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There is a swirl of investment and acquisition interest in the online tours and activity market right now, from TripAdvisor’s $200 million acquisition of Viator to GetYourGuide’s $25 million Series B round.
Despite the activity, our conversations with operators and third-party sellers demonstrate that the actual business of getting tourists on tours, buses, and boats remains relatively unchanged.
While airlines started making their booking and inventory options available online through a variety of outlets more than a decade ago, the tours and activity market is still full of mom-and-pop shops that use fax machines and notebooks to keep track of inventory and customers. Even major tour operators working with booking giants such as Expedia send product via Excel sheets.
We looked tours and activities in the New York City market specifically and found a few major sales channels: direct sales via operator websites and on-site purchases, street sellers, and third-party sales via concierge desks, travel agents and aggregator websites.
Where and when tourists buy changes based on the activity and the time of year, although it’s evident through our conversations that tours and activities remain a relatively last-minute decision in comparison to the rest of the travel purchase cycle.
Leisure travel accounts for more than three-quarters of visits to New York City and numbers reached a record high in 2013 with 42.3 million leisure visitors. The number of international and domestic visitors rose between three and five percent, reports the city’s tourism organization NYC & Company.
International visitors are of particular interest to the tours and activity market since they spend more and stay three times longer as domestic guests.
The most common activities for both kinds of visitors include sightseeing, museums, theatre events and tours. NYC & Company ranks top activities for international visitors as follows:
|Cultural/Ethnic Heritage Site||23%|
|Attending Sporting Event||14%|
CityPass sells passes and package that gives tourists access to a number of notable attractions for a set price. Although international visitors accounted for just 20 percent of New York’s total visitation in 2013, more than 80 percent of the company’s New York City customers come from abroad. CityPass customers cut across all age groups, but is especially popular among families, particularly multi-generational groups.
CityPass’s chief marketing officer Matt Stiker first told Skift about the high frequency of on-site sales in New York, but was later surprised to find that New York stands apart from other markets that offer CityPass in that it has the lowest on-site attraction sales and the highest advance purchase rates — about 70 percent of sales are done before tourists arrive in the city.
“We hear all the time that people are deferring their travel plans until they arrive in New York City,” explains Stiker, “but the numbers show that people are preplanning their trip to NYC more than we expected.”
Many tourists decide exactly which activities they’ll do once in the city, often times after being approach by street sellers.
Jason Hackett, chief marketing office of New York Cruise Lines, shared his perspective on why some tourists wait to buy.
“It’s a very different shopping and buying activity than flights and hotels. Everyone in a group is involved in activity decisions once actually in the market and ready to do things, explains Hackett.
“The democratization of that decision makes it more of a last-minute choice. The concierge and street sales channel has been and is still becoming an increasingly vital channel in the city.”
Hotel concierge desks are one of the original sales channels for the tours and activities market and remain a popular service.
The percentage of hotels with a concierge has actually increased slightly between 20 percent and 30 percent between 2004 and 2012, according to AH&LA’s 2012 Lodging Survey. Luxury and upper upscale hotels located in urban or resort markets are the most likely to have a concierge.
However, in recent years a shift has taken place in which many hotel concierge desks stopped being run by hotel employees and started being manned by third-party operators.
City Experts is one such concierge desk service used by more than 40 hotel properties in New York. The service is one of the primary sales channels for parent company Twin America’s other tours and ticketing business; however, it sells tours and activities provided by other operators as well.
Some industry insiders argue outsourcing of concierge services impacts the quality of recommendations since employees could be swayed to suggest that operators that pay the highest commission.
Coming Digital Evolution
The sector appears to be headed toward sea changes with TripAdvisor’s unexpected announcement about its $200 million acquisition of online tours and activities booking provider Viator and GetYourGuide’s announcement of a $25 million Series B round, both taking place this week.
Skift’s Dennis Schaal does a terrific job of outlining what this means for online tour and activity providers as well as OTAs in his coverage of the surprise Viator acquisition. The companies we spoke to New York also expressed optimism about the new focus on the sector while noting that their mobile sales are already on the rise.
Tour operators’ lack of digital acumen could be blamed for the sector’s slow entry into online sales. Expedia backed off earlier attempts to integrate the industry into its business model, but digital improvements are getting to a place where a booking site might reconsider the sector.
Mobile is even more important than desktop when it comes to the evolution of tours and attractions booking since many tourists are making last-minute decisions while on the go.
“From an industry perspective, there’s been a jump in mobile sales,” says Stiker. “I don’t see anything to slow that down.”
Another change that could come to the space is electronic kiosks that would replace actual guest service employees in front of attractions or even hotel kiosks.