Digital, Booking Sites

Tours and Activities Race for Dominance in 6 Charts

Seth Borko and Rebecca Stone, Skift Research

- Mar 06, 2018 1:30 am

TripAdvisor Reveals Some of Its Tactics in Growing Experiences

Sean O'Neill, Skift

- May 08, 2019 11:40 am

Online Travel Agency Giants Are on the Backfoot in Tours and Experiences

Sean O'Neill, Skift

- Oct 31, 2019 11:00 am

Expedia CEO Admits Tours Business Is Underfunded

Dennis Schaal, Skift

- Aug 01, 2019 4:35 pm

Digital, Booking Sites

Booking.com CMO: FareHarbor Was a Smarter Buy Than GetYourGuide

Dan Peltier, Skift

- Apr 27, 2018 4:33 pm

Digital, Booking Sites

GetYourGuide’s New $484 Million Infusion May Force Consolidation in Travel Experiences

Sean O'Neill, Skift

- May 16, 2019 9:00 am

Digital

GetYourGuide Defies Conventional Wisdom on Tour Booking So Far

Sean O'Neill, Skift

- Apr 08, 2019 1:00 am

Digital

GetYourGuide Will Market Some Tours and Activities Under Its Own Brand

Sean O'Neill, Skift

- Jun 18, 2018 2:00 am

Digital

Tours and Activities Site GetYourGuide Secures a $75 Million Funding Round

Sean O'Neill, Skift

- Nov 02, 2017 10:00 am

Digital

Tours and Activities Site Klook Secures $60 Million Round as Goldman Sachs Invests

Sean O'Neill, Skift

- Oct 25, 2017 8:30 am

Special Report: Why the tours and activities market is more hype than the next big thing

Dennis Schaal, Skift

- Feb 21, 2013 6:21 am

Digital, Booking Sites

What 5 Years of Klook Says About the Strength of Its Asia Playbook

Raini Hamdi, Skift

- Sep 12, 2019 11:00 am

Digital, Booking Sites

Klook Receives $225 Million SoftBank Investment in Nod to Tours and Activities

Raini Hamdi, Skift

- Apr 09, 2019 5:55 am

Partnerships

Why the Shangri-La and Klook Partnership Isn’t as Odd as It Seems

Raini Hamdi, Skift

- Dec 05, 2018 7:30 am

Digital, Booking Sites

Klook Raises $200 Million to Expand Activity Bookings

Sean O'Neill, Skift

- Aug 07, 2018 2:00 pm

Travel Services, Tour Operators

Asian Activities Booking Platform Klook Heads to the Americas

Raini Hamdi, Skift

- Dec 01, 2017 1:30 am

Digital

Tours and Activities Site Klook Secures $60 Million Round as Goldman Sachs Invests

Sean O'Neill, Skift

- Oct 25, 2017 8:30 am

Digital

The Battle Over Tours and Activities Reservation Systems Rages On

Sean O'Neill, Skift

- Oct 31, 2019 1:30 am

Travel Services, Tour Operators

Airbnb Invests in Tiqets for Experiences That Are Not, Well, Unique

Dennis Schaal, Skift

- Oct 29, 2019 1:00 pm

Asian Tours Aggregator BeMyGuest Gets Funding Shot in Arm

Raini Hamdi, Skift

- Jun 24, 2019 8:00 am

Digital, Booking Sites

Airbnb Expands Experiences Into Multiday Adventures

Dennis Schaal, Skift

- Jun 13, 2019 7:45 am

Digital, Booking Sites

TripAdvisor Buys Tours and Activities Tech Provider Bokun as Connectivity Race Heats Up

Dennis Schaal, Skift

- Apr 20, 2018 8:30 am

Skift Take

Viator leads in online tours and activities, as Skift Research’s new analysis shows, but being in first also puts a target on its back. Rivals are working hard to close the gap and the race is far from over.

— Seth Borko

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The tours and activities space still remains fragmented and dominated by numerous small operators located in their individual destinations. Many of these operators manage their businesses and bookings manually, using pen and paper or rudimentary databases to keep track of reservations.

