Growth experience

Why do people travel?

For most leisure travelers, the end goal of a vacation probably isn’t to fly on a plane, sleep in a hotel or drive a rented car. It’s to do something — even if that “something” is relaxing on a beach — away from home. It could be something cultural, like a museum visit, or something driven by a passion, like taking a cooking class with a local or shopping in a Paris boutique.

In other words, what the industry calls “experiences.”

“Experiences are the core reason for travel,” Phocuswright research manager Coney Dongre said during the Tours, Attractions and Activities sector panel at this year’s Phocuswright Conference.

The tours, activities and attractions sector — more broadly known as the experiences industry — is a fragmented space populated largely by small businesses. Arival, a company that tracks the sector, estimates there are a million operators globally.

“It’s not like a conventional, uniform product segment the way other sectors of travel are,” said Arival co-founder and CEO Douglas Quinby. “We all know what an airline is. We all know what a hotel is. We know there’s a difference between a JW Marriott and a Residence Inn and a Red Roof Inn.”

But within the activities and attractions sector, there are around 140 to 150 distinct industry types, such as walking tours, boat tours, bus tours, amusement parks and beyond, plus any number of hybrids and combinations. 

It’s also the third-largest sector of travel and tourism, with prepandemic gross bookings peaking at $254 billion globally, only surpassed by flights and accommodations, according to Quinby.

Like other sectors, experiences took a heavy hit from the pandemic, Phocuswright found in its “Outlook for Travel Experiences 2019-2025,” published in October and prepared by Arival. But gross revenue is expected to surpass 2019 levels by 2024, when global gross bookings are projected to reach $260 billion.

A crowded field online

As anyone who has tried to research or book an experience online in the past few years knows, the Internet is awash with options.

A Google search this month for “Vatican tours,” for example, returned more than 76 million results. The first page alone contains links to 13 different websites, including thevaticantickets.com and vaticanguidedtour.com, among more common names like Tripadvisor, Viator and GetYourGuide.  

“The experiences industry within travel has blossomed in the past decade or so in great part because these companies can now make themselves visible online, and that visibility extends both to travel advisors as well as travelers,” said industry analyst Henry Harteveldt, founder of Atmosphere Research Group.

Nontraditional types of experience providers, like people offering cooking classes out of their home, can list their services on sites like Airbnb Experiences, he said. Knowledgeable locals can list their personal tours on Viator.

“The Internet has democratized access to activities and experiences, but it has also introduced a level of complexity and concern,” Harteveldt said.

But even while a number of operators have gravitated to either having an online presence or offering online-bookable products, there are even more operators who are lagging behind. Those operators still rely on bookings by phone or email.

Quinby said experiences trail the rest of the travel industry as a whole when it comes to “digitization, connectivity, accessibility for booking.”

New booking systems brought online in recent years are helping more operators digitize, according to Quinby, and the sector has experienced some “profound shifts” in the past five to 10 years. However, an Arival study found that 56% of day tour operators don’t use a booking system. That number stands at 31% and 23%, respectively, for activity operators and visitor attractions.

Unsurprisingly, those who don’t use a booking system tend to be smaller companies. But more will likely look to digitize.

“Adoption has grown dramatically over the past decade,” Quinby said. “Operators, especially the forward-looking ones, have seen that the future is digital.”

The preferred way to book activities

For travel advisors, the sector is an important one: While it may represent a fraction of a commission check compared with accommodations, experiences are typically the most memorable part of a client’s vacation. Most opt to book through a preferred supplier or a destination management company (DMC), partners they know and trust to serve their clients.

The level of complexity in the space “is really where travel advisors come in and, as they always do, make sure their clients are going to be in the best possible hands when it comes to booking an activity,” Harteveldt said.

As the sector has grown, it’s become more difficult to find out which operators are legitimate, he said. He recommended an advisor, or someone on their team, do thorough homework before working with a new experience provider. But, in many cases, organizations they are already affiliated with, like a host agency or consortia, have already done that work, he added.

However they vet operators, though, Harteveldt pointed out the importance of offering clients a full slate of services, even if it’s not the biggest slice of a commission check.

“It may not necessarily be about the money,” Harteveldt said. “Even if you are selling an activity that is several hundred dollars, if you’re getting a 10% commission, it will barely pay probably for a few reams of paper or something. That’s not the pathway to becoming a billion-dollar corporation. But it does improve the utility of the advisor to his or her clients, and it elevates the advisor’s knowledge and credibility with the client.”

