When PhoCusWright released its When They Get There and Why They Go research study in 2011, I fully expected a glut of new and innovative sites and services to emerge around in-destination experiences.
To some degree, I wasn’t disappointed.
There have been a number of new entrants in the tours and activities space, as can be confirmed by the number of start-ups featured in TLabs.
The question is, how many of them are actually innovative and how many are simply rehashing existing models?
Status quo in tours and activities
Before we can discuss innovation, we need to understand what the current state of play looks like in tours and activities.
Technology in tours and activities falls into two main categories: supply side systems and retail side solutions.
On the supply side, there are inventory management systems and CRM solutions for tour and activity businesses, similar to PMS and CRS systems for hospitality providers. Generally these solutions support e-commerce functionality, back-office management, customer relations, and payment processing. These types of solutions albeit new to the tour and activity space, have been around for a long time in hospitality and even retail e-commerce. On the retail side, we have consumer facing marketplaces that sell tours and activities to travellers. These sites all share a similar model; the marketplace negotiates a net rate with the supplier, suppliers use an extranet to load their tour information into the marketplace (or the marketplace writes the content themselves), customers book and pay with the marketplace, the customer receives a voucher or ticket, the customer goes on tour and gives the voucher to the supplier, the supplier sends the voucher back to the marketplace, and the marketplace sends net payment to the supplier. This is essentially the same model shared by the likes of Viator, Expedia, Orbitz, Excursiopedia, Peek, GetYourGuide, TUI/Isango, Reserve123, and dozens of others.
Innovation in tours and activities
The retail side of tours and activities has seen the greatest amount of attention and funding over the past few years. This isn’t all together surprising though considering that this is where the perceived money can be found.
And I agree that it may seem that way, but when you consider that these sites are all utilizing the same business model pioneered by Thomas Cook in 1841, it starts to feel a bit like lipstick on a pig.
Mobile is innovative
But surely all the development around mobile is innovative, for example being able to search and book an excursion on your smartphone.
Though using a smartphone to make a booking may be new, the actual process of booking and the supply chain that supports it is not new. This is a process that is almost entirely manual, masked by a thin veil of technology.
In some cases not much more sophisticated than an email or even a (cough cough) fax message.
On the supply side we’ve seen a number of new systems emerge that help tour and activity businesses manage their inventory and customers more effectively.
With only 14-20% of suppliers using electronic reservation systems, it seems to me that the supply side of the equation requires the most attention. Even the experts at the tours and activities panel at PhoCusWright ITB in 2013 said…
“For many small suppliers online is something they really do not get and they do no invest in technology. Many today still will not accept something [booking confirmation] that is not a paper voucher.”
Yet despite all the talk, there has been very little movement in terms of investment or development in supply side technologies.
Although there are a few established systems that have been in business for more than five years, have industry traction and credibility, and are profitable, the bulk of new entrants are, in some cases, years away from profitability and are relying on limited investment dollars to build traction.
There is, in my opinion, also very little that truly differentiates these new entrants from one another or even the established systems.
Many quote the PhoCusWright research to justify their business models but lack the market research or industry relationships to build a successful and scalable business model.
Building another supply side booking engine does not constitute innovation and in some cases is nothing more than repackaging functionality that has already been around for a long time.
In my opinion, there hasn’t been any WOW in tours and activities. True innovation in tours and activities will happen when the retail and supply sides of the segment finally figure out how to work together.
I’ve written about attempts at this kind of collaboration in the past, for example the efforts by the Tourism Exchange Australia (TXA).
The approach TXA has taken by creating an open exchange of retailers and suppliers for the Australian market is the closest thing I have found to innovation in tours and activities.
The issue, however, is that TXA isn’t just for tours and activities and is primarily used by hotels and other accommodation providers. The model for an open exchange for accommodations is not particularly new, so the addition of tours and activities to a system that is skewed to accommodations isn’t really innovation, it’s more of a band-aid.
In 2012, I also outlined a potential approach to connecting suppliers and vendors in a more realistic manner using retail side APIs.
Although I’d like to think that the approach I outlined was innovative it was simply a logical next step in the evolution of supply and retail solutions.
Hospitality supply side systems have been connecting to switches like Pegasus and now sites like TripAdvisor for many years. Channel management is well established in hospitality and the logical step towards channel management for tours and activities is for retailers to support connectivity to supply side systems.
It has now been two years and there has still be no movement in retail side APIs or connectivity.
More and more new entrants are popping up, claiming to be innovative, yet clinging to the safe and established models of the status quo. Is there room for innovation in tours and activities? I certainly think so.
The bigger question is why is there so little of it and how can we foster it for the betterment of suppliers, retailers, and ultimately travellers?