Interest in so-called travel experiences hit a new high on Thursday when GetYourGuide announced it had raised $484 million in new financing led by venture capital giant SoftBank Vision Fund, the largest ever for the travel sector.

The nearly $100 billion Vision Fund’s stake in the Berlin-based startup is notable beyond its size, raising speculation about potential consolidation in the experiences sector or the possibility of IPOs.

Vision Fund in April revealed it had led a $225 million investment in GetYourGuide’s Hong Kong-based rival, Klook. None of the companies have revealed valuations.

“Both GetYourGuide and Klook have raised sums that would suggest their respective valuations would be north of $2 billion,” said Olan O’Sullivan, CEO of Trekksoft, a Swiss-based provider of tour operator booking software.

The market leader in attractions sales remains TripAdvisor via its TripAdvisor Experiences and Viator brands. In 2014, TripAdvisor paid about $200 million to acquire Viator. GetYourGuide’s and Klook’s presumptive valuations are now about ten times as much as that. The Berlin-based-GetYourGuide alone has raised $659.5 million since its founding in 2009.

Given their price tags, GetYourGuide and Klook may have little choice but to go public, merge, or both.

“The valuation doesn’t leave many strategic buyers with sufficiently deep pockets to take them out via an acquisition,” said O’Sullivan.

GetYourGuide said Thursday that SoftBank is adding investor Ted Fike as a member to its board of directors, though Fike was not involved in the Klook deal.

SoftBank Vision Fund is being closely watched right now. While the Vision Fund is run from Tokyo, state funds of Saudi Arabia and Abu Dhabi provide the biggest shares of its money. Saudi Arabia’s alleged assassination last year of Jamal Khashoggi, a journalist for The Washington Post and Al-Arab News, discouraged some companies, but not these two travel startups, from doing business with the country.

A Potential for Mergers and Acquisitions

“Klook focuses on different geography and a different product set, and their strategy quite different,” said Johannes Reck, the CEO and co-founder.

“I don’t see significant overlap in the near-term future either,” Reck said. “Regardless, it is not a zero-sum game, given that only about 3 percent of experiences worldwide are bookable online yet.”

GetYourGuide cofounders CEO Johannes Reck and chief operating officer Tao Tao source getyourguide

GetYourGuide cofounders CEO Johannes Reck (left) and chief operating officer Tao Tao at the company’s Berlin headquarters. Source GetYourGuide.

A hint that deals may be in the works came on Thursday when the company said it had appointed Nils Chrestin as chief financial officer. Chrestin comes from Global Fashion Group (GFG), where he helped lead the post-merger integration of four regional e-commerce brands The Iconic, Zalora, Dafiti, and Lamoda. Chrestin previously helped with deal-making for Morgan Stanley and Bain and Company.

GetYourGuide may seek acquisitions with other players to plug gaps in its inventory and geographic coverage, analysts said.

Potential examples of target companies mooted by experts included Civitatis, which leads in many Latin American markets, TourRadar, which offers multi-day tours, a category GetYourGuide has broadly ignored, and Tiqets, whose inventory includes tickets for museums, cultural heritage sites, and attractions.

Growth, But Not Stellar Growth

GetYourGuide’s sales are up, according to industry players.

“If our first quarter of this year is anything to go by, it looks like GetYourGuide has taken another leap in terms of growth,” said Tony Carne, the Melbourne-based managing director of Urban Adventures, a tour operator. “They are now the clear number two in online travel agency distribution for us, after Viator/TripAdvisor, and potentially taking market share if we look at all our results across online players in the quarter combined.”

GetYourGuide’s strong first quarter didn’t include an acceleration of marketing spending compared with the previous two quarters, said Reck.

“A majority of the recent growth is from traction and adoption of the product,” Reck said, adding that momentum has been building. Between June 2018 and March 2019, GetYourGuide sold 10 million tours, activities, and attraction tickets. It took a decade before that for the company to sell its first 15 million.

“That’s not all that many tickets,” said Stephen Oddo, CEO and co-founder of tour company Walks¬†who said he similarly saw a surge in GetYourGuide referrals this year.

“The investment must be based on what the company’s future prospects are,” Oddo said. “But it definitely adds further validation to the enormous opportunity that still exists in the tours and activities space.”

GetYourGuide said it has done a better job than global players of attracting the industry’s most desirable customers due to spending potential. More than half of its mobile web and app customers are under the age of 40.

On the supplier side, GetYourGuide only has about 36,000 experiences. That’s less than market leader TripAdvisor, which currently lists 202,000 experiences. GetYourGuide claimed this ensures it refers greater volumes of customers in the most popular markets to operators than its rivals do, which helps it win popularity with important suppliers. That may be partly true, but it also suggests public relations spin over an inventory deficit.

How SoftBank’s Portfolio Might Work Together

SoftBank, a Tokyo-based mobile phone company and tech investor, hasn’t publicized its plans for the travel sector. But the fund has spoken about having its portfolio of companies help one another.

