Whether building tours and activities or vacation rentals, acquiring companies soon find out that this stuff isn't as easy as it looked. From confidential internal documents obtained by Skift, it's clear Booking.com found out that scaling experiences on its own wouldn't be a cakewalk, and it's turning to Musement to kick off a preferred partnership strategy instead.
Booking.com laid off as many as 40 employees in its attractions unit a couple of months ago, and is on the cusp of finalizing a preferred partnership with TUI Group’s Musement, Skift has learned exclusively. The move marks a strategy reversal that shows Bookings’ challenges in expanding tours and activities to build its often-touted connected trip.
In one potentially controversial aspect of the Musement deal, which is believed to be all but signed but not yet announced, the Milan, Italy-based online tours and activities aggregator would contract directly with Booking.com’s FareHarbor booking software solution. It would also share customer leads, according to sources close to parent company Booking Holdings.
Some tours and activities operators and online sellers take a dim view of tour sellers having to share leads with booking engines and online travel agencies, whether it be Booking.com or Tripadvisor and its Bokun unit because operators use multiple booking engines for distribution and are loathe to see big online travel agencies get a preferential edge.
Booking Holdings CEO Glenn Fogel said last month that the company would change its strategy in sectors such as experiences and dining, and emphasize partnerships instead of its prior build-your-own focus, but he didn’t identify Musement as the launch partner in tours and activities aggregation. Coronavirus, and the fact that Milan is one of the northern Italy cities currently under severe travel restrictions, could be a wild card in contract finalization.
Confidential Internal Documents
In confidential internal Booking.com documents obtained by Skift, Booking.com informed employees of its Attractions unit who were laid off or given the option of finding other employment within Booking Holdings starting in late November, that one of the factors in the strategy shift was that “the largest competitor of our Attractions business currently has more than 40 times the number of attractions than we do.”
Although the Attractions team adopted lofty goals for attach rates by 2022 to facilitate upselling in the Connected Trip, “unfortunately our attractions product is not in a state to enable rapid expansion of supply on-boarding and coverage in a scalable way while also fine-tuning the product to increase attach rates,” the documents said.
Skift also learned from these Booking.com documents that in the span between the layoff notifications and partnership implementation — which is expected to be in June — account executives would continue to support existing tours and activities partners that Booking.com signed on directly, but it immediately halted all efforts to sign on new tour operators in early December.
“We still believe that in the long run, owning the customer journey is the most optimal situation,” the internal documents said of the strategy shift.
When Booking.com formed its Attractions unit, the company thought it could quickly overtake competitors’ supply advantages in order to make good on an end-to-end travel offering, including attractions, dining, ground transport, flights and lodging, according to the internal documents.
“The process to build technology to on-board suppliers and the contracting has proved to be much more time challenging and to take much longer than expected,” the internal documents stated.
Asked about the strategy shift, Booking Holdings spokeswoman Leslie Cafferty said: “Our vision over time is to play an even bigger role in our customers’ lives, supporting them through multiple aspects of their trip. This includes what travelers do in-destination, whether that’s how they get around on-the-ground, where they eat or what they do. We are very early days in execution, and we remain open to partnerships when and where we think it makes sense for us to execute our long term-strategy.”
Both Musement and Booking Holdings declined to comment on their looming preferred partnership.
Booking Holdings’ Acquisition Targets
Skift also exclusively learned from internal documents that Musement, Isango, and Tiqets are not only potential Booking.com tours and activities partners, but are likewise potential acquisition targets. The largest public company and venture-funded players, though, including Tripadvisor, GetYourGuide and Klook, were considered potential partners in the new third-party strategy, but were ruled out on a list of possible merger and acquisition candidates.
When Lawrence Hester Became Vice President of Attractions
Estimates of layoffs in Booking.com’s attractions unit ranged from 30 to 40, while another 10 found new positions within the company. It rankled some impacted employees that Booking.com fired Attractions employees, but was simultaneously adding workers at its FareHarbor unit.
In 2018, when Booking Holdings announced its acquisition of FareHarbor, which brings tours and activities operators online, it said “FareHarbor will operate as an independent business within the company.”
FareHarbor really did operate independent from the Booking.com experiences and attractions team, according to a source close to the company, until a change in the Attraction leadership over the summer.
But last June, Booking.com appointed FareHarbor co-founder and CEO Lawrence Hester as vice president of its restructured Attractions business. Hester, according to a Booking.com organization chart Skift viewed, now has six direct reports, including his longtime colleague Max Valverde, who is the CEO of FareHarbor.
Prior to the reorg, Ram Papatla had been vice president of Booking.com Experiences, which included businesses such as attractions, dining, and some ground transport. Papatla now heads shopping and flights, while both he and Hester report to Booking.com Senior Vice President and Chief Product Officer David Vismans.
Some within Booking.com and among competitors see it as a conflict that Adelaide Hester, who served in channel development roles at FareHarbor prior to the acquisition and is the sister of FareHarbor co-founders Lawrence and Zachary Hester, has been working on signing up attractions-aggregator partners such as Musement as part of her current role as a Booking.com business development manager. That’s because some potential partners and competitors are put off by Booking Holdings owning FareHarbor, which was supposed to be operated as a separate business.
One Booking Holdings insider countered, however, that working on attractions contracts is only one facet of Adelaide Hester’s role, and it isn’t uncommon to hire executives who might have clashed with competitors.
Gillian Tans’ Exit
Some point to a change in culture — or at least tone — when Booking Holdings CEO Fogel took on the additional role of Booking.com CEO in June. Gillian Tans is running out the clock this summer on her one-year deal as Booking.com chairwoman following her ouster as longtime CEO of Booking.com.
Fogel came in, according to sources close to the company, and expressed dissatisfaction with the pace of development toward the so-called Connected Trip, and moved to reorganize several business units. There was at least one published report in the Dutch press about dissatisfaction among some techies at the company with the prospect that more than a few will exit when they can redeem restricted stock units in the next few months.
Reorganizations of various business units, such as what took place in Booking.com’s Attractions division, are common at big public companies such as Booking Holdings.
Said one insider: “Net across the board Booking is hiring. This wasn’t an Expedia-type layoff.”
Photo credit: Gondolas in Venice, Italy shown March 27, 2016. Booking.com is partnering with Musement to further its attractions ambitions. Ray in Manila / Flickr.com