Predicting the long-term future of what was a $254 billion
tours, activities and attractions industry when we are all still in full-on
rescue mode seems a bit foolhardy.
A million operators, most of them small
businesses, are focused on survival. The possible outcomes for the sector from 2021 to 2025 are an infinity of variables. Therefore, the only thing I can predict
with certainty is I will be wrong, but being wrong is not a reason to not try!
Who will be the winners and losers?
The whole sector is being impacted negatively at a scale
that none of us forecast or dreamed of. Different areas within the industry
are experiencing different impacts and that will make a difference on who
survives and who does not and who is then in a position to thrive as we rebuild
the best part of travel.
I think it is becoming pretty clear that those huge
businesses who are on the stock market have already refinanced and will survive
to fight another day. The asset-light online travel agencies of Tripadvisor, Booking Holdings and
Expedia Group will be able to manage the crisis in the three- to 12-month range. If
it goes on significantly longer than that, then even their reserves and ability
to raise cash may be called into question.
However, the main issue for this segment of the industry will be: Will they
continue to be as interested in tours and activities as they were before? Before
the crisis we had already seen them reducing investment in the sector as they
all discovered it was a lot more complicated and harder than they had thought.
In times of crisis, you look after your core business. I expect to see changes
from at least one of these OTAs with regards to tours and activities. These
changes could include sales of standalone platforms like Viator or reversals
from the market altogether. Will Amazon or another digital giant take this
bargain of a lifetime opportunity to get seriously involved in travel?
Subscribe to our newsletter below
GetYourGuide, with its large funding round again, should be
able to sit this out for three to 12 months, and as a pure-play tours and activities
OTA will be looking on at those above for any sign of them withdrawing from the
That said, it probably still has and will continue to have a higher
cost of acquiring customers due to being a pure tours and activities OTA, and
even vast sums of money can be quickly reduced by Google to get access to
All of the above have the advantage of global reach, so they
will be taking bookings in the recovery quicker than most. Also, due to this
reach, they will also be able to laser-target their marketing spend on what is
open and what is not and what product can retail and what cannot. This
advantage will see them gain market share from the reduced market size.
One point of caution on the above: OTAs are not that great
at driving local tourism. If the market stays driven by locals for some time,
the OTAs will struggle to gain those bookings. They need regional and
international travel to restart as soon as possible.
Not all operators need regional and international travel: In fact, depending
on what country you are in there are perfectly viable local tourism business
models that operators can change to rapidly. It is harder in some destinations
than others. If disruption lasts at scale for 18 months-plus, then local wins, and OTAs are not good at local!
These operators make up about 15 to 20% of the supply base,
and it is going to be extremely tough for them to survive in any shape that
resembles what they were pre-crisis. All will have cut what they can, and if
they have not, they should have, but they will still be burning cash every
How deep are the cash reserves? Also, how much debt are they willing to
take to survive? Many who are loading up with debt need to do the calculation
on does the debt work long-term with 50% reduced volume? Do you need that debt
now or do you need it in the future to cash flow operations when tours start
The massively fragmented and hugely diverse global operators
base that is 80%-plus of the industry is in many ways best equipped to deal
with the crisis. Many of these operators are in the team size of one to five
people. They can scale down and hibernate; many do not have fixed monthly costs
except for salaries for founders or maybe a vehicle. Many will be able to get
work outside the sector and return to tourism later.
OTAs are not that great at driving local tourism.
Having said that, I do
expect the supply base to reduce. COVID-19 will be the first real business
disaster many of these operators will have faced, the scale of it will tempt
many of them to return to other industries that they deem more secure in the
long term than tourism. Also, the vast majority of these businesses are
self-funded from savings, families and friends, and the longer the crisis goes
on, it will be like starting a new business again, and many may just decide
they are not up for it.
At this point, it is worth noting that although tours and
activities are without a doubt the best part of travel, the industry does not
exist in isolation, and without a recovery in air travel and the hospitality
sectors the tours and activities industry will be a shadow of what it was in
So although we are all focused on our industry, it is what happens in
these two other sectors that will dictate a lot of our future. I think everyone
in the whole of the travel industry agrees that the recovery will be driven
local, regional and then international. The only disagreements are the
As with all industries, tours and activities are
increasingly reliant on technology providers, such as reservation systems,
channel managers and content systems. No doubt, the industry needs
fantastic technology at its core, and the requirement has just gotten more not
However, it is difficult to see how many of those current providers will
survive with the revenue models they have versus the development and
maintenance costs. The investment levels many of these companies needed, which
were never easy to access, have just gotten a lot harder.
I hope that the
founders and leadership teams of all the many quality technology providers are
in discussions and find a way to merge and rescue the best of what is available
and the best talent to develop and grow our industry technology going forward.
You are needed now more than ever.
All sectors of the tours and activities industry need to
consider these limiting factors.
restrictions: Who can travel? Where can they go? What do they need to be
able to fly?
situation: Some economic forecasts are showing double-digit to a quarter
reduction in countries’ GDP. Previous disasters were in the 1 to 2% GDP
range for a short time. No one in travel has experienced this level of
Many are assuming travel bargains, and yes there may be in the short term,
but medium- to longer-term travel is going to be a lot more expensive.
You will need it, but can you get it, and what will the cost be? Applies also
to businesses, and their customers’ insurance is a critical cog in the
future. What is the insurance price for a 60-year-old getting on a cruise
ship in 2021 or ‘22? I never thought I would ever hear myself say this,
but insurance is likely to be an exciting place for travel startups post-COVID!
So what is different from 2019 for these operators and who
will not just survive but thrive?
It may surprise many, but I do not see much change. Those
operators in any of the above sectors of our industry which are:
that their only strategic asset is their customer relationships
- Have a
balanced distribution arrangement
make a profit per tour departure
control costs and have a variable cost model
outstanding experiences as the entry to the game
adapt to a different customer base
tailor their marketing to a varied customer base
deal with drive and alternative accommodation as partners in an experience
The crisis just put into hyper-speed much of what was
already happening. Those operators who were on top of some of the above will
Underreported impact: I just want to mention
that the biggest losers in this disaster are all those small family tourism
operators in the developing world. Most of these family operators do not have
digital reach. Technology is a mobile phone. They are in countries with zero
safety nets. No matter how bad you are currently feeling about your business,
please just remember we are lucky to be dealing with this from a position of
strength many sadly are not.
* In part 2, publishing Monday, Syme looks at short- and long-term impacts on the sector and where he sees opportunities for innovation.