The tours and activities space could almost be described as a final frontier in travel simply because of how vast and often misunderstood the space truly is.
At the Expedia Partner Conference earlier this December, Douglas Quinby (VP Research, Phocuswright) shared the key challenges facing the tours and activities sector as well as his predictions on how current technologies will hopefully advance it, in the near future.
CHALLENGE #1: NOT ENOUGH INDUSTRY LOVE
The first challenge is that the industry has simply not devoted enough attention to developing the tours and activities segment. There is too much preoccupation with flights (43%) and accommodation (34%) as they account for the majority of industry revenue and profits, says Quinby.
However, that is not to say that tours and activities don’t pull in a pretty remarkable level of revenue each year.
Phocuswright predicts that on a global basis, Asia’s tours, attractions and activities space make up for $45b, $46b for Europe and $38b in the USA (not including dining and shopping) of traveller spend. Without wishing to overstate the size of the segment, Quinby still predicts its worth at around $130b.
It’s a shame, he adds, as surely when travellers plan a trip, they remember “all of the things that they do in destination, the experiences they have and the memories that they create” far more than the hotel they booked or airline they used.
Fortunately, “the industry conversation is slowly beginning to shift onto this category” as large companies are devoting more resources to developing and upgrading how tours, attractions and activities merchants operate, to keep up with the modern day traveller.
Booking.com has ventured beyond its sharp focus on the accommodation space, Expedia has invested in incorporating tours and activities in their app, TripAdvisor has acquired Viator, and then of course, Airbnb launched its Trips platform.
“The industry love is starting to emerge.”
CHALLENGE #2: TOURS AND ACTIVITIES ARE NOT A SINGLE VERTICAL
The second challenge that Quinby identifies is the flawed treatment of tours and activities as a single, unified vertical or sector within travel.
“When you think about travel, it really isn’t an industry… travel is a human experience that brings different industries together. In the case of experiences in destination, we’re actually talking about multiple industries and [it makes] the problem exponentially greater.”
Phocuswright developed a taxonomy of all the different types of available travel experiences, identifying about 30 distinct categories and new, emerging sub-categories of ‘tours and activities’.
“We’re talking about dive shops, yoga classes, sightseeing tours… what do all of these businesses have in common? The economics of how they manage their businesses and their distribution are all fundamentally different.”
For a travel distribution company trying to aggregate all this content, streamline it and present it as a single industry, it poses a challenge and in Quinby’s words, “the travel industry has done a really crappy job.”
Quinby cites the example of the “perfunctory ‘Things to Do’ page” on so many websites that often misidentify what leading activities are, rendering them as a useless resource for travellers seeking out what to do in destination.
CHALLENGE #3: TOURS AND ACTIVITIES ARE INCREDIBLY FRAGMENTED
In the case of T&As “this is like the long tail of the long tail of travel” in terms of the supply chain. Tours, attractions and activities are so widespread and vary so greatly in terms of size
TripAdvisor alone has one of the largest databases of things to do in destination, making up an enormous amount of supply of over 700,000.
The issue is you are dealing with tens of thousands of small businesses, mum and pop shops, and this creates all sorts of challenges around: how do you normalise this content? How do you access it? What is the cost to acquire it and bring it onto an online distribution system to make it accessible, let alone bookable for the online traveller…”
CHALLENGE #4: THE LONG TAIL EFFECT AND IMPLICATIONS FOR TECHNOLOGY
Phocuswright found that among suppliers, about 1 in 3 make less than $250,000 in gross booking volume. (This sample actually skews towards larger players, representative of the companies that Phocuswright tends to work with.)
On top of that, 2 in 3 tours and activities suppliers report an annual spend of less than $25,000 on technology. It reflects how the industry has fallen behind the rapidly evolving digital landscape as company resources are not being directed to developing necessary technology.
In Quinby’s words, “as we all know, in order to be a successful travel company you really also need to be a technology company”. This creates real challenges. How can they actually be dealt with, without spending more on technology?
The problem manifests itself most clearly through a breakdown of how bookings are managed across suppliers, where an incredible 82% of bookings are still handled via manual processes.
If you add in extranet (10%), over 90% of bookings are still being handled or ‘touched’ by someone on the supply side. As a result, online penetration is clearly low and not nearly as accessible to travellers as hotels and flights.
Restoring some hope, Quinby identified four key predictions about what would help advance tours and activities much further.
Firstly, the digital mainstreaming of tours and activities will be one of the most important developments in the space, particularly as larger companies begin to devote more resources to it.
“There has been an incredible flowering of startups that are making technology so much more accessible to small tour operators… that’s completely changing the game,” said Quinby.
Soon, a large body of suppliers will be able to gain instant access to inventory management and effective distribution systems that they did not have before. “This is a really huge development in the ‘plumbing’ on the supply side.”
The second related trend is what Quinby describes as the “traveller tipping point”. The unpleasant booking experiences for travellers themselves (like dealing with long queues, lost ticket printouts etc.) reflect a lot of inefficiencies that could be improved upon.
Working through and identifying travellers’ grievances could vastly improve customer experience. However, Quinby was quick to point out the importance of paying attention to when travellers choose to make their purchases.
For example, experiences in-destination that tend to be more of a trip-driver (the reason for travel), the more likely advance bookings will be made… or, if there is a constraint on available bookings.
Beyond that, a lot of decision-making will only occur in-destination as travellers increasingly tend to research, shop and book on the go. Suppliers could provide competitive prices, convenience, or even a perk to incentivise more online purchases.
The main point is that “travellers are waiting for the industry to make this content available and accessible in-destination.”
Thirdly, while mobile bookings and ticketing is already mainstream in many aspects of the industry, again, tours and activities have yet to catch up as many attractions still require a physical ticket printout. Thus, the next big trend would simply be to make ticketing and redemption far more seamless.
Finally, Quinby placed strong emphasis on the importance of fully utilising messaging to improve standards of customer communication.
The application of messaging as a means to reinvent travel planning and booking processes assumes (potentially) too many changes on the part of consumers behaviour, said Quinby.
However, travellers tend to be much more supportive of using messaging as a platform when it comes to getting instant customer service. There are lots of new solutions that are emerging to enable companies to provide messaging to handle guest queries quickly and efficiently that tours and activities should surely embrace.