NB: This is a guest article by Matt Zito, an online travel business consultant.
At the Travel Business Academy, a professional online course teaching entrepreneurs how to start a travel business, we have been researching and analyzing the in-destination mobile app travel business.
This article looks at the current online booking and mobile booking landscape for the tour and activity market and shows where a large entrepreneurial opportunity lies.
The PhoCuswright research report When They Get There (And Why They Go), first published in February 2011, shed a boat-load of interesting data on the tour and activity market.
For example, highlights covered in the ten-page summary report include the following:
- Travelers spent $27 billion on activities, attractions, events, and tours in 2009.
- Most activity providers (operators) generate revenue under $1 million with 33% generating $250,000 or less.
- The majority of the operators in the “in-destination” activities industry are self-employed, mom and pop business, true SMBs.
- The average price of an activity purchase is less than $100.
- Operators are very limited in their technological know-how.
- Fewer than four out of ten operators sell activity bookings through a website.
- One in five operators have no website. Yes, you read that correctly.
- Phone sales account for 60% of sales.
The in-destination tours and activity business is a run by local small businesses.
After reading the report summary data above you would probably decipher that the tour and activity industry is run by small businesses. Indeed, small activity providers generally employ between one and five people
The guy that takes you on the tour is most likely the guy that you pay when you first check in. The business is conducted by Excel spreadsheets, general ledgers, cell phone and fax. If you have gone on a destination tour, activity or excursion, you know that these people are some of the nicest people you will ever meet.
Many tour and activity operators run a seasonal business and work other jobs when the season closes. They love what they do and they really donâ€™t like other people telling them what they need to do and how to run their business.
From a perspective of selling them business services (B2B) they are very hard to sell.
The majority of their business is booked either by a traveler calling them on the phone or the walk-in at the time of the activity. I personally know this because Iâ€™ve successfully worked with a few small operators in Bar Harbor, Maine, US, where I have a vacation home.
Bar Harbor is a global destination that sees two million annual vacationers in less than five months. Travelers come from all over the world.
In Bar Harbor there are 25-35 activity providers providing everything from kayak tours, whale watching trips, schooner sailing trips, National park tours, guided bird watching, bus tours, cultural museum tours, dinner and entertainment shows and biking tours.
Business is conducted locally
On the marketing side of the activity provider’s business, most belong to the local Chamber of Commerce, they network closely with the other travel businesses in the town the destination is located and they tend to listen to and participate in opportunities that the state government or local DMO is pitching or providing.
If youâ€™re a sales representative, an outsider, letâ€™s say an Expedia or Travelocity rep and you’re pitching them about a new sales and distribution program to sell their activity service online, most arenâ€™t going to listen. Itâ€™s just very hard to break in as an outsider.
Why havenâ€™t the big travel players cracked this market (though some are now clearly trying)? If youâ€™re not local and the small business owner has never personally shaken your hand itâ€™s a huge uphill battle from here.
What we know about the travel consumer who purchases in-destination tour and activities.
The majority of tour and activity bookings, the one-day purchases are being made within three days prior to the actual consumption or attendance of the in-destination activity. The majority of the purchases are one-time only visits. After the traveler participates on the tour or activity they will most likely never return as they are on vacation.
Consumer mobile data is showing that over 50% of travelers are using their mobile devices to find and search for things to do in-destination while on vacation. Itâ€™s only a matter of time for when the activity operators realize that mobile is their meal ticket to enhanced reach and sales.
Who is going to help them?
Stephen Joyce, founder and CEO of Rezgo (technology provider of web and mobile booking software for tour and activity providers), makes a great point in a blog post that to make in-destination mobile truly work, activity providers need geo-location service.
So when a traveler is looking for a thing to do near the activity provider the traveler can find the activity on their mobile device.
If the activity provider has no website, no reservation service, no mobile app how in the heck are travelers ever going to find the activities in the first place?
[NB: Easy tip – an activity provider could add their business to Google places so the business shows up on Google Maps. Recent research is showing that 70% of all travel mobile use is on Google Maps, with the other 30% going to OTAs and travel guides.
Let’s not forget that entrepreneurship is about seeing opportunity, execution, luck, hard work and the ability to be at the right place at the right time.
When you look at all the consumer and activity provider research data, actually talk to and work with activity providers, the obvious sales tool to help the tour and activity providers expand their reach and sell tickets to vacationers in-destination screams the following: a third party mobile activities booking app.
Build a company the equivalent of an OTA or wholesaler, but mobile-only sales, selling the sweet spot of 72 hours or less prior to arrival.
The one big player so far that is headed in this direction and most recently launched a mobile app to sell tours and activities is the wholesale aggregator Viator. Viator is the king of the mountain.
Will travelers buy tours and activities online or via a mobile like they book hotel rooms?
There is a new entrepreneurial push to sell tours and activities online. Aggregators and OTA business model type companies are springing up to jump into the action.
The reality of the current market is that travelers are not booking tours and activities online and in my opinion actually may never really buy in any matter of volume. Apparently only 2% of tours and activities are booked online.
Sure you can make arguments to the fact that online tour and activity bookings are increasing and that there in lies the opportunity.
I agree with this and do believe that online booking of tours and activities will grow, but the bigger opportunity lies in playing in the mobile booking game, aligning with the existing consumer buying habits and fulfilling the need of the activity provider that wants and needs in-destination sales.
I think that any tour and activity operator that doesnâ€™t have a website to sell their services is making a huge mistake. Technology solution providers like Rezgo and TourCMS that we recommend at the Travel Business Academy are really necessary tools you need as a tour and activity operator to compete in todayâ€™s marketplace.
Why pound your head in the sand to try to change something that is already happening and has been happening for years?
What I have learned as an entrepreneur is that itâ€™s very difficult to change peopleâ€™s habits. I tried betting against this concept once before when I tried to develop an online marketplace for the buying and selling of Maine hand-made products, trying to get artisans to change the way they sold their products. I got burned badly and that story is for another day, but it was a great learning experience.
In-destination mobile sales are a solution that meets the needs of both the traveler and the activity supplier.
Supplier demand for it
Activity providers I have talked to recently including a few major theme parks in a top five global travel destination all said that they will participate in sales and distributions programs that help them get travelers that are already in the destination looking to make purchases in the next 72 hours. Within 72 hours prior to the activity is their bread and butter money.
This is what they want and need.
Activity provider owners, especially the mom and pop small operators are seriously limited in the resources (cash) and time to implement the new technology for online and mobile sales. I am not saying this as a negative I am just stating the reality.
A mobile booking platform that provides the activity provider with low hanging fruit, last minute sales, in which the activity provider has inventory available. Activity providers will jump on this revenue all day long, this is guaranteed.
The solution is not mobile apps or mobile technology that the operator can use to sell direct to consumer, although I think there is an opportunity here and a small percentage of operators will want to market and promote their own apps.
What I envision is a global mobile only booking platform similar to what Hotel TonightÂ and others haveÂ created in the same-day hotel booking space.
A traditional sales model the likes of an Expedia or Groupon will not succeed in selling the activity operators in the thousands of global destinations like a Bar Harbor, Maine. A new type of sales model is needed. One built on social, local and networking may succeed.
Iâ€™d love to get into this big travel business opportunity.Â Wanna build a mobile booking platform for the $28B tour and activity market?
NB2: Mobile travel ocean image via Shutterstock.