How does a decimated activities sector find a route to recovery, part 2

Last week, part 1 detailed potential winners and losers in the tours and activities space after the COVID-19 crisis abates; for part 2, Syme suggests business strategies for existing operators and opportunities for entrepreneurs.

Short- to medium-term focus and opportunity for operators

My own personal focus is now 90/10 local versus international until I get better intelligence on the future global market with regards to the likely restrictions that will dampen demand.

What is local? Well, my own Scotland-based day and short break adventure tour operator had a domestic market of about 100- to 150-mile radius. The population within 30 miles very rarely used us, but from 30 to 150 miles there was good business. 

I am currently focusing on my core local market now being all of Scotland, 5.4 million population, and the outer local market the rest of the United Kingdom, which is a 61 million population, a potential 500-mile drive market, train market and internal flight market. Domestic flights are likely to be more appealing than international for some time.

The basics of experience-to-market-fit are essential. Some operators just need to tweak their current offerings and pricing, others have to do more significant changes. Some operators who were 100% international customer source markets, they have a massive task of not just creating suitable experiences but then getting them marketed to the right future guests.

We need to look at the rest of the travel industry to see how they recover. Learning from other sectors will help us to judge our moves. I am betting on alternative accommodations improving first, hotels second, flights internal and regional third, long-haul flights forth and cruise ships last. 

Yes, I have seen the data showing an increased interest in cruises in 2021, but I suspect those 60-years-plus fans who are super loyal have not seen the changes to their insurance policies that are coming! I do not see international travel getting back to 2019 levels until 2025, maybe later. Local gets seriously exciting when you think in those terms! Just make sure you can handle the booking window getting really short!

The biggest winner in all of this disaster is Google Travel.

What will be the main longest-lasting impact on tours and activities?

Those operators that survive are going to be much better business people. None of us joined this industry to be business people, but the hard reality is you need to understand business. 

The high growth market of the last five years has allowed thousands of operators to enter the market with great new experiences delivering fantastic service to their guests. Still, the underlying business models were not great. Many would have struggled with a 10 to 20% market contraction, never mind where we are now. Therefore those that survive are going to be a lot more focused on business basics. So we should end up with a more business-educated operator base.

Those operators that were not in control of their distribution now really want to build direct-to-consumer businesses supplemented by online travel agencies and the trade rather than being majority OTA and trade. They now have time to put the foundations of direct marketing in place, and it will be interesting to see who does and who jumps straight back into taking any bookings from all sources. When the markets open, that will be everyone as a booking from anywhere will be prized. But over the medium-term, operators who can build more resilient businesses should do so.

The type of tour and activities on offer will continue to evolve and grow. A disaster like this breeds innovation, so I expect to see a whole new range of experiences as we get back to business. Some will last the test of time, others will not.

Growth is going to be available, but it will be much harder to borrow to fund growth. More sustainable business models should appear, and operators will be more focused on having as few fixed costs as possible, so we will have a boom in even more freelance staff supporting operators.

Terms and conditions across the board are going to change, and customers are going to read them pre-booking. Cancellation terms are going to be front and center of customers' minds. OTAs have an advantage here, so operators need to think this through. If I ever recover my long-haul expedition business, I will be at zero deposits for 2021 to 2022. I will be using the customer's flight purchase as confirmation that they are attending.

So what will be the most significant, most extended impact? Well, at its core, what we are suffering is a health-related disaster. Therefore, you have to think the most prolonged and most significant effect will change with regards to health. 

Customers are going to be thinking about it, destinations have to consider it, all transport and accommodation have to address it, so we are no different? Or are we? All other sectors are going to be doing things to make customers feel safer and address social distancing, cleanliness, low-touch services and products, etc. All of this comes at a cost. Tour and activity operators are in the business of creating experiences, so when we have a global population concerned about health, I would suggest it is now time to create new experiences that address those concerns. 

Do remember that although it is a health-related disaster, it has rapidly become and will continue to be an economic disaster, so when altering and creating new products, keep these two society drivers in mind.

What will happen in the tours and activities startup sector?

Many will think that it is crazy even to think about doing a startup in this space just now. I take the opposite view. The jungle is now neutral, and we are all startups again. Some have a little bit of advantage of past customers and digital presence, but it has never been easier for innovative startups to make a mark.

The considerable marketing spends some were doing pre-disaster are not coming back soon, so there will be space to find your customer-product fit. Judging by the number of calls from startups I have had in the last six weeks, others are thinking the same. Raising money will be incredibly hard in this space, so being lean takes on a whole new meaning.

I hope to see startups entering who look to change the industry with a focus on the experience and sustainability of the experience. I hope not to see yet another technology layer that goes between the customer and the operator. We have enough of those already. Please can someone build customer-technology-operator at scale with the technology part not being several levels deep?

I hope to see startups that can help destinations genuinely place a value on different types of tourism that they attract and what should be encouraged and what should not be. I hope to see startups that merge travel with helping the environment, the local populations and the wildlife.

Often startups in this sector are all about addressing the massive fragmentation of our industry. Well, I suspect that fragmentation will increase and that may just be a good thing if the new operators are focused on doing the right things.

Startups that focus on escaping the mad crowds that many of our tourism destinations had attracted will do well. Startups that allow people to connect with nature, themselves and improve health and well-being will also do well. Quality over volume, deep experience over speed. Closed borders are dangerous and help no one, but when these borders open again does anyone want to just return to regular tourism? 

Startups that connect with people and help them answer questions about how their travel adventure will impact the people they meet, the destinations they visit and the resources they use. Startups that can prove that they are indeed helping not just the traveler but the communities and the environments that the traveler encounters.

I think we can all see the huge challenges we have and discuss them 'til the cows come home, but let's start thinking about and discussing the opportunities. How do tours and activity operators address the following.

• Local and domestic travel at scale. Can you be a local operator in many different destinations?
• How do you take the health concerns and not just do hand-washing but create experiences that really minimize the concerns?
• How do you deliver the guest the most flexible booking possible?
• How does insurance play a more important part going forward that can help the guest and the operators? (My own business disruption insurance did not like this disruption!)
• Lots of big travel companies have discovered customers really like speaking to other people when disaster strikes. How do you maximize your communication value in the future?
• Destinations, how do you communicate closer, safer, less crowded, and how do you work with local operators to deliver on that?
• Virtual is here and scaling. It will not disappear, but how do you integrate it to enhance rather than replace?
• With alternative transport solutions - which were coming anyway and now coming faster - how can you work with them?
• What experiences will help the customers feel safer, better about themselves and be positive to all involved?
• What can you do as an operator to reduce as much risk to the customer as possible in the whole travel experience?

You, me and the rest of the world have never been so connected. This period of isolation from each other has driven even more connections, albeit virtual. We will travel and meet again and have a coffee or drink a beer together. 

I am hoping we are not building what we built before but something much better - something that really touches all those involved in tourism in a positive manner and minimizes the negative impacts. We have been given the opportunity to do it, so the only question is - will we?