Aggregators have faced significant challenges in tapping into the market’s full potential, owing to the category’s lower online penetration rates and booking values. Nevertheless, the market is starting to change and online distributors now see the segment as a previously untapped source of commissions.

Similarly, for tour operators, offering a variety of booking options is important to target as many travelers as possible. Distribution via online travel agencies is likely to make that easier and result in more bookings overall.

As a part of our latest report investigating the tours and activities market, Skift Research analyzed the inventories of six major online tours and activities distribution platforms. We found that Viator leads in the online arena based on total number of listings and number of listings in the top 100 tourist destinations.

Our analysis also shows that this lead is not yet set in stone. Some sites are growing their inventory in an attempt to match Viator’s scale. Yet others are building specialists platforms that offer a more curated selection of tours focused on specific region.

With online travel agencies accounting for only approximately 4 percent of global tours and activities revenues, it’s clear that online distribution has a long way to go. What is becoming increasingly apparent, however, is that there is considerable untapped potential for the online travel agency players, as tours and activities bookings shift online and mobile.

Last week we launched the latest report in our Skift Research service, The State of Tours and Activities 2018.

Below is an excerpt from our Skift Research Report. Get the full report here to stay ahead of this trend.

Skift Research conducted a proprietary analysis of tours and activities inventory on six major online distribution platforms, Viator, Expedia, Airbnb, GetYourGuide, Klook, and Peek, to gain a general sense of regional listings and approximate current market shares. For all six sites, we compared how many listings were offered to U.S. consumers across 100 of the most popular tourist destinations worldwide.

To make valid comparisons, the same set of cities was used on each site. We collected information for publicly available, English-language listings as of February 2018. For sites that required a date range, we searched for inventory available in August 2018. Skift collected data on nearly 70,000 activities. Although not a complete sample, we believe our dataset represents almost 40 percent of all tours available on these six sites.

Viator had the highest number of listings for the cities we tracked.

Source: Skift Research, Company Websites

*For Klook, we are tracking unique suppliers of activities on its US-language webpage. This means that activities with multiple package options are only counted once. Please note that individual providers will vary on how they display activities with multiple package options but we believe our sampled data is broadly comparable and generally only tracks top-level activity options.

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Europe has made the most progress in offering online booking of tours and activities, with over 27,000 listings available across all five platforms in the cities we surveyed. This makes sense given Europe’s position as the leading tourist destination worldwide, with 671 million visitors. Asia has the next most cumulative activities offered.

Europe had the highest number of total listings, followed by Asia.

Source: Skift Research, Company Websites

Because of Europe’s position as the leading tourist destination in the world, we analyzed more cities in Europe than in any other region. We adjusted for that bias by looking at tours and activities offered on a per-city basis. With this adjustment, Europe remains in the lead in terms of average number of activities offered per city, but now North America and Oceania rate considerably higher, likely reflecting the technical sophistication of tour operators in cities such as New York and Sydney relative to other regions.

Europe has the highest average number of activities offered by city.

Source: Skift Research, Company Websites

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On a single country basis, the United States leads in terms of number of activities, followed by Italy and China, respectively.

The United States, followed by Italy and China, have the most activities.

Source: Skift Research, Company Websites

Further, our analysis largely corroborates Skift’s previous reports that Viator/TripAdvisor is in pole position when it comes to online attractions. It has the largest number of tour listings, more than twice as many as its next closest competitor. We estimate that Viator has nearly 55 percent market share worldwide for the 70,000 online listings that Skift Research collected. Our analysis does not account for overlapping inventory on multiple platforms.

Viator had the highest number of online listings globally that we collected.

Source: Skift Research, Company Websites

That doesn’t mean the game is over yet. Viator will have have to fight to stay in the lead, as our data also shows. For instance, many platforms see an opening to compete by being regional specialists. Klook is clearly positioned as an Asia expert, for example. It has 70 percent of its listings on that continent. GetYourGuide is tilted heavily towards Europe, which accounts for 57 percent of its inventory. Peek has a similar concentration in North America.

