Through a Holidays tab on some of the airline’s websites, travelers can access tours and activities from Viator in the airline’s route network, including for New Zealand, Australia, Fiji, Japan, Europe and the US.

The new offering is branded Air New Zealand Activities and it is powered by Viator.

Viator has plenty of distribution partners — including Air France, British Airways, Air Asia, Delta Air Lines, InterContinental Hotels, RCI, Wyndham and Priceline — although Air New Zealand is the first to use Viator’s new API.

Air New Zealand’s websites access Viator’s destinations activities in the standard way that other partners do by linking to Viator’s white-label offering.

Where the new API comes into play is with Air New Zealand’s email marketing.

When Air New Zealand sends confirmations and other pre-travel emails to passengers, Air New Zealand accesses the new Viator API and sends tours and activities offers to them based on their destinations, says Ken Frohling, vice president of business development for Viator.

Ultimately, the goal will be to customize these offerings based on the type of traveler, Frohling adds.

A Viator spokeswoman says the new API is being “offered to a select group of Viator partners” and “there are plans to open it to a wider audience early next year.”

Now that the genie is out of the bottle – through the release of the PhoCusWright report When They Get There (and Why They Go)- and a dollar value has been attached to the segment, how can anyone continue to ignore the in-destination activity space.

$26.8 Billion for the US market alone is a huge number, but still pales in comparison to the potential global activities market.

So, just how big is the activity space?

Well, the addressable portion of the activity space (ie. the bookings that can be tied to travelers and not local buyers) is estimated at $20 Billion, which is more than double the value of the car rental industry, and three times the size of the packaged vacation or cruise market. That makes the activity segment the third largest segment of the travel industry after hotel and air.

Wow, who would have guessed!

Before all you VCs start grabbing your check books, I have some sobering thoughts.  The issue with the $26.8 billion activity market (I love quoting that number) is that it’s a lot like fishing.

This segment, unlike almost every other segment, except for maybe the vacation rental market, is made up of tiny fish.

I’m not talking tuna here, I’m talking sardines. The report shows that 81% of the businesses surveyed generated less than $1 million in bookings per year, with 33% generating less than $250,000.

Based on my anecdotal research, this may actually be understated considering the businesses that were surveyed tended to be more technologically aware.

Don’t get me wrong, I’m not trying to diminish the importance of each and every one of these businesses. My point is that these are very small businesses, perhaps even better qualified as micro businesses, and yet, in aggregate, they wield as much economic impact as the car rental and cruise segments combined.

Much like the food chain of every major ocean – the smallest of creatures often make up the basis for an entire ecosystem.

Undoubtedly, now that this report is published there will be all sorts of new businesses and services that will emerge to help these small businesses move towards automation, increased revenues, and increased distribution through new and emerging channels.

I can imagine we’ll see more intermediaries jump into the murky waters hoping to bring order to the chaos by aggregating and distributing activities.

But is distribution what this segment needs?

Companies like Viator and CityDiscovery, both sponsors of the report, and others like Isango, Kijubi, and GetYourGuide currently use a merchant model working with these small companies to distribute and sell their tours and activities to travellers who book in advance.

Yet with the growing number of these dedicated activity retailers, we still only see 14% of bookings coming through these channels.

Most suppliers who were surveyed (90%) said that cost and display limitations were primary reasons for not distributing through sites I’ve mentioned.

The bulk of bookings (64%) are still made in person or over the phone.

Why? Because only 36% have websites that allow any kind of on-line booking! Even fewer, about 12% of suppliers have a reservation or CRM system.

The vast majority of businesses rely on tools like Microsoft Excel or paper ledgers to keep their businesses organized. Frankly you can’t even start a discussion about online distribution if the business doesn’t have a website, it’s just not feasible.

So where does that leave us?

Well, imagine the activity segment as an iceberg.  Right now, on-line travelers can see less than a third of that iceberg (if they even know where to look).

The remainder of that vast iceberg remains submerged and invisible to travelers on-line and certainly to the rest of the industry.

