxury travelers who are willing to pay a premium for unique experiences.
To estimate the profitability of overseas adventure travel, we’ll use the gross profit margin (GPM) formula:
GPM= (Revenue – COGS) / Revenue * 100
Let’s assume that an adventure travel operator charges $2,000 per person for a Mount Everest Base Camp trek, and the COGS is $1,000 per person. The GPM would be 50%.
Now let’s say that the adventure travel operator has $50,000 in marketing and overhead expenses and sells 400 Everest Base Camp treks per year. With an average revenue of $800,000 ($2,000 per person x 400 treks), the adventure travel operator’s net income would be $350,000 ($800,000 – $450,000). In this scenario, overseas adventure travel would be profitable.
Conclusion
Overseas adventure travel can be profitable if done right. Adventure travel operators need to carefully balance the costs of goods sold, marketing and overhead expenses, and competition to ensure profitability. The COVID-19 pandemic has undoubtedly impacted the adventure travel market, but the world is gradually opening up. As people seek unique experiences, the market for overseas adventure travel is likely to continue to grow.
