A big bright spotlight has just been pointed at, until now, a largely ignored segment of the travel industry - that of activities, tours, events and attractions.
Now that the genie is out of the bottle - through the release of the PhoCusWright report When They Get There (and Why They Go)- and a dollar value has been attached to the segment, how can anyone continue to ignore the in-destination activity space.
$26.8 Billion for the US market alone is a huge number, but still pales in comparison to the potential global activities market.
So, just how big is the activity space?
Well, the addressable portion of the activity space (ie. the bookings that can be tied to travelers and not local buyers) is estimated at $20 Billion, which is more than double the value of the car rental industry, and three times the size of the packaged vacation or cruise market. That makes the activity segment the third largest segment of the travel industry after hotel and air.
Wow, who would have guessed!
Before all you VCs start grabbing your check books, I have some sobering thoughts. The issue with the $26.8 billion activity market (I love quoting that number) is that it's a lot like fishing.
This segment, unlike almost every other segment, except for maybe the vacation rental market, is made up of tiny fish.
I'm not talking tuna here, I'm talking sardines. The report shows that 81% of the businesses surveyed generated less than $1 million in bookings per year, with 33% generating less than $250,000.
Based on my anecdotal research, this may actually be understated considering the businesses that were surveyed tended to be more technologically aware.
Don't get me wrong, I'm not trying to diminish the importance of each and every one of these businesses. My point is that these are very small businesses, perhaps even better qualified as micro businesses, and yet, in aggregate, they wield as much economic impact as the car rental and cruise segments combined.
Much like the food chain of every major ocean - the smallest of creatures often make up the basis for an entire ecosystem.
Undoubtedly, now that this report is published there will be all sorts of new businesses and services that will emerge to help these small businesses move towards automation, increased revenues, and increased distribution through new and emerging channels.
I can imagine we'll see more intermediaries jump into the murky waters hoping to bring order to the chaos by aggregating and distributing activities.
But is distribution what this segment needs?
Companies like Viator and CityDiscovery, both sponsors of the report, and others like Isango, Kijubi, and GetYourGuide currently use a merchant model working with these small companies to distribute and sell their tours and activities to travellers who book in advance.
Yet with the growing number of these dedicated activity retailers, we still only see 14% of bookings coming through these channels.
Most suppliers who were surveyed (90%) said that cost and display limitations were primary reasons for not distributing through sites I've mentioned.
The bulk of bookings (64%) are still made in person or over the phone.
Why? Because only 36% have websites that allow any kind of on-line booking! Even fewer, about 12% of suppliers have a reservation or CRM system.
The vast majority of businesses rely on tools like Microsoft Excel or paper ledgers to keep their businesses organized. Frankly you can't even start a discussion about online distribution if the business doesn't have a website, it's just not feasible.
So where does that leave us?
Well, imagine the activity segment as an iceberg. Right now, on-line travelers can see less than a third of that iceberg (if they even know where to look).
The remainder of that vast iceberg remains submerged and invisible to travelers on-line and certainly to the rest of the industry.
The challenge with this segment is not on-line distribution, process automation, or building better reservation systems. The biggest challenge is one of educating this fragmented set of businesses in the importance of having a web site so that more of the iceberg is exposed.
Not to diminish the innovation potential with this segment, but we need to keep in mind that we cannot expect this segment to run when two thirds of it isn't even crawling yet.
We are still a long way away from realizing the on-line potential of the in-destination activity space but at least now we can see the iceberg and we have some notion of just how big it truly is.
NB: Author is CEO of Rezgo, a sponsor of the PhoCusWright report.
NB2: Photo - Alan Light.
Update: Corrected the stat regarding number of suppliers with websites that support booking.