The challenge with this segment is not on-line distribution, process automation, or building better reservation systems. The biggest challenge is one of educating this fragmented set of businesses in the importance of having a web site so that more of the iceberg is exposed.

Not to diminish the innovation potential with this segment, but we need to keep in mind that we cannot expect this segment to run when two thirds of it isn’t even crawling yet.

We are still a long way away from realizing the on-line potential of the in-destination activity space but at least now we can see the iceberg and we have some notion of just how big it truly is.

NB: Author is CEO of Rezgo, a sponsor of the PhoCusWright report.

NB2: Photo – Alan Light.

Update: Corrected the stat regarding number of suppliers with websites that support booking.

The report, When They Get There (and Why They Go): Activities, Attractions, Events and Tours, projects that U.S. online sales of trip activities will climb 13% in 2011 and 11 percent in 2012.

The sector’s growth pace would surpass that of U.S. online leisure travel, which is forecast to grow 8% and 9% in 2011 and 2012, respectively.

In fact, the study says, the $26.8 billion U.S. travel activities market grew faster than the U.S. leisure travel sales market during the economic woes of 2009 by 11 percentage points.

The study notes that the car rental ($14.2 billion), cruise ($12 billion) and packaged travel ($10 billion) sectors pale in comparison to the $26.8 billion U.S. trip activities market, although the latter is extremely fragmented and a portion of it isn’t addressable by the travel industry.

So how is all of this online growth of travel activities and tours going to take place, given the fragmentation of activities’ operators, their lack of big budgets, the relative dearth of online distribution and only the very beginnings of industry standards?

“There is a convergence of trends at play — consumers’ continued the shift online, mobile, and lower-cost technology enabling more suppliers to participate in the travel distribution system,” says Douglas Quinby, PhoCusWright’s senior director of research.

Of course, plenty of these activities and tours will be booked last-minute, when travelers already have secured their hotel rooms and are looking for something to do at the destination, Quinby says.

“The growth of smartphones and rich, locally aware mobile travel applications will play an enormous role in influencing activity selection and purchasing,” Quinby says.

In addition to mobile solutions — or in tandem with them — the report says user-generated content will be a driver of activities’ sales online.

The study looked at some 20 activities’ verticals, including spas; air, water and land tours; adventure activities [kayaking, trekking]; spectator sports and performing arts; attractions and ground transporation — almost everything except dining and shopping.

Out of such a large pie, defined as $26.8 billion in 2009, about $20.8 billion is addressable by the travel industry, the study estimates.

“The market is so fragmented, there is a tremendous opportunity for online intermediaries to step in,” Quinby says, adding he expects significant investments by online intermediaries in the in-destination activities’ sphere.

From 2009 to 2012, online intermediaries’ activities and attraction sales are forecast to more than double, albeit from a smaller base than the supplier channel, the study finds.

In the same period, suppliers’ online sales of in-destination activites and tours are expected to climb 33%.

“I expect to see online intermediaries leverage the opportunity around the convergence of influencing travelers in-destination around mobile services,” Quinby says.

One such intermediary, Viator, which was one of the study’s sponsors, states traveler behavior is shifting, with more travelers purchasing trip activities in advance.

Of course, Viator specializes in the advance, online booking of trip activities.

“We’ve long known what the study reveals — that activities are an extremely relevant part of the travel industry and travelers know the value in researching and purchasing them online before they go,” says Barrie Seidenberg, Viator CEO and president.

The emergence of mobile, however, means there will be a lot of spontaneous, in-destinations bookings — and online intermediaries and suppliers will have to address the trend with mobile websites and/or  apps.

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Disclosure: The author does some work with PhoCuswright as an analyst.

Viator offers some 5,500 destination activities — event tickets, tours and attractions — in 450 destinations in 75 countries.

Through private label deals, iSeatz offers ancillary services — including hotels, car rentals, activities, ground transportation and airport parking — to clients, including Delta, Air France, KLM, Air Canada and Amtrak.

