Many years in the making, the online tours, activities and experiences category finally started heating up in 2018.
Major online travel companies including Booking.com, Expedia, TripAdvisor and Airbnb have assembled large teams and made significant acquisitions in the space, while private companies including GetYourGuide ($170 million), Klook ($296 million) and Tiqets ($45 million) have raised large rounds of funding.
How this juicy pie will be sliced up, who takes the biggest piece and who will be left with the crumbs is among today’s hottest topics in the online travel industry.
A fascinating aspect of this battle is that four of the biggest players - TripAdvisor, Airbnb, Booking.com and Expedia - are approaching the tours, activities and experiences category from angles that leverage their respective strengths.
Each are investing hundreds of millions in this market, and all have stated its critical strategic importance.
Here is my take on their strategies, and how things might play out.
TripAdvisor plays its massive traffic hand
TripAdvisor (disclosure: my former employer) brings its massive traffic to the table and employs a more traditional model than the other incumbents. It provides a large catalog of things to do - hundreds or even thousands of individual tours and activities for larger cities - and uses reviews to help travelers filter through the listings.
Distribution is competitive across the board, but supply mix is an area of opportunity for all four companies to build in different ways.
Joost Schreve
This approach leads to lots of choice for travelers, which might be a positive, but sorting through this huge inventory also means a lot of work.
With millions of travelers a day landing on TripAdvisor’s top “things to do” pages, the company only needs to convert a small fraction of these visitors into actual bookers to be a key player in the experiences category.
The acquisition of Viator in 2014 has helped get the supply in place to fulfill on the purchase intent of these travelers.
Bokun was added into the mix to create deeper ties with individual attraction providers and help connect the many mom-and-pop providers who are still offline.
While TripAdvisor holds a strong hand with all of these assets, it needs to prove that it can execute on the messy lower parts of the funnel.
Airbnb doubles down on its “Live Like a Local” theme
In 2016, Airbnb CEO Brian Chesky announced that the company would begin helping travelers plan and book entire trips, expanding the company’s offerings beyond lodging to Experiences and more.
Initially, Airbnb’s Experiences offering was centered on multiday “immersions” around certain themes, such as a three-day music immersion in Cuba, but limited interest by travelers to commit to such niche products for multiple days led the company to pivot to more standard two- to four-hour durations.
What remained a key part of its strategy is the focus on more “local and authentic” offerings, such as unique cooking classes and behind-the-scenes tours.
While this approach stays true to Airbnb’s positioning to “Live Like a Local,” the question is whether it really meets the activity needs of most travelers. Sure, many people are interested in cooking classes and the like, but travelers also prioritize seeing a destination’s highlights, like the Eiffel Tower and major museums.
Airbnb has essentially positioned itself against these kinds of experiences, potentially boxing itself in a corner. The company will need to walk a fine line between staying on-brand while broadening its offerings to appeal to more travelers.
Booking.com's surprising approach
Booking.com is best known for its data-driven approach and performance marketing skills. Not as well-known is the way the company has gained a strong foothold in the “alternative lodging” vertical. It has carved out a position against Airbnb by marrying the convenience of hotels (instant booking, keyless entry) with the breadth and local flavor of apartments.
It took several years for this strategy to start paying off, as the buildup took more time than its competitors’ more conventional approaches, but in the past couple of years Booking.com appears to have zoomed past many of the players who entered this vertical before it.
This is worth mentioning because the company appears to follow a similar under-the-radar approach in tours and activities. Experiences are conspicuously absent on the public Booking.com website; instead, this category only appears to users who have already booked a hotel in a supported city - and even then, the links to access experiences are quite hidden.
Why would Booking hide its experiences like this? The answer seems to be twofold. First, this allows it to do controlled experiments where the context is well-understood, i.e., a traveler is going to stay at a given hotel in a known location at known dates. This allows the company to target the offering to the individual traveler and learn in a controlled environment what resonates and what doesn’t.
Secondly, with one million bookings on an average day, it has plenty of travelers to play with even in a “hidden” test like this.
What makes Booking.com’s approach even more interesting is the way the actual tickets are delivered to travelers. Travelers get a QR code that they can display on their phone to access any of the supported attractions and are only charged for attractions they actually enter. The decision to purchase a ticket can be spontaneous, which maps well to the typical traveler mindset.
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There are some challenges with this approach, as well, including the need for a somewhat “deep tech” integration at each supported attraction. Time will tell if this approach will give Booking the upper hand. It’s certainly an original solution that sets it apart from the other players in this space.
Expedia’s “Local Expert” angle
Expedia was an early entrant in the tours and activities category with its Experiences Marketplace. The company’s approach sits somewhere between TripAdvisor’s volume play and Booking.com’s focus on travelers who have already booked their hotels.
Expedia’s experiences are prominently listed on its public website (like TripAdvisor), but the company also has a specific focus on the traveler after he or she has booked a hotel. Travelers who book in popular travel destinations like Hawaii, Las Vegas and Orlando, among others, receive an email from an Expedia Local Expert who offers discounts and activity booking assistance.
These Local Experts are in fact Expedia-branded local retail travel agents that can help book all kinds of activities. This is an interesting approach that aligns with travelers’ desire to connect with a local, although it’s unclear if this will work beyond obvious major high-traffic destinations.
How will this play out?
It’s clear that global travelers will see increased innovation and easier access to a wide variety of experiences the next time they plan a trip. What’s harder to pin down is how the diverging strategies of the major players in the tours, activities and experiences space will play out in the ensuing battle for hearts, minds and wallets.
Three elements are crucial to coming out on top: enough distribution, the right supply mix and a convenient booking experience.
Distribution is competitive across the board, but supply mix is an area of opportunity for all four companies to build in different ways.
TripAdvisor and Expedia might suffer from too much of a good thing - paradox of choice - while Airbnb has boxed itself into the “authentic” corner. Booking looks good here in terms of balance, though it still has room to grow.
Convenience of booking experience is the trickiest part to master, and for that reason, might very well become the crux. Expedia and TripAdvisor don’t seem to have put a lot of emphasis here, at least not visible to the casual traveler.
Booking’s approach, allowing customers to fast-track access to attractions with a pay-as-you-go approach, can be a real winner here - and combined with its strengths in distribution and supply mix, may mean that Booking holds the best cards in the tours, activities and experiences game.