Understanding the Value of a Service Rendered

A follow-up to last week’s post about the “Groupon mentality.”

This morning, I got an email message that I can only assume is from the same man the hotel concierge I blogged about was dealing with. I guess he figured that he could cut out the middleman and save some money. His message (with parts redacted), was as follows:

Heard about you from [redacted] Hotel. … my wife and I are in the area for business and I wanted to do a helicopter tour of the grand canyon. I was hoping the two of us could do it for about $500?

Grand Canyon DawnI’ll give the guy the benefit of the doubt and assume that he didn’t get pricing for that flight from the concierge or see Flying M Air’s website. In other words, I’ll assume he has no idea what Flying M Air charges for a trip like that.

So let’s look at what this particular trip entails.

  • Exclusive use of a helicopter for more than 8 hours in the same day. (In other words, no other flight will likely be possible that day.) It should be noted that this aircraft cost $350,000 to acquire and has annual insurance and maintenance costs of about $20,000 to $25,000.
  • A properly certificated pilot with 2,800 hours experience and about $50,000 worth of training, also occupied for the entire day.
  • 30 to 60 minutes prepping the aircraft for flight and meeting the passengers.
  • A 90 minute scenic flight from North Phoenix to the Grand Canyon.
  • Ground transportation into the park.
  • Park entrance fee.
  • Up to four hours of waiting time for the pilot while the passengers enjoy the view from the rim.
  • Another 90-minute scenic flight back to Phoenix.
  • 30 minutes post-flighting the aircraft.

Don’t you think that’s worth more than $500?

Even if my hourly operating costs were zero — and I assure you that they’re much higher than that — at $500 I’d have to fly every single day, without personal compensation, for nearly two full years just to bring in enough revenue to cover the acquisition costs of the aircraft.

The reality is that $500 doesn’t even put a dent in my hourly operating costs for three hours of flight time. So I’d be doing the flight at a serious loss.

It it really possible that these people have no concept of what it costs to own and operate a helicopter?

My response was polite but to the point:

No, I’m sorry. That’s not possible. Our trips to the Grand Canyon start at $1,695 per flight (not per person). It’s a three-hour round trip flight with up to four hours on the ground. We are not permitted to overfly the Grand Canyon.

We offer a tour of Phoenix from Deer Valley airport for $495 per flight. It’s about an hour long and covers most of the Phoenix area.

You can find more information about all of our services, including pricing, at http://www.flyingmair.com/.

What’s interesting about this is that I’m one of the few helicopter operators based in Phoenix that will even make the flight from Phoenix to the Grand Canyon. Most operators either aren’t Part 135 (which is required for a flight like this) or don’t want to take their aircraft offline for a whole day. The few that do charge a heck of a lot more than I do. I guess what I’m saying is that not only is it impossible for them to find such a flight for two for $500, but I’m likely the cheapest option around.

But it bothers me that people think I’m making a windfall on every flight I conduct. I’m not. I’m just asking for what I consider fair compensation for the use of my aircraft and my personal services.

If it’s too much, I’m sorry — but my prices are firm and that’s the way it is.

I’ll serve the folks who can afford my services and appreciate what they’re getting for their money.

11 thoughts on “Understanding the Value of a Service Rendered

  1. I understand your frustration, but I think it’s not just possible, but even extremely likely that people don’t really know what to expect in terms of helicopter services prices. I’ve looked into becoming a pilot myself (can’t afford to on my own, and my eyes aren’t good enough for the military, so that’s a no-go), but if I hadn’t looked into it on my own I wouldn’t have a clue what to expect. I’ve only met one helicopter pilot, and that was when I actually took a helicopter tour near Vegas. When I was looking into options for learning to fly myself, all my friends were extremely shocked to hear that even small helicopters cost way more than many houses (I live in MN, so maybe it’s just equal to a house in a lot of places). And the maintenance and instruction costs are obviously pretty obscure for most, since they’ve never had to deal with those directly, or even indirectly. At any rate, I think your response was fair and hopefully received as such, but I think that as long as helicopter pilots (and thus, services) remain somewhat uncommon, the understanding of the costs will too. But it’s good too that this post will serve as some instruction for anyone trying to find approximate costs online.