Karryn Christopher, Signature Travel Network’s executive vice president of marketing and preferred partnerships, called tours and activities “a fragmented and complicated landscape.” Despite that, most Signature members do sell experiences to clients. They largely work through Signature’s preferred partners.

“Not only is selling activities and experiences lucrative, those special moments create the differentiated experience travelers want,” Christopher said.

Signature works with a number of preferred partners that offer tours and activities, like Bedsonline, Traveling Spoon, Walk and its 88 Signature Destination Specialists, most of whom offer excursions and activities. Many offer online booking options, she said.

One of those preferred partners, a newer partner for Signature, is Project Expedition. Its co-founder, Rob Keen, said his company competes with the likes of Viator from a business-model perspective, but it focuses on the B2B segment. Project Expedition works with local tour companies and offers 22,000 products from nearly 2,000 local companies. More are added on a weekly basis.

“If you’re a travel agent, trying to build that network yourself is hard,” Keen said.

Project Expedition focuses on customer service and getting to know the advisors it works with. The company is a preferred partner with Signature, Internova and MAST Travel Network.

Christopher said Project Expedition was “a great example of a company that continues to refine their technology and services to meet the needs of travel advisors and their clients.” 

More than half of Signature’s member agencies are booking with it, she said.

Keen said he expects more operators to digitize, which means more choice for advisors. 

“Remember, when people get home, they’re going to talk about that day tour, that daytrip, that experience that they had,” Keen said. “That’s part of your overall trip, and the overall trip is what you as an advisor put together. You want them coming home and talking about that one thing.”

Kathryn Mazza-Burney, chief sales officer of Travelsavers, said most of the advisors who are affiliated with an American Marketing Group company use preferred partners and DMCs to book experiences not only because they know the product well but because it offers a higher commission.

Online players that are more consumer-focused, like Viator, but also offer agents commission are usually viewed as “a last resort” for advisors, she said, “because they are pretty complicated to navigate around.”

However, larger sites like Viator do offer commission (starting at 8%, in Viator’s case) and options, and agents are tapping into those resources.

Viator houses more than 300,000 bookable experiences, and lately it has been a shining star in Tripadvisor’s portfolio of brands. In the third quarter, its revenue grew 138%, and it is pacing ahead of prepandemic revenue. As of the end of the third quarter, revenue was 179% of 2019 levels for the same period of time, and gross bookings were 92% higher than 2019 levels.

Sarah Dines, Viator’s chief commercial officer, said the company’s Travel Agent Program is “experiencing significant growth,” with more agents turning to Viator to book experiences for travelers.

“Souvenirs are not enough,” Dines said. “They’re craving unique, high-quality experiences they will remember for the rest of their lives.”

OTAs in the game

Experiences are also an attractive market for online travel agencies.

OTAs themselves “have had a major impact on how travelers discover and book experiences and on general marketing and distribution trends,” Arival’s Phocuswright report on activities states.

In October, Priceline launched Priceline Experiences with more than 80,000 activities available on Priceline
.com. It was the OTA’s first significant foray into experiences.

Denise Bialek, Priceline’s senior director of ancillary products, said the move was driven by consumer demand and the need to book experiences in advance. Priceline Experiences is powered by ticketing platform Musement.

Kasia Jawien, Expedia Group’s senior director of activities, focuses on overseeing the company’s commercial partnerships with activities providers.

“Activities have been a part of Expedia offerings now for over 20 years,” Jawien said. “And the simple reason for that is that it’s the reason why people travel, to explore new cultures, learn new cultures and really get those human connections.”

Originally, Jawien said, Expedia focused more on direct relationships with activities providers, but it shifted toward working more with third-party providers to offer more than 220,000 experiences sold on most of its brands.

That mirrors a larger industry trend, according to Phocuswright’s “U.S. Online Travel Agency Market Report 2021-2025,” which found that while sourcing supply directly was an initial OTA strategy, most have moved toward working with partners like Musement, Viator and GetYourGuide.

With much of the activities sector still offline, Jawien said, opportunity abounds.

“We acknowledge that there’s certainly more to be done to move this industry to be a more digital industry,” she said. “That opportunity is there.”