Other than Viator and Expedia, online travel agencies kew toward a specific geography.

Source: Skift Research, Company Websites

These regional specialist sites are also more likely to put a vetting process in place so that their platforms offer only higher quality tours. We recognize that one of the main limitations of our analysis is that it evaluates quantity over quality. The smaller platforms are more likely to offer a curated selection of tours, and so our analysis cannot fully take some of their advantages into account.

Subscribe now to Skift Research Reports

This is the latest in a series of research reports, analyst calls, and data sheets aimed at analyzing the fault lines of disruption in travel. These reports are intended for the busy travel industry decision maker. Tap into the opinions and insights of our seasoned network of staffers and contributors. Over 200 hours of desk research, data collection, and/or analysis goes into each report.

After you subscribe, you will gain access to our entire vault of reports, analyst calls, and data sheets conducted on topics ranging from technology to marketing strategy to deep-dives on key travel brands. Reports are available online in a responsive design format, or you can also buy each report a la carte at a higher price.

Skift Take

TripAdvisor’s key tactics to grow its tours and activities business include the discounting of some products for consumers, practically giving away a reservation system to operators, and rolling out a brand marketing campaign this year. The company talks like it’s in it to win it.

— Sean O'Neill

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TripAdvisor has said for some time that its strategy is to be one of the world’s largest online travel agencies for experiences such as parasailing excursions and walking tours. But on Wednesday it revealed more of the tactics it has been using.

Sales of experiences have been TripAdvisor’s fastest-growing revenue stream for a few years. However, the company faces competitors such as Airbnb, Booking.com, Ctrip, Expedia, GetYourGuide, Klook, KKDay, and others attempting to take their share of the pie for tours, activities, and attractions. Yet TripAdvisor argues it leads competitors in supply and bookings worldwide.

“Competitors are strong,” said CEO Steve Kaufer during an earnings call Wednesday. However, he noted that TripAdvisor has more online shoppers for experiences than any other player.

Kaufer claimed the company’s “existing demand footprint” for tour operators is “nearly impossible to replicate.” He noted the company has recently had between 400 and 500 million visitors a month on average to its various branded platforms each month.

“That’s the part that’s probably really hard for anyone else to replicate,” he said, presumably referring to the marketing challenge facing well-funded startups like GetYourGuide and Klook in cost-effectively acquiring customers.

SUPPLY GROWTH

Kaufer said TripAdvisor and its sister brand Viator are “leading on supply in most parts of the world.” He said the company now offers for booking 202,000 experiences across its platform, which is more than competitors have and more than double what it had a year earlier.

“Even if supply growth isn’t doubling again next year, that’s not really an issue for us,” said Kaufer said. He argued the company already had “a pretty comprehensive supply footprint in many, though not all, parts of the world.” The company saves much of its sales teams outreach efforts for so-called long-tail products, such as quirky tours that have limited online availability today, and geographic reach in markets where it’s still relatively underpenetrated, such as Asia.

“It’s a combination of our reps targeting the accounts that we’re best able to serve, the technology that automates the onboarding process so that our existing suppliers and new ones can add more of the product that they hadn’t bothered to list with us before, and to get it all right,” said Kaufer.

TripAdvisor will focus on demand because tour operators and experience providers will be drawn to it as a channel if it is providing the most cost-efficient leads.

Not everyone agrees with TripAdvisor’s strategy. Some competitors argue that if you increase your inventory faster than you increase your volume, then that just means you generate less demand for some suppliers. However, TripAdvisor’s recent revenue growth does speak for itself.

SOFTWARE ON SALE

Last year, TripAdvisor acquired Bokun, a software company that enables tour operators that were previously offline the ability to offer bookings online.

“We’re giving Bokun away practically for free,” said chief financial officer Ernst Teunissen. “We’re aggressively pursuing new suppliers with this software as a service offering. If we build this business up to scale very quickly, we can leverage that over the long term. It’s not a revenue driver for us in 2019 but is a potential revenue driver in the future.”

