Like any industry, travel has been
profoundly changed by advancements in technology. How people research, book and
experience a trip is completely different than it was just 20 years ago.
Yet moving the travel industry from
the offline world to online hasn’t been without its challenges - not least
because travel is inherently about a physical experience.
Travel is about seeing, doing,
tasting, touching, meeting.
It’s about human interaction.
And while the foundation of our
coverage at PhocusWire is focused on how online systems have transformed the
travel process, the offline component - the agencies, the technologies, the
suppliers that have a person-to-person element to their services - remains very
much at play.
One sector that remains predominantly
rooted in the offline world is the tours and activities market. According to
Phocuswright, more than 80% of gross bookings for tours and activities are made
offline.
For part three in this series, we
talk to leaders from companies working to digitize this sector of
travel about the benefits online systems can provide to suppliers, the
challenges that exist and why some suppliers may be happy to stick with paper and pen.
Background
This year may be remembered as a tipping
point for the digitization of the tours and activities sector within the global
travel industry.
Consider some of the headlines just in
the past two weeks:
And since the beginning of this year:
And that is just news from some of the
biggest names in the industry - there have been many more announcements from
smaller players about funding and activity aimed at bringing suppliers into digital, instantly bookable consumer channels.
This escalation in activity is the
result of an evolution rather than a revolution. The sector has been shifting
for several years.
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In a July 2017 report, Tours &
Activities Come of Age: Global Travel Activities Marketplace 2014-2020,
Phocuswright analysts predicted “the global online T&A market will nearly
triple from $10 billion in 2014 to $27 billion by 2020.”
But those figures for online bookings
still represent just a fraction of the total tours and activities market, which
Phocuswright says accounted for $95 billion globally in 2016 and should grow to
$129 billion by 2020.
Clearly there is still potential for
substantial digitization in this sector.
Back-end systems
There are two primary ways tour and
activity operators can use technology: to manage their business and to manage
the distribution of their inventory.
Small suppliers make up the bulk of
this sector. According to Phocuswright, 64% generate less than $250,000 annually, and more than half have five or fewer staff members during the high season.
So the business management piece - inventory
and customer relationship management, point-of-sale systems and payment
processing - can be very valuable.
“When you get into the smaller end of
the market, something we find to be tremendously important is convenience - you
have to use technology to make their lives easier,” says Ben Drew, vice
president of business development for TripAdvisor.
“That is one of our main objectives in
the acquisition of Bokun: to provide convenient, fast and very cheap, powerful
tools for managing your business.”
Stephen Joyce, founder and CEO of tour
and activity software provider Rezgo, says this is the value proposition suppliers
need to hear.
“I think it’s a case of giving these
small businesses the tools they need to manage their business and not focus so
much on distribution or buzzwords or things like that,” he says.
REGISTER NOW! TripAdvisor, Peek, Klook and others speak at The Phocuswright Conference 2018
Click
here for details, tickets and the program for this year's
event in Los Angeles, November 13-15.
Ruzwana Bashir, co-founder of travel
activities marketplace Peek, can clearly explain the benefits her customers experience
from using Peek’s software - a 30 to 40% increase in revenue, a reduction in
operating costs up to $15,000 annually and a time savings of 10 hours per week - but she says suppliers can still be apprehensive.
“If you’ve been using pen and paper
and phone calls, it can be quite intimidating to change that, and frankly only
in last few years have systems come to a point where we can provide them with
something so compelling,” she says.
Customer engagement
The adoption of online distribution channels
may be more complicated.
According to Phocuswright, 31% of
smaller suppliers have no plans to acquire reservation software.
Joyce says in many cases this lack of
interest is justified. If a small supplier can generate sufficient business
through offline channels, they may not see a need to change course.
I think it’s a case of giving these small businesses the tools they need to manage their business and not focus so much on distribution or buzzwords or things like that.
Stephen Joyce - Rezgo
“Some
suppliers are heavily dependent on local distribution - DMCs [destination
management companies] or concierge networks, things like that - and in those
markets moving online doesn’t benefit them. They may use tools that are online
to manage those bookings and to manage the relationships more effectively, but
the bookings themselves are still not going to come from online,” Joyce says.
“If they are generating their revenues
from partnerships in local markets … they won’t care about a brand like
TripAdvisor or Expedia or whoever. So you have to look at what the actual pain
points are for these supplier, and if they don’t have pain points, you can’t
sell them something to relieve their pain.”
But interest in growing online sales is
increasing. According to Phocuswright’s 2017 report, three in four suppliers
said they would have live online booking within a year.
The entry of Google into the market
with its Touring Bird product could also prompt some suppliers to accelerate that
development. For now, Google is sourcing inventory through third-party
resellers including Viator, GetYourGuide and Expedia.
“The fact they are using online travel
agencies as their primary source is an indication that direct-to-supplier isn’t
there yet,” Joyce says.
“Google is very good at promoting
direct to supplier with their hotel product, with their air product - they
drive people equally to the OTAs as well as to the airline or hotel websites. But
at lot of these [tour and activity] suppliers aren’t online in a way that
Google can connect to their inventory easily.”
Mobile
The accelerating expectation from travelers
to book last minute while in-destination may be a factor that coaxes some tour
and activity operators to transition to digital, instantly bookable systems.
“The rise of mobile is undeniable in
the overall context of e-commerce and getting bigger and bigger,” Drew says.
“One of the most important use cases for
the [TripAdvisor] app is in-destination, and one of the things we’ve been
intent on doing is acquiring supply - for example “skip the line” products - so
you can book tickets while you are standing there in the line. That’s a great
example of how the Viator product along with the TripAdvisor app can offer a
use case for the traveler that is very convenient and adds a lot of value.”
Along with acquiring supply - which now
stands at about 125,000 products from TripAdvisor Experiences, up 90% year-over-year -Drew says it is in the process of rolling out a complete overhaul of the
tools it provides suppliers to manage their products, rates and availability,
making the interface easier, faster and more automated.
In addition to answering travelers’
desire to be able to assess availability and complete bookings from their
smartphones, the development of mobile solutions have also benefited
suppliers.
“If
I’m a tour operator, I’m often not behind a desk. I’m in the middle of city
doing a walking tour, I’m on the beach, or I’m in low connectivity environments,”
Bashir says.
“You really see this space wasn’t one
that could adopt desktop. So mobile has been very central to allowing this
space to come online.”