1) Research and Product Development: The expenditure on market research is used to conduct study on the travel behaviour and motivations of customers. It incurs cost to prepare a survey report. The cost for development of new packages includes the process of planning and exploring new places of tourist interests.
2) Travelling and Transfer: International and domestic air fares, rail travel, transfer and departure tariffs are also included in the cost component of package tour.
3) Accommodation: The cost of booking rooms constitutes one third of total cost of package tour. Tour operators get best possible room rate after negotiations.
4) Sightseeing & Activity: Tour operators arrange several value-added activities in sightseeing and excursion tours. The cost of activity is equally divided across the members of group. Administrative and Technical Cost: This cost is incurred towards the payment of salary, allowance, incentives, etc. It is also added to the total tour costing. Technical cost includes the acquisition of new software, hardware and computers for the reservation of hotel rooms, air, train and bus and ferry tickets.
5) Training and Development: The cost of training staff is indirectly included in total cost. Tour operators hire the trainers for in-house training or send the staff and senior managers to professional institutes.
6) Marketing and Sales Promotion: Marketing cost includes advertising and sales promotion. The sales promotion includes discounts, commission and other benefits to the travel agents and customers.
7) Printing and Publicity: The cost of printing tour brochures is included in total tour costing. The cost of foreign promotional tour is included in total cost of package tour.
8) Payment of Interest: Tour operators incur the cost of payment of interest to the banks on the investment of capital to run the business.
9) Depreciation of Assets: Tour operators incur depreciation cost in the long run due to the obsolete nature of software and hardware, and electronic gadgets.
10) Miscellaneous Cost: This cost includes porterage charges at airports and railway stations, tips at hotels or airports, entrance fees, insurance premiums, gifts and welcome dinners.
