An illustrative calculation of a transport fleet serving a mountain destination, showing how the off-season, not the peak, decides whether the business makes money.
Trojena is NEOM's mountain destination, planned for year-round outdoor tourism with a seasonal peak in the cooler months. Any business that serves such a destination, from transport to equipment rental to catering, faces the same question: will the quieter months carry enough of the fixed costs? The example below uses illustrative numbers to show why the off-season decides the answer.
The situation
A foreign operator is considering a fleet of ten guest transport vehicles to serve a mountain destination under a service agreement paid by the day of use. It wants to see whether the business breaks even on realistic seasonal demand.
Assumptions (illustrative)
- Assumed purchase cost per vehicle: SAR 300,000, depreciated over 5 years.
- Assumed peak season: 100 days at 80% utilisation and SAR 1,500 per vehicle per day.
- Assumed off-peak: 265 days at 30% utilisation and SAR 1,000 per vehicle per day.
- Assumed operating cost per active vehicle day (fuel, driver shift, cleaning): SAR 500.
- Assumed fixed annual cost per vehicle (insurance, maintenance, retained staff): SAR 60,000.
Step 1: Peak season revenue per vehicle
100 days multiplied by 0.8 equals 80 active days; 80 multiplied by SAR 1,500 equals SAR 120,000.
The peak brings in the most money per day, and it is the number most business plans are built around.
Step 2: Off-peak revenue per vehicle
265 days multiplied by 0.3 equals 79.5 active days; 79.5 multiplied by SAR 1,000 equals SAR 79,500.
Almost as many active days as the peak, at a lower rate. Total revenue is SAR 120,000 plus SAR 79,500, or SAR 199,500.
Step 3: Operating cost per vehicle
80 plus 79.5 equals 159.5 active days; 159.5 multiplied by SAR 500 equals SAR 79,750.
Operating costs follow use, so they fall in quiet months. Revenue after operating costs is SAR 199,500 minus SAR 79,750, or SAR 119,750.
Step 4: Fixed cost and depreciation per vehicle
SAR 300,000 divided by 5 equals SAR 60,000 depreciation; plus SAR 60,000 fixed cost equals SAR 120,000.
These costs run every day of the year whether the vehicle moves or not.
Step 5: Annual result per vehicle
SAR 119,750 minus SAR 120,000 equals a loss of SAR 250.
On these assumptions the vehicle roughly breaks even and earns no return on the capital tied up in it.
Step 6: Fleet result
A loss of SAR 250 multiplied by 10 vehicles equals a loss of SAR 2,500 per year.
A strong peak season does not rescue the fleet. The business needs either better off-peak use or a different contract structure.
What changes the answer
- If off-peak utilisation rises from 30% to 40%, off-peak revenue becomes SAR 106,000, operating cost SAR 93,000 and the result a profit of SAR 13,000 per vehicle.
- A contract with a minimum annual payment per vehicle would move the fixed cost risk to the client.
- Redeploying part of the fleet to other projects in quiet months raises off-peak utilisation without new vehicles.
- Leasing vehicles for the peak only, instead of owning the whole fleet, cuts depreciation on capacity that is idle much of the year.
What the numbers tell you
- For seasonal destinations, the off-season decides profitability far more than the peak.
- Fixed costs should be matched to year-round demand, with peak capacity bought or leased flexibly.
- Contract structure, such as minimum payments, can matter more than day rates.
- Visitor numbers at a new destination ramp up over time, so the first years may be weaker than any steady-state model.
Limits of this example
Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.
If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.
Frequently Asked Questions
What is Trojena?
Trojena is a mountain tourism destination within NEOM, in the mountains of north-west Saudi Arabia, planned for outdoor activities, hospitality and events, with cooler temperatures than most of the country. It is being developed in phases under NEOM. Its facilities, timelines and event plans are subject to official updates, so check NEOM's current information before building a plan on them.
What business opportunities does Trojena create?
Opportunities include construction and specialist building services during development, and later hospitality operations, transport, equipment and activity services, food and beverage, retail, maintenance and event services. Many of these are seasonal, so viable models tend to combine Trojena with other destinations or clients, or use contracts that share the fixed cost risk.
How should suppliers price services for a new tourist destination?
Price on realistic utilisation across the whole year, not on peak days, and allow for a ramp-up period while visitor numbers build. Separate fixed costs from use-based costs and seek contract terms, such as minimum payments or flexible capacity, that match the destination's demand pattern. Test the plan against lower utilisation before committing capital.
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