The flurry of recent acquisitions and investments has made it clear - the tours and activities sector is now even more attractive to OTAs. Some of the largest players, including Booking.com, Expedia, TripAdvisor, Ctrip and Airbnb, have either purchased companies or expanded their tour and activities offerings.
A 2017 Phocuswright report on tours and activities states, “For tours and activities (T&A) to come of age, it first needs to move out of the stone age and into the digital world.” Last fall, WEX took a look at this sector and the need for and challenges to moving these bookings online. Much has happened since then.
FareHarbor, which includes nearly 5,000 tour and activity providers in the US, drew the attention of Booking Holding. In a recent piece by Dan Peltier on Booking.com’s purchase of FareHarbor, CMO Pepijn Rijvers said, “If you look at this experiences space, from a technology standpoint this is a very immature segment still.” Adding, “We think with this technology from FareHarbor we have a really well-functioning platform.”
Expedia CEO Mark Okerstrom told Skift the company is interested in “more actively upselling customers who had already booked a flight or hotel on Expedia with an activity” and is “looking at making offers to guests while they are in a destination, via Expedia’s mobile app.” He also recently announced, “In the first quarter of 2018 Expedia grew its activities transactions by approximately 20 percent.”
Late last year, Ctrip signed a strategic partnership agreement with Big Bus Tours, “the world's largest operator of open-top sightseeing tours.” In a Ctrip press release the company stated they will work on “product diversification to ensure customers are able to have more access to tours options” and a “one-stop shopping option” in the 19 cities (on four continents) that Big Bus Tours serves.
Skift Research offers three reasons for the recent uptick in activity:
- “Strong internal growth dynamics, in part driven by consumers shifting to experiences”
- Accelerated move to online booking (majority still offline)
- Sector changes are “happening at a time of consolidation for the largest, hyper-competitive global travel brands”
Moving tour and activity bookings online won’t happen without some challenges, but the opportunity is sizable. Phocuswright estimated growth of “gross bookings to more than double from $12 billion in 2015 to $27 billion in 2020.”
In its 2018 US Affluent Traveler Survey, Skift finds that while these travelers represent 20% of the US population they “account for 51 percent of US travel-related spending.” When it comes to choosing how to spend their money, 67% would prefer activities versus a better hotel, which is an 8% increase over the previous year. In addition, 75% of affluent travelers have “participated in at least one organized tour or activity.”
Low online T&A penetration has potential for companies who are able to successfully aggregate inventory from suppliers while observing local market circumstances. A 2018 WEX whitepaper, 3 Ways Digital Transformation Of Supplier Payments Can Drive Growth Online, finds opportunities for both travel companies and suppliers, noting travelers want to book online in advance and last minute. “This is driving suppliers to adopt technology to allow for online distribution which presents an opportunity for travel companies. 71% of suppliers expect the online reseller channel to grow.”
And the tour and activities suppliers see the benefit of these partnerships as well. Writing for this group on Trekksoft.com, Nicole Kow suggests, “Both Viator [TripAdvisor Experiences] and Expedia…have developed their online marketing and booking capabilities to maximize conversions…both companies offer a lot of visibility and reach, promising to put you in front of thousands of eyeballs each month.”
Noting that commission rates replace marketing costs when working with OTAs, Kow adds, “the chances of you attracting the same volume of browsers as these marketplaces do is slim at best. It takes time, energy and expertise, something that Viator and Expedia have perfected over the years.”
We can expect to see much more tours and activity action in the short term. There likely will be more mergers and acquisitions and OTAs will continue to expand their product offerings. Seth Borko, senior research analyst for Skift Research sees a pattern in which OTAs “hope that this increased breadth will bring economies of scale to their platforms. More travel products bring greater consumer demand onto their platforms, which in turn attracts new suppliers and gives the OTAs greater pricing power. Greater supply at a lower price brings even more consumers to the platform, and the cycle repeats itself.”