A look into the tours and activities sector

The tours and activities sector is one of the fastest growing segments in the travel industry today. Despite being called the younger sibling of flights and accommodations, tours and activities is the third-largest segment of the $1.3 trillion travel industry, after airfare and lodging (which together account for 80 percent of total industry revenues).

The current state of the market

The tours and activities sector is very fragmented. It is an industry dominated by quite a number of small to medium sized businesses that are mostly locally-owned operators who have always relied on in-person, often last-minute bookings to grow their businesses.

The act of booking tours and activities itself has always been a last-minute affair and most travellers will wait until just before their trips — or until they have actually arrived in-destination — to make decisions about what tours and activities to book – this is in contrast to flights and hotels, where travellers are known to book their flights and accommodations months in advance.

Key Players: Booking Platforms

The tours and activities industry is still frequently booked offline than online. This presents OTAs and other in-destination booking platforms with a unique set of challenges as well as plenty of opportunities.

In order to succeed in this space, companies will need to be able to figure out ways to both drive pre-trip tour and online bookings as well as leverage mobile technology to meet the needs of travelers who want last- minute, on-demand tour booking options.

Emerging Markets

Perhaps the largest untapped source of revenue within the tours and activities market is within emerging markets. Unsurprisingly, China and India hold a lot of potential, as well as emerging markets in Southeast Asia, Latin America, Eastern Europe, and the Middle East.

Finding the Right Booking Model

Currently, there are two major models that dominate in the tours and activities booking industry: curated models where tours are vetted or curated, and marketplace-style open-listing models where any provider can offer a tour or activity without first having to go through an application and vetting process.

Online Partnerships

Although tours and activities providers are warming up to the idea of selling their offerings online, OTAs and in-destination booking companies, and other distribution channels still face challenges, simply because many tours and activities providers don’t believe that online booking is the wave of the future. Some tours and activities providers view online marketplaces/OTAs as not impactful enough nor an effective marketing channel compared to online review sites like Tripadvisor.

Driving Advanced Online Bookings

Getting consumers to pre-book their tours and activities ahead of time is likely to be one of the biggest challenges OTAs and in-destination booking platforms will face in the years to come. In the eyes of the average traveler, there are very few obvious advantages to booking online ahead of time, unless they are looking at tours and activities that are high-end, have limited space, and might sell out. Moreover, some travelers prefer to play things by ear, not wanting to commit to activities that can always be booked later should a change of heart get in the way.

Modern travelers are now used to instant gratification with booking anything they might need, ranging from a taxi with Uber or a hotel on Booking.com. It means with tours and activities, they want to pull out their mobile phones to find things they would like to do that day, easily see what’s available and be able to book in real-time with instant confirmation. The question remains of how to get consumers to book in advance. Looking at conversion rate optimization (CRO) might be one of the keys to driving the market overall.

Key Takeaways

Getting travelers to book their tours in advance and online is important, and mobile bookings are the holy grail. Unsurprisingly, mobile plays a huge role in tours and activities bookings, and will surely continue. Travellers will have to be convinced and conditioned, that by booking online and in advance, they will get the best rate and value for their money than if they book on-site or on the gate.

Companies that are able to optimise conversion by providing best rates (value) and last minute inventory as well as instant booking and confirmation will do well in the coming years. But in order for this to work, tours and activities providers will need to be on-board with the program or at the very least, set up with business process technology (APIs) that allow them to push online their real time inventory and provide travellers the convenience of automatic bookings and confirmation.

On the same token, pushing advanced bookings through flexible cancellation policies and other incentives will be crucial to helping consumers rethink how they traditionally have approached booking tours.

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