This is part two of our three part series on the online tours and activities market, focusing on the buzz around venture-backed startups in the space. Part one here.
There are only a handful of companies that matter these days in selling tours and activities, and they are a mix of old-guard established companies, a hungry wannabe, and an online travel agency making some overtures.
And, although there has been venture capital money funneling into the sector, the track record has seen a paucity of success stories.
“There are never any winners in the space,” one experienced travel-industry investor chimes in, dismissing the tours and activities sector.
Viator’s long wait
Case in point, observers say, is Viator, an established online player, founded in 1995, that has raised some $20 million in funding from investors, including Carlyle Venture Partners and Technology Venture Partners.
Viator is thought to be doing roughly $200 million in annual sales as it aggregates tours and activities online, and provides white-label services to a bevy of partners ranging from Air France and InterContinental Hotels Group to Priceline and TripAdvisor. Viator this week announced another partnership deal, with the smallish startup, Beach.com.
But you can imagine the frustration that must be in full force at Viator as a relative newcomer, GetYourGuide, steals some of Viator’s thunder, and in five years has almost raised as much funding at $16.5 million.
A slog of 18 years is a long time to wait for an exit as Viator’s valuation is undoubtedly an issue for existing investors and potential buyers.
As tours and activities becomes a bigger area of focus for outside investors and internal- company investments, Viator is also getting pinched by high customer acquisition costs, as are its competitors.
Rod Cuthbert, the founder of Viator, and currently CEO of Rome2Rio, says Viator’s excellent SEO is one advantage it has over competitors. And, about Viator’s long-awaited exit, Cuthbert assures: Viator has “patient investors.”
GetYourGuide makes boasts and enters new markets
GetYourGuide has been the subject of buzz as it recently picked up $14 million in funding, and is using it to expand beyond its base in Germany, Switzerland, Austria, UK, and the U.S. and into France, Spain, and Italy.
But it is an open question whether the Berlin-based company, which likely does around $10 million in annual sales, will evolve into a long-awaited success story in the tours and activities arena.
Viator founder Cuthbert likens GetYourGuide’s current market position to that of UK-based Isango several years ago. A tours and activities distributor, Isango raised $8 million in a series A round led by Spark Ventures in 2008, but has hasn’t made much noise of late.
“Isango didn’t break through the barrier and possibly isn’t growing as fast as it hoped,” Cuthbert says.
Founded in 2008 and having attracted about $16.5 in total funding from the likes of Spark Capital and Highland Capital Partners Europe, GetYourGuide is aggregating triple the product choices in new markets than does its larger and more global competitor, Viator, claims Johannes Reck, GetYourGuide co-founder and CEO.
Reck says GetYourGuide’s mission is to collect all of the world’s tours and activities, and he argues that Viator has chosen to limit shelf space for tours as it favors a few tour suppliers in each of its markets.
Hyperbole aside, GetYourGuide is currently displaying 353 tours in Paris to Viator’s 195, for example. Reck likens GetYourGuide’s approach to that of Booking.com, which has amassed the largest online and global hotel portfolio.
He concedes that the process can be slow, arguing that it always takes time to build a marketplace.
Suppliers can use the GetYourGuide extranet to update their pricing, Reck says. ”It can be painful for suppliers,” Reck says. “They have to do the work. Slowly we see it working out.”
Old guard Gray Line trying new stuff
One of the tours and activities distributors in the most enviable position is one of the oldest, Gray Line, but unlike Viator and GetYourGuide, Gray Line is a membership organization and a hybrid in that it is a tour operator in its own right and also a distributor.
Gray Line, which traces its roots to 1910, is a force to be reckoned with its bus tours, dinner cruises and other sightseeing expeditions in 700 destinations, as some estimates peg its annual sales at around $300 million. The company is global, operates some of its own tours, has about 100 local affiliates; and they help aggregate other company’s tours, as well.
Although it is among the oldest players, Gray Line is poised to make strides on the tech side of things, although it doesn’t have a mobile app or even a mobile website.
In addition to all of the fragmentation in the tours and activity sector, even the most savvy online players and operators have had an achilles heel: the inability to handle real-time inventory, or anything approaching it.
For most tours sold online today, you have to book them a couple of days in advance, and can’t whip out your smartphone or tablet while lounging on the beach on vacation to plot and reserve your next activity.
Gray Line says it took a step toward resolving the availability problem in November when it partnered with a UK tech company, TourCMS, with the goal of facilitating the online booking of tours at the last-minute.
Indeed, this afternoon the Gray Line website showed as available a tour of Chicago’s north side that was to begin in a few hours.
Such last-minute availability, particularly when the capability migrates to mobile, is considered the “holy grail” in tours and activities.
“Someone has to crush it in mobile and there has to be a live system,” says strategist Bruce Rosard, former vice president of sales and marketing at PhoCusWright.
Expedia: The elephant in the room … or not
Then there’s Expedia, which has dabbled with tours and activities for more than a decade, and is said to be making a renewed and heavy push into the sector with new connectivity options for tour suppliers.
Expedia is said to do a tours and activities business about the size of Viator’s, and is especially strong in airport parking and airport ground transfers.
Expedia’s Local Expert network already offers concierge-like services at about 100 hotels and other retail locations.
While Expedia, given its marketing clout, is definitely a force to watch, some observers aren’t quaking in their boots, arguing that Expedia is unlikely to give the effort the required focus it deserves.
“Expedia may give it a fair shot, but to be honest, I’m not scared of the online travel agencies,” says Reck of GetYourGuide. “I don’t think they will be the utlimate winners in this space.”
Rosard, however, notes that Expedia has lots of cash and “plans to go huge” in tours and activities.
“You have to watch what they are doing,” Rosard says.
Thomas Cook and TUI lumber along
Tour operators such as Thomas Cook and TUI are undoubtedly large players in tours and activities, although their sales volumes in the sector are difficult to determine because they own local operations, and all of the tours they offer are bundled into the vacation price.
However, Cuthbert believes Thomas Cook and TUI will almost inevitably start unbundling tours.
“They will get more active and become big players in unbundling,” Cuthbert says.
The counter argument, though, is that neither Thomas Cook nor TUI have shown any acumen in the online arena, let alone mobile, where tours and activities battles will ultimately be fought.
Stutter-step or inflection point?
Cuthbert believes an “inflection point is around the corner” in tours and activities.
All concede, though, that turning the corner has taken awhile.
Cuthbert says a trend bolstering his argument is that emerging economies, such as those of China and India, will generate tons of outbound travelers who will “put tremendous pressure on new markets.”
For example, the Moulin Rouge in Paris sometimes offers special late shows for Indian tourists, and will likely do the same for Chinese tourists once they arrive in force.
“Tour and activity systems will become much more in demand because it will be the only way” to get a reservation, Cuthbert says.
Cuthbert and Rosard agree that changing consumer behavior will drive tour and activities tech improvements.
Few people book tours when they buy their flights, and many travelers want the flexibility to purchase tours on the spur of the moment.
“Someone has to crush it in mobile and there has to be a live system,” Rosard says.
Or as the CEO of one of the tech providers in tours and activities puts it: “Neither Viator nor GetYourGuide will blow it out of the water on the desktop.”