TICKETS AT A DISCOUNT

The commissions TripAdvisor collects for experiences and dining, on average, can be “very healthy,” Teunissen said.

In 2018, TripAdvisor said its experiences and dining unit posted $48 million in earnings before interest, taxes, depreciation, and amortization — a measure of profitability — on revenue of $372 million, for an adjusted percentage margin of 13 percent.

However, in 2019 TripAdvisor is forgoing some of that margin to drive business on simple, inexpensive experiences like tickets for museum admissions and group walking tours. In the first quarter of 2019, the company spent $24 million out of the $80 million on revenue back on product development, marketing, and discounting.

“In 2019 we’re expanding our offerings around ticketing and some other products at a lower price point, and we’re privileging them on our site,” said Teunissen. “We’re doing that to get more users to experience our product at a lower price point.”

That move is depressing the average order value of experience products booked on TripAdvisor and Viator but is a bet on getting people accustomed to booking tours and attractions online.

It will take at least three to five years for experiences and dining to generate margins similar to its hotel business, Teunissen said, given the cost of investments. However, he expected comparable margins, crediting the pricing power large players can have in a supply market that’s even more fractured than hotels.

MARKETING INVESTMENTS

Last year TripAdvisor spent $115 million on TV brand advertising, and it plans to do about the same this year. However, its message will shift over time. Last year ad campaigns emphasized TripAdvisor as a hotel-price-comparison site.

This year it will start to broaden that message to market TripAdvisor as a place to book experiences, the company said.

Skift Take

Expedia, Booking.com, and Ctrip are boosting the supply of sightseeing and experiences options that can be booked in merely a few clicks. But several factors are complicating any plans they may have to dominate bookings in this sector the way they have in flights and hotels.

— Sean O'Neill

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Online booking companies are stepping up their efforts to sell travelers tours, attractions, events, and activities. But the travel industry’s three largest online agency conglomerates — Booking Holdings, Expedia Group, and Trip.com Group — continue to have strikingly small market share in the sector.

Some industry observers assumed the giants would swoop in. After all, they already have millions of customers booking with them monthly. That gives them a marketing edge. It costs relatively little for them to try to upsell their customers on, say, a zip-lining ride or a wine-tasting tour.

But the titans of travel haven’t done that yet, and they may come to rue what appears from the outside to be either laziness or a miscalculation.

Attending a conference for sightseeing and experience operators can feel like entering an alternate universe where the world’s most dominant players in travel distribution are mere bit players. This week’s Arival event in Orlando had a striking absence of any “Big Three,” unlike airline and hotel trade conferences, where executives often grapple with issues related to the dominance of a few distributors.

In terms of interest for experience operators, TripAdvisor outdoes Expedia Local Expert. GetYourGuide frequently tops Booking.com, and Klook, KKDay, Traveloka, and Veltra all bite at the ankles of Ctrip. Representatives from the online travel agency brands of Expedia, Booking Holdings, and Ctrip weren’t even on-stage at Arival.

It’s not that the legacy players are standing still. Expedia, for instance, has doubled the products it lists in the past three years. But other players claim to be onboarding inventory at faster paces.

GOOGLE’S EDGE

So, who poses challenges to the traditional travel titans in this sphere?

Google could become formidable, at least in the attractions and standardized tours slice of the sector. Right now, all attractions operators participating in Reserve with Google are charged zero commission.

Many visitors to a destination and regional residents are trained to turn to Google for ideas on what to do. That habit gives the search giant a comparably low-cost way of acquiring customers.

One caveat: Google appears to be primarily interested in standardized offerings, such as a ticket to a museum exhibition or a standard walking tour rather than complicated products like, say, a multi-day safari.

AIRBNB’S AMBITION

Airbnb has openly stated its ambitions to lead in experience bookings. The online booking service is believed to have kept its digital marketing costs lower on average than the typical ones for Expedia and Booking.com. Airbnb seems to retain word-of-mouth popularity among enough people that it has to pay less to get them to book short-term rentals through it.

Airbnb aims to upsell these travelers on tours. It’s also encouraging rental hosts and property managers to add activity-related products, which can also be a comparatively cheap way of onboarding inventory.

