Skift Take

Klook has adapted seemingly well to the pandemic by switching its focus from international inbound travelers to domestic consumers. But along the way, it attracted a new set of commercial rivals. It must stay vigilant.

Travel startup Klook expanded rapidly in the tours-and-activities market until 2020. But the pandemic dried up its key source market of international travelers looking for things to do in destinations worldwide.

“More than 90 percent of our revenue had been coming from cross-border travel,” said Eric Gnock Fah, a co-founder of the company. “But today it’s 100 percent domestic.”

Fah said the Hong Kong-headquartered startup no longer makes most of its revenue from classic day tour products, such as guided walking tours. It introduced products such as “staycations,” which match a hotel stay with a restaurant meal, spa visit, or nearby attraction. The company also expanded its mobility options from intercity train reservations to car rental, particularly in South Korea, Taiwan, and Australia.

Earlier this year, Klook raised $200 million, and it used some of that capital to pivot to become more of an all-purpose online travel agency for primarily domestic travel. The startup has raised more than $720 million since its founding in 2014, and it vies with Berlin-based GetYourGuide as the most heftily funded startup in the experiences category.

We spoke with Fah to learn how the company had to change its inventory, use its enterprise software tools as a wedge to gain share, and partner with — rather than compete against — some of its rivals such as the superapp Grab.

Revenue Gains

As a private company, Klook doesn’t share financial details. But Fah said the early signs were positive.

“In many key markets, meaning the likes of Hong Kong, Taiwan, China, and to some extent Singapore, things have been faring quite well,” Fah said. “The domestic revenue has exceeded even the pre-Covid level of the inbound/outbound travel revenue, and in some cases, we’re actually even doing like 50 percent more than before.”

The crisis has required the company to add inventory in categories such as spa treatments, vacation homes, and car rentals. But the domestic travel sector hadn’t been digitized, particularly around the acceptance of online bookings and payments.

By getting an early lead in helping digitize this domestic travel content, Klook hopes it will retain it as a strong domestic segment even after the re-opening of international travel likely causes the company to reshift its focus back to international travelers and the types of experiences they prefer.

Partnership With Grab

Before the pandemic, Klook mainly faced competition from GetYourGuide, TripAdvisor-owned Viator, Booking.com, Expedia, and Trip.com.

Today it faces an array of companies trying to add domestic travel experiences to their e-commerce offerings. Players include fast-growing travel tech player and lodging operator Yanolja, Taiwan-based KKday, AirAsia’s digital app, Tencent’s WeChat, and Meituan.

Klook argues that adding supply and making it digitally bookable and serviceable in a seamless way is a difficult operation that some other players, such as food delivery services seeking to add travel as a new segment, may underestimate.

Grab, the ride-hailing platform giant in Asia, seems to have recognized that problem. Singapore-based Grab has partnered with Klook to plug in the missing inventory on its platform.

“We’ve basically plugged in our inventory so that any consumer on Grab can book an activity,” Fah said.

Leading in Taiwan

When Klook faces local competitors, it tries to get an edge by having a more seamless experience. For instance, it works with local attractions providers, such as an aquarium, to help the venue digitize their abilities to accept bookings and payments and serve guests. When Klook sells tickets, it often can offer same-day confirmed bookings via a mobile app. Other rivals often struggle to match that convenience because of the lack of a connection to the new enterprise software used by the attractions.

In Taiwan, during the peak late summer travel season after covid-related restrictions were eased, Klook claims its market share was double the next largest local player’s. Fah said officials in Taiwan pushed attractions vendors to digitize in an act of pandemic preparedness. Klook happened to have an enterprise software system that many vendors picked. An upgrade version of Klook’s system offered optional point-of-sale devices and electronic gates, similar to turnstiles, through partnerships with hardware vendors.

Over time, the attractions will become fully omnichannel and be able to take all types of bookings for all types of brands. But for now, Klook can have an early edge.

Klook also earned popularity for its business-to-business solution by expanding a product for making intercity buses and trains bookable online.

“This was a very offline segment in Taiwan,” Fah said. “We built a customized system to enable vendors to achieve real-time availability of not only bus schedules but also seating. We’re going to push this into Korea and elsewhere in Southeast Asia as well.”

Shifting Fortunes in Korea and Hong Kong

In South Korea, Klook appears to be a bit more on the backfoot.

“Yanolja has raised a lot of money and in some ways is flashing a lot of cash in the market,” Fah said. “So we’re being a bit more careful in our spending in Korea. But we’re optimistic long-term partly because the vaccination rate is quite high and we’re optimistic about when international travel resumes.”

In Hong Kong, Klook is optimistic about a government initiative launched in late November. The government is handing vouchers worth about $640 ($5,000 Hong Kong dollars) to stimulate local consumption. The products Klook offers are valid uses, so the brand hopes to get its share of the stimulus spending.

Worldwide, Klook has slashed its budget for paid search advertising, focusing instead on content and social marketing. That’s because, when it comes to seeking inspiration for domestic experiences, many consumers are finding inspiration via non-search routes, such as visual-based social media. Klook emphasizes marketing in these channels.

Prepping for the International Rebound

Fah argued that Klook is better than other online travel agencies at “creating” demand, or inspiring people to consider booking, say, a staycation with a spa experience when they hadn’t been thinking about it or searching for it. Other online travel agencies have been built to “capture” demand that already exists, using methods like paid search ads and TV advertising, but they’re not good at inspiring interest in new products or product bundles, Fah said.

For operators in the experiences segment, Klook has also had its engineers focus on a long-time pain point of “channel management.”

“We now provide a robust channel management tool for our partners connecting not only, of course, the international markets through the global OTAs [online travel agencies] but also the large e-commerce players such as Grab or even non-traditional players such as Japan Airlines,” Fah said. “We help experience operators distribute their inventory to more channels.”

Klook handles all customer service problems with agents at its subsidiaries and offices across the Asia Pacific. But it is working on enabling consumers and merchants to connect directly to resolve issues more speedily when partners agree to participate.

The innovations that can please a consumer long-term can be a danger to short-term profit. Klook seems to have cleverly navigated the shoals of the pandemic by changing the products it sells and its marketing strategy. But fat profit margins may have to wait until the pandemic ends. The company’s executives didn’t volunteer financial details.

Looking ahead, one of Klook’s investors, EDBI, a Singapore-based global investor, is working with Klook to grow the startup’s corporate service team for departments such as legal, human resources, and research and development, in Singapore.

Klook has been well funded. But a further capital injection from EDBI and other investors may eventually be needed if the pandemic continues to dampen the international tourist travel that provided Klook and its rivals with their highest-margin sales.

CORRECTION: This article has corrected the name of the investor to EDBI, from EDB.

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Tags: experiences, grab, Klook, online travel agencies, singapore, startups, tours, tours and activities

Photo credit: South Korea's National Folk Museum in Seoul as seen in 2013. Source: Ministry of Culture, Sports and Tourism Korean Culture and Information Service.

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