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I was at this strip bar in Norway a few years back. Absolutely beautiful women. But none were dancing. I asked how much a table dance cost and it was equivilent of just over $100. So being a CPA, I just had to ask the manager about the economics. His theory was that, since few customers ever had dances, he had to charge that much to pay the girls. I suggested that if he lowered the price to $25, many more customers would have dances, and he could likely make the same money. Plus, since his place would stop being so dead if the girls were dancing more, more people would come in to have a good time, buy drinks, etc. I suggested he would likely make much more money by actually charging less. He thought I was ridiculous.
The point is, sure you have to cover costs, but there is a market level out there for the service provided. If it costs too much per person to cover the costs, but no one goes because it is in excess of what the market will bear, you are lost. I think Elliots did it right when they started these trips at $400 to see what market was out there, and then they raised the price accordingly. As much as I like these trips, I doubt there are that many folks out there to fill the boat if you cross the $1000 mark. If you take 20 at $1000, or 30 at $750, it doesn't really cost any more, and the lower price gets more revenue.
Of course, finding that market price is the trick. Let's just hope most of us can afford it.
Can you tell I'm bored at work?
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