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As the peer-to-peer sector of the travel industry continues to grow, the tours and activities arm has struggled to take off in same manner as lodging and ground transportation.
What is thriving is a smaller set of entrepreneurs who are building unique and creative tour businesses aimed at travelers and locals who want to experience a traditional destination or attraction in an untraditional way.
Building a small business — whether it’s creative tours around the Metropolitan Museum of Art or gallery hopping around Chelsea — include insurance, licensing exams, and smart marketing channels.
New York City has become a fertile growth ground for these startups given the many locals, in addition to tourists, looking for unique activities or experiences within their own city. As Skift noted earlier this month, locals account for 40 percent to 70 percent of many walking tours’ business and are more likely to become repeat customers as well as send friends and families.
For example, David Behringer, founder of Chelsea gallery tour operator The Two Percent, says he is primarily targeting young New Yorkers who will come back again and again to new art exhibits and bring their friends. He wants to attract customers not only for the tour, but the kind of people they can meet while on it.
Rise of Tour Entrepreneurship
There are a number of factors driving this particular form of entrepreneurship, explains Museum Hack founder Nick Gray. These include tools like Square and PayPal for credit card transactions, platforms like Eventbrite and Zerve for managing reservations, and online marketing channels including Facebook and Google AdWords.
“It’s also the customer culture,” says Gray. “I think more people, especially young people, want a non-traditional, boutique, locals-only experience.”
Foods of NY Tours was started by Todd Lefkovic fifteen years ago and today sells more than 30,000 tickets per year. Lefkovic says there are “many many many” more entrepreneurs starting walking tours today and credits the increase in tour entrepreneurship to similar tools as well as low barriers to entry.
“To market and advertise this kind of company fifteen years ago, you had to get into the New York Times, New Yorker and New York Magazine. You had to spend a lot of money to send brochures,” explains Lefkovic.
Today it’s a business that an entrepreneurial person can start with very low capital; however, it’ll still take three to five years to start making serious money. But the image of a food lover or art lover starting a tour to spread their passion to the masses isn’t always correct.
According to Lefkovic, many of the people getting into the tour sector are approaching it as a business prospect.
In New York City, you need a Sightseeing Guide license in order to guide or direct people to any place or point of public interest. This includes a $50 Sightseeing Guide exam that consists of 150 questions, of which 97 need to be correctly answered to pass, and license, which costs between $13 and $50 every two years.
The number of people taking the exam fluctuated between 373 and 476 guides, reaching a record 511 people in 2014. Of the 432 individuals that took the exam in 2013, almost all — 92 percent — passed, according to the New York City Department of Consumer Affairs.
Categories covered include public transit systems, neighborhoods and landmarks, literature and theater, parks and planning, ethnic foods, and famous people’s homes.
Determinants to Success
Both Museum Hack and Food Tours of NY used ticketing and discovery platform Zerve to sell tickets.
Zerve founder Scott Newman says, “The basic ticketing is easy to do. I’ve interacted with hundreds of founders and have seen patterns come up that tell you early on whether or not they are like to be successful or still frustrated a year or two later.”
Newman says one of the most common mistakes that founders make is thinking that they need a ton of products and tours to attract customers. He sees companies have better success when they become known for a token product and then build front here. Founders also make the mistake of building the product around themselves, a strategy which makes its difficult to expand as they attract more customers and have to switch from a performer role to a manager.
Newman also warns against the lure of discount websites like GroupOn or Living Social. “It’s like a drug, like crack and they can’t get off them,” says Newman.
“They’re not going to compete with Greyline. These companies need to build a virtuous cycle in which every single customer is wow’ed and then amplify that to their social circles. It’s counter to what you hear in mass media, but the reality is that most travelers make purchase decisions through a search vehicle, not a social vehicle. It’s far more important to nail SEO and search.”