Under the agreement, iSeatz now gets direct access to Viator’s inventory of destination activities and Viator can obtain wider distribution of that product through iSeatz clients.

iSeatz says the partnership means that iSeatz clients will now have the option of integrating activites from Viator into their booking paths after customers purchase their flights or rail tickets.

The agreement means the two companies, which competed somewhat in the activities arena, now will be able to gain a stronger foothold as airlines and other supplier seek to attract more ancillary revenue from consumers.

And, consumers will get the option to do more trip-planning about in-destination activities on airline or rail websites before they depart for their vacations.

The “things to do” transaction site enables users to transmit recommendations to their networks on Facebook and Twitter, but stopped short of deeper social network integration for now.

President and CEO Barrie Seidenberg says deeper Facebook integration is “very much part of our future roadmap. We believe Viator is all about travel inspiration and sharing information. That said, as a transaction-based travel site, it’s important that we fully understand how our community wants us to integrate with social websites, including Facebook.”

Over the next few months, Seidenberg says, Viator hopes to identify how users would prefer to integrate Facebook, Twitter, Foursquare and other social platforms.

To pull off the site improvements, Viator wrote basic content covering 3,000 top global attractions to provide an overview, points of interest nearby and a mapped location. It also that linked content to existing product reviews.

It’s interesting that Viator chose to create the content itself — a substantial undertaking — without aggregating it from the usual suspects.

Viator has for some time enabled members who have purchased a tour on the site to write a review or upload a photo, but it has added the ability for them to submit “traveler recommendations” and to share them with their Facebook and Twitter networks.

The company also added user profiles to the site so other users can click on a public profile and view all of that member’s recommendations and photos in a single location.

Thus, if users click on Rio de Janeiro Soccer Match and Stadium Tour, they can read Viator-written highlights, schedule details and tour and pricing options, and also check out user reviews and photos.

A booking widget sits alongside the basic information.

There are 15 user reviews currently available for the stadium tour and you can click on the author’s profile to get a sense of who they are.

Two user-taken photos of a match were also readily available for viewing.

“The tour-related reviews and photos, which we have had on the site for the past few years, require that you actually purchased and experienced that tour,” Seidenberg says. “That is not changing. It is a critical quality-control feature for us. Unlike other travel review sites, our tour-related reviews and photos come from confirmed travelers with first-hand experience.”

“By opening up more of a dialogue on the Viator site, we are giving travelers access to more information they can use to plan their trips, which also creates a more active community,” Seidenberg adds.

And, Viator hopes a more engaged community will lead to plenty of more customers using that booking widget.

Smart Destinations, which provides prepaid attaction passes in 14 North American destinations, says it picked up $3 million in debt financing in a round led by MMV Financial, a venture capital firm based in Toronto.

Square 1 Bank, an existing backer, provided $1 million of the debt financing, Smart Destinations says.

Smart Destinations co-founder and CEO Kevin McLaughlin, who calls in-destination trip-planning “almost virgin territory,” says the funding will help the company in its expansion efforts.

Smart Destinations had $10 million in previous funding, according to CrunchBase.

The company is to launch local language sites in Holland, Denmark, Sweden and Norway, joining dedicated sites for the German, French and Spanish markets already up and running.

The roll out of specific country sites is paying dividend, Viator claims, with the France, Germany and Spain sites “contributing as much 30 percent of the gross bookings to some of Viator’s top 10 destinations”.

Managing director of Viator Europe, Patrik Öqvist, says:

“It is remarkable that three of these countries collectively rank sixth in travel bookings across Europe and beat out the UK in online travel sales, with the highest online adoption across Europe.

“We are excited to be entering all four of these important markets, a clearly receptive audience, enabling not only Viator but our suppliers and affiliate partners alike to more effectively target this savvy group of travellers.”

Recent research from PhoCusWright indicates the attractiveness of the Scandinavian marketplace for travel companies – Denmark, Norway and Sweden between them are sixth in terms of travel spend in European.

Online penetration in the region is also running at 45%.