Why Tours & Activities is an Untapped Goldmine for Travel Companies

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Traditionally travel industry was formed by flights, hotels and everything else. The unnamed everything else is anything and everything that you’ll need at your travel destination, sightseeing, activities, transfers, rentals, event, class and many more. Till as recent as 5 years back, flights and hotels together would account for 70% of the travel market and rest 30% was, well “everything else”.

But the young travellers have changed the face of what travel means to them. They are adopting alternate stays and seeking experiential travel, survey showed that 69% of the travellers would rather spend more money on an activity during their trip than on nicer hotel room. The market for “Everything else” is becoming significant and is not unnamed any more. Defined as ‘Tours & Activities’ sector in travel industry and is expect to be $183 billion market globally.

Today Tours & Activities sector is one of the fastest growing segment of Travel industry, but despite its huge potential remains relatively untapped. 

What is this sector? 

Before we get into details of exploring its potential, let’s first this understand this sector better.

A Tour, Activity or an Experience can be a city sightseeing tours, and also be a multi-day bike ride in the Himalayas. It could be water sports on a beach and a guided cultural walking tour, it can also be a training lesson or a class. Tours & Activities holds together many categories in one. Categories range from sightseeing to adventure to spa & wellness to outstation tours, attraction ticket like amusement parks and museums, all this is a part of the umbrella segment, Tours & Activities.

In matured western markets, conventionally this sector has been restricted to conducted bus tours, attraction tickets and amusement park passes. That is one reason why the market-size of this sector never looked big enough for investors or established companies to care much.

Now some travel start-ups have identified the huge opportunity this segment offers. Realizing that this “everything else” part of the travel is the actually the reason why people travel in the first place. Even by quick ball-park figure calculation this is a few hundred billion market worldwide. Phocusright and Skift estimate the global tours and activities market to be between $150 and $183 billion by 2020. And as mentioned earlier, a survey conducted by Skift shows that 69% of travellers would rather spend more money on activities than a nicer hotel room. This is not surprising, as the young travellers believe that new experiences are the best part of travel.

There are various factors responsible for emergence of this third major segment of travel industry. This change took decades to reach here and now Tours & Activities sector is in a rapidly evolving phase.

So one may ask how it is now that this sector has finally come of age. There are 5 main factors contributing to the rise of this segment and making it the right time to tap into the true potential of the segment. 

  1. Smartphone is powering the discovery

Smartphone and internet penetration has made travellers independent. Rather than having to ask hotel travel desk or physically discover activities options, travellers now research destination tours and activities their phones. Most travellers still book short duration activities much later than their transport and stay for the trip. A majority looks for in-destination bookings. Like flight or hotel industry, offering real-time availability for Tours & Activities is imperative. To offer seamless booking experience for customers, operators-suppliers of activities and tech companies need to work together to build the needed infrastructure.

Smartphone and internet penetration is amongst the top factor responsible for the growth of Tour & Activity segment. Rather than having to ask hotel staff or physically discover activities options, now travelers research local experience on their phones before and during their trip. Most travelers still book short duration activities much later than their transport and stay and majority actually do it while in-destination. Like hotel industry, it’s imperative that operators and suppliers of activities offer a real-time and seamless online booking experience. One of the challenges in Activities & Experiences space has always been the fragmented market which had low online penetration. GDS like technology was not present for activities & OTA were not interested in this space. As much as 90 percent of this sector’s total bookings still take place offline or through an O2O (Online to Offline) model.

It was these issues – a large fragmented market, missing technology backbone and ignorance from large players that made this space a lucrative opportunities for travel-tech startups like Trodly. With new technology and distribution capabilities, discovery and booking these travel experiences is now becoming as easy as you book flights and hotels. 

Thanks to a wide array of activities type in this segment, there is a very long tail of very small operators and suppliers. This made it paramount to invest in technology to allow instant online bookings and a streamlined distribution process. The distribution that was being done with e-mail, phone and text messages is now moving to automated integration.

  1. Millennials are changing the face of travel

In a market study by Trodly, team found that that 81% of the millennials would choose to spend money on experiential travel instead of the usual itineraries. These young professionals are taking time out to travel, more than their predecessors.  Millennials see themselves as explorers and are more inclined to visit new destination and indulge in new experiences. 

Millennials are leading the trend and are also influencing the ways they travel with family. Influencing the decision making, millennials are bringing family members on-board for experience the travel better.

  1. Spending by Travellers

Earlier the travel budget was limited to transport and accommodation, tours and activities were the miscellaneous head. That is now changing, young professional with higher disposable income and mindset of spending more on travel experiences are driving the growth of the segment and are demanding better customer experience, convenience and personalisation. Emerging economies are playing a vital role in the growth of the sector. Indian and Chinese travellers are on a rise. While Chinese travellers are spending more than any other nation, India’s young professionals enable by their smartphones, 250 million from 1.3 billion population, has started to show the same spending behaviour on their travels.

World Travel & Tourism Council expects India is expected to become 4th largest tourism economy after China, US and Germany. International travellers are visiting India more than ever i.e. over 12 million in 2018 but the real boost is coming from domestic travellers. We are discovering their own country, 90% of all travellers in India are Indians.

  1. Rise of Experiential Travel

The holiday packages for centuries (yes!) had remained unchanged. With a tour operator as a supplier, travel agents would offer bundled packages to travelers that included transport, stay and some usual activities. It all used to work out well because travelers had little other options to string together a complete trip on their own. With digital transformation, travelers have both the means and desire to choose every trip detail themselves. A lot of modern traveler havestarted planning a vacation around an activity. For some it is adventure in the seas or jungle, for some it could be spiritual retreat in the Himalayas and for others it could be an active family holiday. Demand for such travel is bringing operators of these activities to the forefront. As the component of package tours themselves become independent products or commodities that can be individually booked online.

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Mr. Ankit Jindal, CEO & Co-founder of Trodly

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