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Posted June 17, 2019

People on Camels

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Once seen as a seemingly insignificant part of the travel industry, the tours and activities sector continues to grow (and experience growing pains) as it follows its own path.

The annual tours and activities global market is estimated at $150 billion (Skift Research), and it’s predicted to grow 9% annually over the next few years. It’s a sector that’s seeing increases even though, according to Trekksoft, the vast majority (80%) of the gross bookings are done offline and operators with real-time booking capabilities account for just 13% of bookings.

According to Skift.com, Trekksoft research shows “the percentage of travelers who use mobile for tours and activities lags behind nearly every sector across all age groups, with use coming in closer to translation software or restaurant reservations than that of air travel, ridesharing, or hotel apps.”

Tours and activities is also unique in terms of the importance of having a live person as part of the booking process. Trekksoft finds bookings made without human interaction, defined as those made through operator websites or online marketplaces, generated less revenue than those involving a person in both 2017 and 2018. “Consumers spend more when they speak to a person when making a booking, whether this is a hotel concierge, your own salesperson, your guides or a booking agent on a busy street.”

Today’s tours and activities sector is reminiscent of the early days of online hotel booking, “before the rise of Booking.com helped connect the disparate market of independent and boutique hotels across Europe to online booking sites.”

Skift.com quotes Dermot Halpin, TripAdvisor’s president of attractions and vacation rentals, who notes there’s been “a lot of skepticism” about connecting the diverse tours and activities market online. Adding, “making that easier is in the industry’s interest because you get more people looking at more [products]. You get a bigger market and more liquidity in the market.”

A decade ago the tour and activities sector was fragmented and small. “The time to establish standards seemed perfect,” writes Stephen Joyce, CEO at Rezgo. “Creating a standard would mean that any new entrants, on either the supply or demand side, could save time and resources in developing their APIs by using an established and adopted messaging standard.”

Tours are a different animal because no two are alike even with the same operator and often depend on factors that companies have little control over,” explained Dan Peltier and Andrew Sheivachman. “Many tour operators use pen, paper, calendars, and spreadsheets to check if they have availability for a same-day tour, and don’t capture much customer data as a result. In some cases, it might be more expensive for a company to take online bookings because of the cost of distribution software.”

The folks at Trekksoft find “supplier inertia” in terms of technology adoption and “underdeveloped distribution standards for API connections to online marketplaces and OTAs.”

Without standards, the market has spawned numerous supply side and demand side options. Rezgo’s Stephen Joyce sees both positives and negatives. “The good news – to simplify connectivity, everyone has created an API to access their platforms. The bad news – each one of these APIs is different, with their own capabilities, data structures and messages.”

Joyce describes a sector where most are interested in standards, and if stakeholders (large and small) take part, “now is a good time to move forward and take a new path before the situation gets worse.” And those stakeholders include OTAs, which account for only 5% of tour and activity revenue. Citing a need for “better access to supply, pure and simple,” Joyce believes connectivity will give OTAs “improved access to product, availability and booking.”

Until there are standards, an option for travel companies offering tours and activities that ensure the ability to customize options is integrating VCNs with existing booking system—making it much easier to pay suppliers.

Peltier and Sheivachman see a “big opportunity in the tour sector to bring the space into parity with the revenue management and marketing capability of the hotel and airline sectors.” The challenges they see are large tour operators selling well using humans (agents, call centers) and complex products that often don’t translate in the online environment. “Travelers are more likely to book a $100 guided day tour of Athens online than a $10,000 weeklong excursion across Greece.”

The pair quotes Jeff Russill, senior vice president of marketing and product at tour operator G Adventures, “More than half our traffic’s mobile, but once they’re down the sales funnel people are still calling at the same rate as they used to.”

The Trekksoft team that created their 2019 travel trends report admits the industry appears, from the outside, to be “maturing,” but the reality is they’ve “seen a number of marketplaces we’re connected to match some of their more vaunted peers. We’ve seen merchants begin to understand the challenges a more multi-channel world presents for them, and start to take steps to invest in their future.”

Stephen Joyce foresees that the tours and activities industry “will find its own ways to adapt to the connectivity challenges by developing intermediary technologies to fill the void, just like hotels did.”

A quote in a Skift.com piece last fall nicely sums up where we are with tours and activities. Lukas C. C. Hempel, co-founder and chief technology officer of BookingKit points out, “the same shift [that happened in flights and hotels over the last thirty years] is happening right now in tours and activities.” As he explains, “operators are feeling pressure from two sides: the distribution side, and on the other side from the customers who expect them to be bookable last-minute, to be bookable online, and to be able to pay online. Someone has to help them manage this challenge because most operators are product-driven guys; they love surfing or city tours. They don’t wake up in the morning and say, ‘Wow, I want to optimize my channel booking flow and yield management criteria.’”

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David Craft

David Craft

With WEX since 2016, David looks after our travel customers. David joined WEX as a Solutions Engineer, having previously held accounting and system development roles at a travel customer of WEX – this experience provides David with a strong technical understanding of our virtual payments solution. David holds a Bachelor of Science degree from The University of Texas at Arlington and currently lives in Austin, TX.


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