“I list on Airbnb because I know a good number of executive assistants and office managers are in their twenties,” said Lauren Herpich, an operator of Local Food Adventures in the San Francisco Bay area, during an on-stage panel. “When they’re tasked with organizing their team-building experiences, they’re more likely to be on Airbnb looking for things to do.”

Herpich said she gets a lot of leads via Airbnb. But not so much elsewhere.

“I can count on two hands the number of bookings I’ve got through Expedia in five years,” she said.

One in seven people who booked an experience on Airbnb in the second quarter of 2019 had never booked a stay on the service before, the company told Fortune last month. The company told the media that, in more than 25 cities, more than 10 percent of customers who rent homes through it also book an experience.

TRIPADVISOR’S TITLE TO HOLD

The continued market leader remains TripAdvisor Experiences, partly through its brand Viator.

TripAdvisor’s fastest-growing segment is bookings within the last 48 hours of an experience starting, suggesting that some consumers are turning to the world’s most visited travel app for last-minute planning via mobile devices while in a destination.

Some operators have grumbled at various changes that TripAdvisor has made in the past few years. But the company has tripled the number of workers offering support to the suppliers.

“I know that doesn’t help a person who has had a bad interaction, but from the average perspective across the company, things are getting better,” said Dermot Halpin, who leads the experiences and vacation rentals businesses at TripAdvisor. Halpin cited improving scores from surveyed operators as a sign of improvement.

HOTELIER AND AIRLINE HOPES

Hotels have long worked with sightseeing and experiences operators to promote their services in exchange for kickbacks. Hotel giants like Marriott International have an opportunity to upsell guests who they already have and who they know are going to be in a particular place at a particular time.

“Hotels are not just another reseller,” said Susan DeBottis, who leads Marriott International’s global tours and experiences business. “We’re operators, too. We know the attention to detail to deliver a good customer experience, and we know how to fight the commoditization of brands from online resellers.”

But Marriott hasn’t attracted much industry buzz since its March 2017 equity investment in PlacePass, a tours-and-activities price-comparison service. It has quietly added attractions offers to the Wi-Fi sign-in page greeting guests at many of its hotels, but it hasn’t disclosed how successful it has been at driving activities bookings.

Some airlines also could upsell travelers on experiences, as AirAsia began attempting to do in earnest this year.

THE RISE OF THE REST

Experiences-focused online agencies GetYourGuide and Klook both claim to have amassed large numbers of shoppers and large amounts of inventory. Their recent mega-rounds of funding led by Softbank (GetYourGuide received $484 million in May, Klook received $225 million in April) may fuel their short-term growth. But the Softbank Vision Fund’s recent troubles may raise eyebrows.

The most intriguing aspect of companies like GetYourGuide, Klook, and KKDay is the investment by each one in actually running tours branded under their own name. The activities space doesn’t yet have a global brand for tours. If people come to associate having a tour with a particular brand name (“I took a GetYourGuide tour”) and keep going back to that brand for repeat business, that trend could become a hurdle for the legacy online travel groups to overcome.

While tours aren’t standardized like, say, a Starbucks latte, they are much more emotional purchases and the power of brand reinforcement is large, said Jack Louis, president of Fat Tire Tours, an experience provider in multiple destinations.

Vertical integration between the transaction side and the operation side could also give these companies a data edge in fine-tuning their work, vis-a-vis the established travel conglomerates. And because these companies are now too expensive for the giants to buy, they could remain thorns in the sides of the legacy players for years to come.

Affiliate advertising is also only now opening up to experiences providers.

This year, Travelpayouts, an affiliate marketing network focused on travel, added experiences retailers TourRadar and TUI-owned Musement, with Klook set to become active in November and GetYourGuide set to come on board in early 2020.

Affiliate links are used often by bloggers and non-travel companies to resell travel and can vary from text links to full branded display advertising (which Musement) uses. Unlike standard Google ads, affiliate links only pay when a transaction is completed, said Tatyana Buyanova, head of business development and partnerships at Travelpayouts.