How might cooperation work in travel? SoftBank is a major investor in Oyo, having led an $800 million round of financing in the hospitality company last October. Last month SoftBank announced a partnership with Oyo to offer strategic help in flooding the country with budget hotels.

So, cross-selling of tours by Oyo might be one possibility.

A GetYourGuide and Klook merger may happen over time. The GetYourGuide investment may have closed before the Klook one, despite the timing of the announcements, though the companies declined to say.

Making a superapp play could be another move to marry transportation with experiences. A possible partnership for GetYourGuide or Klook might be with Grab, a Singapore-based super app used by many Southeast Asian consumers for ecommerce, payments, and ridehailing. Perhaps the experiences inventory will be listed on the superapp, helping Grab to compete with Google, which also aims to be a superapp. A similar play might be made with another of its investments, Paytm, a rising superapp with travel and other services in India and Japan.

Vision Fund might also look to turn its portfolio company WeWork into a broader hospitality brand. WeWork has been trialing a WeLive apartment brand, and the mobile apps for both businesses might start cross-selling customers on local tours and experiences.

More simply the investor may simply want to make a quick buck. SoftBank has flipped investments before. In August 2017, Vision Fund bought Flipkart, an Amazon-like retailer in India. Less than a year later it sold the company on to Walmart at a profit. SoftBank might consider selling GetYourGuide or Klook one day to companies beyond the traditional candidates like Airbnb to a player outside of travel, such as e-commerce player Alibaba, which SoftBank holds a significant stake in and which has a nascent online travel business.

SoftBank’s Vision for Travel

Reck said he expected GetYourGuide would strategically cooperate with SoftBank Vision Fund’s portfolio of companies without giving details.

“[SoftBank boss] Masayoshi Son thinks very holistically about the future of travel,” said Reck. “He thinks the future is geared towards both experiential travel as well as innovation of the core hospitality industry. In a way, it’s kind of funny how in line everything is among the portfolio companies.”

Reck cited GetYourGuide’s soft branded tours to illustrate his point. Since last August the company has taken tours run by independent operators on a white-label basis and marketed them under the Originals brand, selling about 40,000 tickets to date. The company often surveys and studies guests throughout tours and uses the data to fine-tune the online and offline product. It plans to add branded tours to 25 more destinations this year.

“If you look at Oyo, it’s playing on the same playbook,” said Reck. “It’s essentially a vertically integrated hospitality chain that uses data to predict supply and demand better, to set rates, to source inventory, and to improve customer satisfaction.”

“Our experiences industry has so much overlap with the transportation sector,” said Reck. “How do people get to their destination and how do they get to the experience, for example. Those [transportation] assets are ones we’re keen to leverage, and discussions are already going on about testing this in the future.”

Skeptics Balk

GetYourGuide faces several risks: SoftBank Vision Fund might implode. The piles of cash might lead to a lack of discipline. Customer acquisition costs may rise steeply. Ramping up branded tours may create surprise problems.

SoftBank appears to be more dependent on its CEO’s whims than the average large public company or venture firm. At best, depending too much on one genius introduces risk. At worst, Masayoshi Son, CEO of SoftBank and leader of the Vision Fund, will turn out to be a chancer whose luck ran out and whose impulsive decisions, powered by significant debts, end in disaster.

Human nature also tends to be unchanging. Everyone knows of people who have misspent windfalls. GetYourGuide’s executives may get reckless as they spend the mammoth funding.

Costs may escalate, too. GetYourGuide has structurally more difficulty in acquiring customers than global online travel companies Expedia, Booking.com, Ctrip.com, and Airbnb, which can save some money by cross-selling existing customers of their lodging and other travel products on tours and activities.

Commission pressure may take hold, too. Last year GetYourGuide trialed boosting commission rates from a typical 25 percent to about 30 percent, but then retreated after resistance from suppliers.

It makes sense that GetYourGuide seeks fatter margins and more brand loyalty by acting more like a tour operator than merely aggregating supply, said Carne.

However, running product is a whole other level of complexity, he said. While the aggregation business they’ve built is impressive, they’re unproven at the next challenge.

“I don’t think you could call anything GetYourGuide or other players are doing today real ‘vertical integration’,” said Oddo. “What they’re doing today is basically white-label. Which is not to say there’s not an opportunity there.”

For more, see Tours and Experiences: The Next Great Untapped Market in Online Travel.

“It would also be great to see some consolidation among the aggregators,” said Oddo. “There are too many booking companies competing against each other rather than solving the problem of exposing our inventory to the right consumers at the right time.”

“My hope is GetYourGuide, which has been a great partner for us, will spend more time plugging experiences into more places where consumers have a chance to book, such as banking reward sites or transportation apps, and really grow the pie,” said Oddo.

Photo Credit: Offers experiences like this dune buggy ride through the desert. GetYourGuide