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Expedia Group has operated concierge desks in popular tourism destinations such as Hawaii and Orlando, and has sold tours and activities for around 15 years, but the company hasn’t prioritized the sector, and is far behind industry leader TripAdvisor.
In a fairly candid assessment during Expedia’s recent second quarter earnings call, CEO Mark Okerstrom conceded that his company’s tours and activities business has been “under-funded” because of Expedia’s traditional focus on its lodging business.
“This is one of these products that just has a lot of potential, but in a big business like ours, where lodging ends up really in the roof, sometimes these things get underfunded,” Okerstrom said in response to an analyst’s question. “We are putting more capital into it right now and we’re optimistic that it can be a bigger driver going forward.”
How Big Is Expedia’s Experience Business?
How big an experiences business is Expedia Group operating? The latest numbers the company disclosed are more than $500 million in gross bookings, which means the full value of the tours and activities sold, in 2017, and a few months later Expedia said the business was growing at a 20 percent clip.
If Expedia Group’s experience business were to grow at that pace through the end of 2019, then it would notch around $720 million in gross bookings; assuming it earns an average of around 20 percent commissions, then Expedia would generate around $144 million in revenue this year from its tours and activities business.
Industry leader TripAdvisor lumps its experiences and dining reservations businesses together when doing financial reporting, but we estimate that the revenue its experiences business would generate in 2019 would be roughly about twice the size of Expedia’s tours segment, or some $270 million.
Okerstrom said Expedia Group is “reimagining” its tours and activities strategy, and is investing in it to accelerate growth.
GetYourGuide points to a connectivity conundrum
Douglas Quinby, co-founder and CEO of Arival, said Expedia has been leaning into the experiences sector, and appears to be very serious about expanding their portfolio of connectivity partners.
At the end of 2018 Expedia offered 35,000 activities from more than 4,500 operators in 1,800 markets. Expedia has been busy adding the connectivity partners that tour operators need to place their inventory on Expedia’s channels such as Expedia.com, Hotels.com, and Hotwire. Expedia lists around 16 connectivity partners that have a degree of traction with its tour operator customers.
The issue of tech/connectivity partners has become an intense issue since two leading players, Booking Holdings and TripAdvisor, acquired FareHarbor and Bokun, respectively, within weeks of one another last year.
GetYourGuide, the leading tours and activities player in Europe, announced Thursday, that it’s a danger for tour operators to tie up to connectivity partners owned by online travel agencies that seek to dominate the industry, and might use suppliers’ data for their own ends.
FareHarbor co-founder becomes booking.com VP
The announcement, which includes financial incentives if operators use preferred partners Rezdy and BookingKit to connect to GetYourGuide, comes as Booking Holdings has appointed Lawrence Hester, the co-founder and CEO of FareHarbor, as Booking.com’s vice president of Attractions. Some see that appointment as symbolic of the fact that one of the industry’s leading connectivity partners is now at the service of one of the travel industry’s premier online travel companies.
GetYourGuide co-founder and CEO Johannes Reck told Skift Thursday that the tours and activities sector needs a level playing field, but his company decided not to disconnect FareHarbor and Bokun because that would be detrimental to operators who choose to do business with the two online travel agency-owned technology partners. Reck didn’t say so but ceasing to do business with the duo would also adversely impact GetYourGuide’s inventory roster.
Reck said that GetYourGuide’s preferred partner agreements with Rezdy and BookingKit include their commitments to remain independent for a period of time that the GetYourGuide CEO declined to specify.
Warning the industry about the “massive bias” that could occur if Booking Holdings, TripAdvisor, and their respective reservations systems could exert if they dominate the sector, Reck said its new preferred partner program enables operators to integrate with GetYourGuide at pricing models that are similar to what Booking Holdings and TripAdvisor offer. He referred to these rivals’ models, which charge operators nominal rates for connectivity, as “a honeypot.”
Asked to comment on GetYourGuide’s announcement, Booking Holdings declined to comment and TripAdvisor didn’t immediately comment. We are reaching out to Expedia, as well.
As Expedia Group ramps up its tours and activities business, it and Ctrip are the only two major online travel agencies in the tours and activities sector that don’t own a connectivity partner.
Reck said he hopes Expedia is “appreciative of our moves” to try to foster the independence of tech partners in the tours and activities sector.