Why the activity segment is an iceberg of Titanic dimensions

A big bright spotlight has just been pointed at, until now, a largely ignored segment of the travel industry – that of activities, tours, events and attractions.

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.

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Stephen Joyce

About the Writer :: Stephen Joyce

Stephen Joyce has been a contributor to tnooz since 2009 and has been working in travel and tourism technology since 1995. Stephen is the CEO of Rezgo.com, a cloud based software as a service reservation and booking platform for tour and activity providers.

Stephen is the Past Board Chair of the OpenTravel Alliance and currently sits on the Education Advisory Group for the National Tour Association (NTA).

Stephen is a graduate of Capilano University, a certified commercial pilot, and holds a certificate in IT Management.



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    An iceberg of titanic dimensions it is indeed… I thought you guys might be interested in this Tnooz article here:

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  9. Ranjan Singh

    Good article Stephen. And indeed a report which was long overdue…we had been urging to anyone who would care, for this market sizing ever since isango! was founded. So, well done PhoCusWright.

    It should serve as a wake-up call to the industry, where this sector is still referred to as ‘extras’.

    While the market is indeed huge, the challenge remains the on-line monetisation of it. All parties of the ecosystem – suppliers, distributors, customers and going forward mobile players – will have to be at a certain level of maturity for the potential to be realised.

    • Alex

      Late reply, but just wanted to add my agreement. It excites me to think the technology is starting to come together that will one day allow the tiniest of one man bands in the back of beyond to efficiently sell his incredible mountain bike trips to inspired and restless travellers. Not just from an expereince point of view is this exciting. When you consider the potential this has to direct more and more of the revenue in this huge fragmented market directly into local communities, travel might start to become the sustainable development tool it has always promosed but never delivered.

  10. Philip Warring

    Great article. I agree with Barrie above that working closely with tour operators, partners and distributors to make the process of implementing technology and assisting them with getting used to the online distribution process is paramount. At tourstogo.com we work with tour operators Australia wide and the majority are micro to small businesses busy running these amazing tours, trips and attractions and they are very passionate but often don’t have the time to make the most of online opportunities. Those that do often have done a lot of research and found options that suit them best and they have good plans in place for what they want to achieve. Technology has to be kept very user friendly and cost effective to the point that they can make changes and update information for multiple channels in as few clicks as possible. There is a big shift happening at the moment with many small companies making the move into the online environment and it’s great to see them grow and benefit from the technology and distribution options in the market place at the moment.

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  12. Gimme A Dream

    I come from the isolated Magdalen Islands in the Gulf of Saint Lawrence and I’m amongst the most technologically advanced on the islands.

    I really do understand that small businesses are slow to upgrade and I’m constantly trying to convince owners that they have the equipment now, that they need to give reservations online. They only need to work their website, preferably with a blog to update frequently.

    I feel like I’m talking to a bare wall though. Eyes cloud over when I mention “online business” and people drift off.

    Wynn Currie

    • Stephen Joyce

      Stephen Joyce

      Don’t give up the ghost. It is so important for peers to encourage other peers to move on-line. Having operators like you encourage other operators has far more impact than me as a technology vendor telling them. You are key to the education process. There are lots of resources out there to turn to and I certainly encourage you to reach out if you need help.

  13. Joe Buhler

    Excellent analysis, Stephen. You correctly state that before the online distribution potential of this huge segment can be realized the players need to have the essential tool in place, i.e. a website and then the capability for competing a transaction. This presents a great opportunity for providers of affordable, easy to manage website / CMS solutions that truly empower the small business owners and not tie them down by having to depend on the provider for changes and updates. It will be intereting to observe who steps up to the plate here. The potential is certainly huge.

  14. Barrie Seidenberg

    Stephen: “The $26.8 billion activities market”, you better believe that we love quoting that number as well here at Viator! More than cruise and car rental combined in the U.S. alone is more than I think anyone outside the sector would have believed, and when factored in with [what is undoubtedly an even larger] global activities market – “titanic” indeed.

    As you know at RezGo, while many of our passions might be for cutting edge technologies and sophisticated distribution strategies, for many local operators theirs is, and always will be, for the tours and experiences they provide to travelers. For years we have been working with the local tour operators around the world to help them present their very local offerings to a very global group of travelers. For many of them, tackling online distribution themselves is less important, and for those who do try, many will lack the technological sophistication or the budget to be successful online marketers (think SEO, user-generated content, etc.) Important to note though that what these tour operators may lack in cyber acuity, they more than make up for in passion and determination.

    While the barrier to entry is quite high for new online intermediaries (knowing first-hand the investment required in time and capital), the writing is on the wall as far as consumer behavior is concerned and points to a continuing shift online. Travelers are anxious to take more control of the activities booking process, forgoing any old-school notion that the concierge was the only way to go. The key will be for distributors you mention (like Viator) to work as partners with the operators (from the smallest to the largest), and not against them as we have seen with the other OTAs and hotels.

    Travel has hit its fair share of icebergs, but the desire for the travel experience has remained well afloat. We’ve known the potential all along but it will be exciting to watch as interest in our sector grows, and competition heats up leading to more opportunities for everyone in the activities food chain – from the smallest tour operator to the traveler and everyone in between.

    • Stephen Joyce

      Stephen Joyce

      I couldn’t agree with you more Barrie. What many forget is that these small businesses are often extensions of the owner and are therefore highly specialized. Quite often, the reason why a tour or activity businesses exists is because the owner is passionate about their chosen experience or activity. As a result, many of these businesses are successful despite the lack of systems or processes available to them. What companies like yours, mine, and others can do is provide ways to make it easier for these owners to share their passions with a wider audience.

  15. Stephen Joyce

    Stephen Joyce

    Thanks Johannes. I think you’re right. It will be a fundamental shift for most of these small businesses, but I think it will open new opportunities for the ones that make the leap.

  16. Johannes

    Stephen: Great article and I am anxious to see the impact of this report on the activities eco-system. I fully agree that the crucial part for the entire segment will be to push local operators into making use of online tools and becoming a part of the online distribution chain.

    This will need a great effort from both,operators & distributors, alike. Yet, I am positive that due to the push of the big online players into location based offerings and local advertisement, this part of the travel value chain will be naturally online in just a few years.


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