Expanding experiences: Nontraditional players in the tours market

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Photo Credit: TW Illustration by Jenn Martins

In what some see as the next frontier for the travel industry, OTAs, hotels, Airbnb and even traditional packagers are positioning themselves to grab a chunk of the $150 billion tours and activities market. What's more, many are investing aggressively in solutions to the serious logistical and technical challenges that market poses.

"The business of selling experiences online is complicated, involving multiple distribution channels, currencies, languages, products, availabilities and more," Ben Drew, vice president of business development and strategy for TripAdvisor Experiences, said. "These challenges have kept suppliers offline and reliant on in-person foot traffic, which has meant a fragmented shopping experience for travelers and missed sales opportunities for operators."

TripAdvisor Experiences officially launched in May as the supplier-facing integration of TripAdvisor and Viator, the activities booking platform it purchased in 2014. (For suppliers, the TripAdvisor Experiences brand has replaced Viator branding, but the Viator and TripAdvisor consumer sites remain unchanged.)

Complications aside, "The Experiences business is the fastest-growing part of TripAdvisor," Drew said. "This is TripAdvisor's largest long-term growth opportunity."

This spring, TripAdvisor acquired Iceland-based Bokun, a business-management software provider for tours, attractions and experiences that serves as a booking engine, an inventory channel manager and a price-management tool.

That acquisition has enabled TripAdvisor to start building an entirely new supplier platform that helps activities suppliers streamline the complicated process of selling experiences online. To encourage supplier adoption, TripAdvisor has made Bokun affordable.

"It's nearly free," Drew said.

TripAdvisor lists more than 104,000 bookable experiences globally, an 86% increase over last year. CEO Steve Kaufer has said the sector represents "a billion-dollar opportunity" for the company.

The TripAdvisor-Bokun deal came almost immediately after Booking Holdings announced it would be investing in new tours and activities plumbing, acquiring Denver-based FareHarbor, a developer of software that gives tour operators the tools to bring their businesses online.

Booking Holdings owns Booking.com, Priceline.com, Kayak, Agoda.com, Rentalcars.com and OpenTable.

Travelers hike Los Angeles’ Runyon Canyon Park with rescue dogs on an Airbnb Experiences outing. Airbnb Experiences launched in 2016.
Travelers hike Los Angeles’ Runyon Canyon Park with rescue dogs on an Airbnb Experiences outing. Airbnb Experiences launched in 2016.

At the time of the FareHarbor acquisition, Booking.com CEO Gillian Tans said, "The local experiences and attractions marketplace is still largely offline. We see an immense opportunity to leverage this technology to bring more local experiences online."

Expedia Group also has high hopes for the sector by growing its activities division, which it calls Expedia Local Expert, into a $2 billion-a-year business. If realized, that would represent a 500% increase over its current sales of around $400 million, Travel Weekly's sister publication, PhocusWire, recently reported.

According to PhocusWire, Expedia is building a self-service platform for suppliers, enabling them to add and manage their inventory in an effort to significantly grow its roster of 4,000 suppliers offering some 27,000 activities worldwide.

The flood of interest and investment in the tours and activities segment hasn't let up since the recent announcements from TripAdvisor and Booking Holdings.

Peek, an online platform with more than 100,000 bookable tours and activities, received $23 million in Series B funding and partnered with Reserve with Google to make its activities bookable through Google products.

Similarly, TourRadar, an OTA that sells multiday tours and river cruises, recently received $50 million in Series C funding. TourRadar sells 25,000 tours offered by a mix of large, well-known operators such as G Adventures, Contiki and Collette, as well as smaller, specialty operators.

Asked why OTAs are suddenly turning their focus to getting tours and activities online, Chris Dane, president of Hickory Global Partners, said the companies want "to get more engagement from their customers and prospective customers and to offer more content to their customers, which translates to more reasons to book with the OTA."

Hickory offers travel management services, including online booking services, to travel agents and suppliers.

"This is the next logical stage for content aggregation," Dane said.

Douglas Quinby, Phocuswright's senior vice president of research, said that as competition heats up in the space, the race is on for OTAs to get supplier partners online and available to book on their platforms.

"The average basket size is small, and the fragmentation makes the cost of connectivity and rolling all these companies up a little bit higher relative to hotels," Quinby said. "So it's got a higher price of entry than, say, the hotels sector, without a question. However, the reason why companies are moving so quickly now into this space is because it's early, and you have to get in early rather than wait."

What's more, Quinby said, reservation system companies "are solving these problems. They are wiring these companies up. They are getting them connected. The big distribution companies want to be there. They want to have this content ready to go."

He added that the tours and activities market is "the fastest growing sector in travel. It is actually the third largest in terms of total traveler spend."

A coastal hike in San Francisco, one of Marriott’s more than 100,000 activities in 1,000 destinations.
A coastal hike in San Francisco, one of Marriott’s more than 100,000 activities in 1,000 destinations.

Hotels, Airbnb also want a piece

OTAs aren't the only companies to zero in on tours and activities. Hotel companies and the peer-to-peer rental platform Airbnb have also been expanding their offerings.

In April, Marriott International made 110,000 Marriott Moments experiences in 1,000 destinations bookable by any of its guests. Previously, it had offered them only to members of its Marriott Rewards, SPG or Ritz-Carlton Rewards loyalty programs.

In a statement to Travel Weekly, Marriott said: "We are creating a one-stop destination for all things travel, and we are integrating all of these elements together so our members can explore the world with ease. Members can book their hotel stay, rental car and all of the experiences they do on their trip with us while earning loyalty points and benefits in the process."

