Whoever said there's no money in tours-and-activities may want to have a chat with the folks at Battery Ventures, whose investment in GetYourGuide brings that startup's total funding to $175.5 million.
Tours-and-activities booking platform GetYourGuide has secured a $75 million Series D funding round. It’s the sector’s largest single fundraising amount to date.
The Berlin-based company has now raised $175.5 million since its founding in 2009.
Leading the investment is Battery Ventures, a U.S. venture firm that has invested in several travel start-ups like ITA Software, a technology firm later bought by Google; and Sabre Holdings, a technology company that later went public; HotelTonight; Duetto; Gogobot; (which was just acquired by Ctrip), IHS, and Go Euro.
GetYourGuide’s previous investors also participated, such as KKR, Spark Capital, Highland Europe, Sunstone Capital, and Nokia Growth Partners.
The Series D round comes just weeks after its new-ish rival marketplace, Hong Kong-based Klook, raised $60 million in a round led by Goldman Sachs. Klook differs slightly in its emphasis on delivering vouchers via QR code for ticketing (a popular method in Asia Pacific) and integration with Asia’s popular messaging service WeChat (where its listings are showing up in travel search results there).
Giving TripAdvisor Competition
Johannes Reck, chief executive of GetYourGuide, said that rising players like Klook and GetYourGuide would be the long-term winners in tours-and-activities.
For a long time, GetYourGuide has been portrayed as a smaller player hopelessly battling the largest player TripAdvisor and the tours-and-activities marketplace Viator that it acquired for $200 million in 2014.
But the Berlin-based company said it sold nearly 5 million tours and attraction tickets in 2017 alone. Reck claimed GetYourGuide had taken the lead position in its market, surpassing TripAdvisor and Viator, Expedia’s Local Expert effort, heavily funded Peek, Musement, and others.
He said the company is profitable and did not need the latest funding to remain profitable but is only taking it to accelerate its growth by investing in software engineering to improve its recommendation engine for its users and to add offices in new markets.
Long-time leader TripAdvisor has had many staff defections as the company has been distracted by developing its main hotel metasearch product.
Dermot Halpin, president of TripAdvisor Attractions and Vacation Rentals, told us last month: “We’re making foundational changes to our business, which support our very steep growth trajectory and extend our position in this space.”
Halpin added: “We see a significant progression across the board – we’ve grown bookable supply by 25 percent this year, our customer satisfaction levels are at record highs, and our strong bookings and conversion growth continues. The improvements in this business were integral to the 31 percent, year-on-year growth, TripAdvisor saw in our non-hotel results last quarter.”
GetYourGuide’s Reck said Wednesday that his company’s inventory includes more than 31,000 tours, activities, and attractions like museums in nearly 7,300 destinations.
His company has just over 400 workers, double the number it had at this time two years ago. That headcount is the same as Klook’s and is believed to be the same as TripAdvisor’s and Viator’s, though those brands don’t disclose their headcounts.
Reck said, “It is very likely that independent players outside the giant global brands will conquer tours and activities because the product is differentiated from hotel and flights product and is heavily a mobile-first product.”
GetYourGuide’s mobile transactions this year represented 40 percent of its total, up from 5 percent a few years ago.
Some industry observers are skeptical that small companies can cost-effectively persuade new users to download mobile apps given studies suggesting there is consumer app fatigue — plus the larger marketing budgets of global giants.
Reck said, “Well, all I can say is our numbers prove that we’re doing it. Battery Ventures looked at our numbers, and they are smart guys, and they were persuaded that we’re making it work.”
Reck’s comments echoed recent comments to us by the founders of Hopper, HotelTonight, and Klook, who all claim that mobile is opening a market gap for competitors.
Reck said GetYourGuide intends to focus on its core competency. That means no immediate plans to get into multi-day tours, which the startup TourRadar has become a market leader with and last month raised a $10 million Series B for.
But the company will expand its business-to-business services via a whitelabel and standard model.
He also said GetYourGuide remains focused on travelers, as opposed to trying to expand to appeal as well to local users like TripAdvisor’s approach toward restaurants.
“One of the most frequent worries we heard from investors in our earlier years was that travel is an infrequent use case and that consumers don’t buy tours and activities enough to offer adequate engagement for GetYourGuide to get traction,” said the CEO.
Reck said the behavior of customers had not borne that concern out.
Battery Ventures has a track record of patience in the bets it makes on companies, and patience will likely be valuable for its bet on GetYourGuide. The sector is still in its early stages of development with few travelers booking activities in-destination online, as Skift Research noted in its “State of Tours and Activities Tech 2017” report.
Two potential game changers would be the long-shot scenario where Priceline bought TripAdvisor and inherited its tours-and-activities business, which it might ramp up more efficiently than TripAdvisor has. The better odds would be that either it or Expedia might buy Klook, which might, similarly, bestow their marketing power in a way that would be hard for GetYourGuide to challenge.
Given its $175.5 million in fundraising — and that its investors want a multiple as a return on their investment — it is a concern of some that GetYourGuide’s only exit could be through becoming a public company within a few years.
Reck said, “For sure, our plan is to remain an independent company and to go public at some point. Our investors share our vision that you need to build a category-winning marketplace first and that that takes time.”
The CEO was insistent in rejecting the notion that tours-and-activities are just another product that can be added by global giants who already have trip details about customers from their other bookings and who already have search engine marketing prowess that gives them an edge in acquiring customers via platforms like Google and Facebook.
“People think the tours and activities sector is like retail,” Reck said. “It’s not. Amazon has a different set of competitive advantages by focusing on retail.”
Reck argued that Amazon can gain efficiencies of scale as a shipper, in negotiating volume discounts, and in a network effect with consumers that lets it compete at a much lower cost, he said. But once comparable e-commerce giants like Expedia, Priceline, and Ctrip step beyond commoditized products like airplane tickets and hotels, they struggle. The complexity of matching non-commoditized product with consumers who are uncertain of what they want and what’s available requires getting into the recommendation aspect of non-standardized products.
One thing about the tours and activities sector is certain, though. Startup rivals like Peek and Musement are stuck in the painful position of going up against GetYourGuide plus the global giants with much less money.
Photo credit: GetYourGuide's founders wearing orange shirts (Tao Tao on the left, Johannes Reck in the center) posed for a photo with some of the company's board members -- Philipp Freise, Kees Koolen, and Fritz Demopoulos -- but not its newest one from Battery Ventures. Alex Finkelstein from Spark Capital is between Tao and Reck. GetYourGuide