    • You’re probably right. I guess I’m too close to it — paying all the bills! — and have been for too long to remember what it was like to simply not have any idea.

      And yes, my helicopter cost nearly twice what my house cost and, with the decline in housing prices, is still worth more than my house, nearly seven years later!

    • Stumbled upon this blog while doing some research on Groupon, and wanted to add my two cents to this post. While I certainly understand your reasoning when I see it written out, as someone who knows zilch about helicopters, I wouldn’t have known that $500 was unreasonable.

      For what it’s worth, I would probably do online research before proposing a price, (actually, I hate negotiating, so I probably would just go with whatever price was being offered) but my point is that I’m sure there are people under-estimating your costs, who are not trying to devalue your service.

    • Thanks for taking the time to comment! Have fun with that Groupon research. There’s certainly a lot out there to read — both pro and con.

      I think that if you did do some pricing research, you would get a feel for what a service costs. That’s pretty basic stuff. I’ll give this guy the benefit of the doubt and assume he had NO idea. In reality, however, I’m pretty sure that he already knew that a shorter tour he’d discussed with the hotel concierge was quite a bit more than $500.

      It’s important to note when researching prices that not all tour companies state their pricing the same way. For example, lots of them offer per person pricing which looks like a real steal — until you learn that there’s a minimum of four passengers to get that deal. And I know of at least three tour companies that add a “fuel surcharge” to their rates when it’s time to pay. One even charges extra for the pilot on custom charter flights! I can assume that there are similar pricing games played with other goods and services. It really makes doing your homework quite a chore!

  2. As I’ve become more involved in general aviation, I am learning that John Q. doesn’t have the slightest idea what it costs to purchase and operate an aircraft or what it might cost to learn to fly it. They either grossly overestimate it (valuing an R44 at $1mil plus) or overshoot in the other direction, thinking that it’s on level with a used Cessna. As with everything, it’s all about education. People who haven’t been involved in it just won’t know what it costs until someone takes the time to teach them.

    • I’m always amused by what people guess the helicopter costs new. I’ve heard everything from $50,000 to $1.5 million.

      But I guess what puzzles me is why people think I’d ask $1,695 for a flight if I could do it for $500 and still make money. What kind of margin do they think I have? It seems obvious to me that if I could do it profitably for 1/3 of what I’m asking, I’d ask for less. Whatever.

    • I once priced an ad for a customer. They countered with an offer of 50%. I asked the gentleman (an insurance salesman) what his response would be if he quoted me life insurance and I countered with half price offer. He laughed and said he wouldn’t be able sell it to me. He didn’t laugh when I told him I wouldn’t be able to sell him an ad either.

      It boils down to the fact that people think their money, products and time are worth more than your money, products and time.

    • I had another customer recently that wanted a huge discount. (Think 75%+) I told them that simply wasn’t going to happen but their product (coupons) was something that my customers really wanted.

      What made him understand was when I offered to hang up the phone, raise my prices 350%, then give him the discount he wanted, which would have ended up at the regular rate minus the discount I was willing to give him.

      He said, “You’d do that?” And I said, “Yes sir, this price is what we’re willing to do. Anything lower will end with me paying you and that isn’t going to happen.” They’re still a customer today at the discount I offered.

      I think people get caught up in the haggling and dickering and forget that we’re all out to make money, not give things away.

  3. Yeah, more generally I agree with all this. I do a lot of freelance photo work and it’s shocking how many people think that you really, really want to shoot photos for them for free to “build your portfolio” or “get your name out there.” And then in the same breath, take note of how much I must have spent on my photo gear, and not see the irony.

What do you think?