Adding tours and activities to their portfolios is a way for travel companies to capture a greater share of their customers' travel spending. And while a $100 sightseeing tour here or a $50 wine-tasting experience there might not seem like much, experts say it adds up.

Auberge Resorts Collection launched Auberge Adventures in 2012 and has been growing it ever since. Auberge's chief marketing officer, Mike Minchin, said, "Due to the interest, we continue to add experiences. We find that most guests look to book at least one adventure over their stay with us."

Airbnb has also seen its experiences business grow considerably since it was created.

"When we launched in November 2016 there were 500 Airbnb Experiences in 12 cities," said Joe Zadeh, Airbnb's vice president of trips. "Now, we have over 13,000 in 180 cities, and in March this year, we hit an annual run rate of over one million [experiences]."

He suggested that Airbnb was uniquely suited to expand into experiences.

"We think this has to do with three things," he said. "Our homes business provides a great foundation for people to learn about and add an Airbnb Experience to their trip. Additionally, people are genuinely excited to travel more around specific interests they have as opposed to just a destination. Finally, we have much to thank our hosts for. They are drawn to the platform to feel economically empowered, but in turn they provide great quality experiences."

Zadeh said the Experiences platform gives hosts the chance to earn extra income. Some of Airbnb's Experience hosts are on pace to earn more than $200,000 this year.

He makes an important point about the economic opportunity this sudden boom in interest in the tours and activities market presents to myriad people and companies -- enterprises than can range from a one-person operation to a large, sophisticated tour or entertainment company -- that are getting greater distribution exposure via the various channels they are partnering with. (See Q&A, "From analog to digital: one supplier that jumped online.")

Zadeh said the most frequently booked Airbnb Experience categories so far in 2018 are those revolving around food, nature and art. He said music-themed experiences have also become a big growth category for the company and that Airbnb has also seen a surge in demand for surfing experiences, especially in popular surfing communities around the world. 

Airbnb Experiences offers Handmade Pasta With Grandma, a lesson with an Italian nonna in Rome. There are more than 13,000 Airbnb Experiences offered in 180 cities.
Airbnb Experiences offers Handmade Pasta With Grandma, a lesson with an Italian nonna in Rome. There are more than 13,000 Airbnb Experiences offered in 180 cities.

Concerns for agents, tour operators

All of this investment in tours and activities is clearly an effort to offer a more comprehensive travel experience, above and beyond travel logistics, the flight, the hotel and the rental car. But it also makes available activities on the ground that will ultimately make a vacation memorable.

In that way, it could be seen as a threat to the services travel agents and packagers provide in creating detailed itineraries that often include tours and activities.

But battle-hardened agents who have already lived through a couple decades of predictions that the internet would result in their demise, along with countless suppliers that have bypassed them to sell directly to travelers, appear resolute that the tours and activities boom will not impact them or the level of service they provide.

"Everyone is always trying to find ways to own the customer and add value" said Mike Cameron, CEO of Salt Lake City-based Andavo Travel. "Competition is always a good thing. It forces us to always stay relevant. The [do-it-yourself] trend has been alive and well since the internet was invented. Our travel advisers have to add a layer of travel knowledge and a concierge level service to be relevant.

"I'm confident that we will be able to continue to add value by knowing the best suppliers and crafting an experience that will encourage clients to return to us for their future vacation needs."

Karen Magee, senior director of industry partnerships and leisure operations at Tzell Travel Group, a Travel Leaders Group company, said the industry is going to continue to see more travel providers enter other verticals in an effort to manage the client experience from beginning to end.

She said that for agencies and packagers that offer boilerplate packages and tours, it is certainly possible that some of their market share will shift to OTAs or hotels.

But she added, "For true niche destination specialists, absolutely not. The value that our advisers bring to their clients goes far beyond the booking of one-off experiences. They provide the seamless integration of the travel experience from door to door and experiences that are exclusive and a la carte. The biggest leisure trend superseding all else is that people want authentic, anti-tourist experiences, which, ultimately, cannot be scaled to [large-scale] distribution."

Classic Vacations president David Hu has a unique perspective on the issue, given that his company operates as a vacation packager that sells exclusively through the trade, though it is owned by Expedia Group.

He said that like the OTAs, Classic is looking to build out its experiences portfolio and to increase the revenue opportunities that tours and activities represent.

"It is still not a huge part of our business," Hu said. "Hotels and airlines and cars dominate that piece. My goal is to be able to touch the travelers while they're experiencing the destination."

The challenge, he said, is to ensure that what Classic offers is different enough from what OTAs, including parent company Expedia, offer. Thus, the company is focused on offering highly curated tours with a very exclusive component or in a destination such as Hawaii, where Classic has a long history, relying on destination knowledge to offer experiences, such as luaus, that have been highly vetted.

According to TripAdvisor, agents, too, can and should be getting in on the tours and activities action.

Drew said that last September Trip Advisor launched its Travel Agent Program, a booking platform created specifically for agents that offers a competitive commission rate to independent advisers as well as host agencies and their members.

He said the tens of thousands of agents who have already signed up for the program can also book TripAdvisor's tours and attractions.

As for where all this explosive investment goes from here, Phocuswright's Quinby said, "Building an OTA for activities is very different from building an OTA for hotels. It's very hard, and only a few companies have made a dent in it.

It's so early in that space, and there's still a long ways to go."

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