Gift Cards 101: Maximize Profits & Win New Customers with Tour Gift Cards

Let’s dive deep into how this simple addition to your business model, when done right, can make an impact on your bottom line. Even better, what we’re sharing here is backed by real-world data and proven strategies from successful tour operators.

The Impact of Gift Cards

Introducing gift card sales can be a real boost for your tour and activity business. Here’s why:

1. Near-term and counter-seasonal revenue generation: Gift cards allow you to generate revenue even during off-seasons. For example, in the northern hemisphere, you can sell gift cards through the holiday period when you might not be actively leading tours.
2. Reaching new customers: Gift cards often bring in new customers who may not have found you through your usual distribution channels and marketing efforts.
3. Encouraging additional spending: Guests redeeming gift cards reliably end up spending more than the card’s value.
4. Potential for unredeemed value: A surprisingly large percentage of gift cards are never redeemed, and that unredeemed value is essentially profit that goes directly to your bottom line.

Real-World Data: Gift Card Redemption Rates

To back up these claims with hard data, we reached out to TOMIS, a leading marketing agency for tour operators, to share some stats with our coaching team. Several years ago, they shared invaluable insights from their large dataset on gift card redemption rates, order rates, and lag times between purchase and redemption.

Here’s what we learned:

• Gift cards valued at $0-$30 have an 18% redemption rate
• $100 gift cards see a 28.3% redemption rate
• Gift cards over $240 have a higher redemption rate, but still below 50%

This data shows an interesting trend: the higher the gift card value, the more likely it is to be redeemed. However, even at higher values, a significant portion remains unredeemed.

The Multiplier Effect: Understanding Adjusted Value

Let’s focus on a $100 gift card with a 28.3% redemption rate. This means $71.70 remains unredeemed, directly adding to your profit. But it gets even better. The redeemed portion often generates more revenue than its face value through extra spending by gift card users and their guests.

TOMIS refers to this as the “adjusted value.” For a $100 gift purchase with a 28.3% redemption rate, you could generate over $353 for your tour business. Even with a more conservative 40% redemption rate, you’re still looking at over $250 in adjusted value.

This multiplier effect is similar to what fast food chains leverage when they offer super cheap drinks or coupons. They know that once they get you in the door, you’re likely to spend more.

This applies even more to tours and activities because these are rarely experiences people want to do alone. Gift card recipients often bring additional friends or family to join them, further increasing your revenue.

The Importance of Lag Time

Another crucial factor for profitability is the lag time between the gift card sale, its redemption, and the actual tour. According to the operator data from TOMIS:

• Mean time between gift sale and redemption: 151 days (about 6 months)
• Average additional gap between redemption and actual tour: 27 days

This lag time is significant for several reasons:

1. Cash Flow: It allows you to collect cash upfront, which you can reinvest in your business through marketing, equipment purchases, or hiring additional help.
2. Seasonal Business Management: If you run a seasonal business, you can generate a large amount of revenue or profitability in the off-season, knowing fairly confidently that there’s going to be a good amount of time before you actually have to deliver on those sales.
3. Financial Planning: Understanding this lag time can help you make better financial decisions and projections for your business.

Discounting Gift Cards: A Counter-Intuitive Strategy

You might wonder if discounting gift cards during promotions is worth it. The answer, surprisingly, is a resounding yes. Even with a 30% discount (offering a $100 gift card for $70), you’re likely to see a 3x multiplier on the value to your business. This comes from both unredeemed gift cards and additional sales volume during redemption.

This strategy works because:

1. The redemption rate tends to hold steady even with discounted cards.
2. The unredeemed value still contributes directly to your profit.
3. Discounts can drive higher volume sales, increasing your overall revenue.

Implementing a Robust Gift Card Strategy

To maximize the benefits of gift cards for your tour business, consider these strategies:

• Year-Round Availability: Offer gift cards at all times, not just during holidays. Make them available on your website and tour description pages.
• Holiday Promotions: While offering year-round, don’t miss out on holiday-specific promotions. Mother’s Day, Valentine’s Day, Christmas, and even made-up holidays can be great opportunities to push gift card sales.
• Post-Tour Sales: Consider offering discounted gift cards to guests immediately after their tour experience. This “Exit Through The Gift Shop” mentality can substantially boost your profits.
• Track Your Data: Keep a close eye on your internal data regarding redemption rates, lag times, and average order values. This information will help you make tactical decisions about your gift card strategy.
• Limited-Time Promotions: Don’t be afraid to offer limited-time discounts on gift cards. The data suggests that even with discounts, gift card sales remain highly profitable.

Getting Started with Gift Cards

Implementing a gift card system is typically straightforward with most modern booking software. These systems usually allow you to create gift cards as a purchasable product on your website, generate unique codes for each gift card sold, and track redemptions and provide back-end reporting on key metrics.

The Bigger Picture: Gift Cards as a Business Strategy

By understanding the true power of gift cards, you’re not just adding a new product to your lineup—you’re implementing a strategic tool that can help stabilize your cash flow, reach new customers, and significantly boost your profits.

Remember, gift card sales are often more valuable and profitable for your tour business than direct sales. While they may make up a minority of your overall sales, they represent a highly profitable sales channel that shouldn’t be overlooked.

Harness the Power of Gift Cards

Whether you’re running city walks, food tours, or outdoor adventures, gift cards represent an often-untapped opportunity to enhance your tour business’s financial stability and growth potential. By implementing a strategic approach to selling and promoting gift cards, you can significantly impact your bottom line year after year, season after season.

Don’t leave money on the table. Start harnessing the power of gift cards today and watch as this simple tool helps transform your tour business’s financial future. Remember, in the world of tour operations, sometimes the smallest changes can lead to the biggest impacts. Gift cards might just be the profit-boosting strategy your business has been waiting for.