Expedia has its own affiliate network, Expedia Partner Solutions. But when asked if it offers experiences providers through it, a spokesperson said they couldn’t share the names of specific partners.

Skift Take

Multi-day tours are an entirely different category, with significantly funded players like TourRadar, Tourlane, and Evaneos tackling different segments.

Smaller players like price-comparison service TourScanner and online agency KKDay continue to look for openings. Meanwhile, in Latin America, Civitatis expects to sell about $100 million worth of tours and activities this year in Latin America, approximately double the amount of the comparable period a year earlier, it said.

Tags: airbnb, booking holdings, expedia, experiences, getyourguide, Klook, tours and activities, Traveloka, trip.com group, tripadvisor

Photo Credit: Airbnb host Kenyatta Forbes holds a Macrame workshop at the Bing Reading Room in Chicago, Illinois, on April 11, 2017. Expedia, Booking.com, and Ctrip are struggling to gain traction in the selling of sightseeing and experiences compared with new players like Airbnb. Christopher Dilts / Airbnb Experiences

Expedia and Ctrip are the two large online travel companies that have so far not acquired a technology partner to foster the growth of their tours and activities’ businesses. GetYourGuide argues that these tech/connectivity companies should remain independent, but how long will it be before some of these smaller companies get scooped up?

— Dennis Schaal

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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.

Skift Take

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.

Whether the price tag on GetYourGuide was too much for Booking to admit, the tours and activities platform is likely still viewed as a viable buy for someone but that notion won’t do much to calm GetYourGuide’s nerves in the meantime.

— Dan Peltier

The tours and activities sector got some Earth-shattering news earlier this month when Booking Holdings announced it was acquiring experiences booking-software provider FareHarbor, likely one of the biggest deals in the space.

At Skift Forum Europe in Berlin on April 26, Booking.com CMO Pepijn Rijvers said he’ll start to experiment with FareHarbor in the coming months and will waste no time bringing the company into Booking’s fold.

Rijvers said Booking Holdings was attracted to FareHarbor’s depth in the United States, which already includes about 5,000 tours and activities providers. “If you look at this experiences space, from a technology standpoint this is a very immature segment still,” said Rijvers. “We think with this technology from FareHarbor we have a really well functioning platform.”

But when asked why Booking bought FareHarbor to scale up instead of a company like GetYourGuide with a wider reach, Rijvers said Booking doesn’t like the kind of value GetYourGuide creates for consumers. “We think there are better ways to create value,” he said.

“GetYourGuide probably needs to make immediate returns off of offering a museum ticket in Berlin whereas we can make it part of an integrated experience that might have completely different incentives,” said Rijvers. “And all of this technology with GetYourGuide is built towards monetizing the audience but that might not fit at all with how we want to fit it into the trip experience.”

GetYourGuide co-founder & chief operating officer, Tao Tao, who also spoke at Skift Forum Europe, said online travel agencies are a great business but haven’t been transformational for the company. “It’s not easy to take your existing customer base and funnel it into something else,” he said. “Booking.com is one of the European companies we really respect. One of the former CEOs of Booking is on our board. So we know Booking.com very well, that said we’re very confident in our abilities to execute.”

Tao, despite admitting that the company has had acquisition offers since it was founded in 2008, feels that it’s still early days for the company to sell and said GetYourGuide has only reached the tip of the iceberg with 2 to 3 percent market share. “We also believe we can execute faster on our own,” he said.

FareHarbor is a commission-based platform and doesn’t charge companies upfront fees to use it. “We really like that model as well and I don’t think we’ll make any changes to that, but who knows,” said Rijvers.

BECOMING A ONE-STOP-SHOP BRAND

But Booking.com was already selling tours and activities in 40 cities before the FareHarbor deal, but only after someone had booked an accommodation on the platform.

“Our vision is that we want you to be able to book everything on Booking.com and that you shouldn’t have to have a hotel booking to do that,” said Rijvers. “This quarter we will start testing [stand-alone tours and activities bookings]. The reason why we started with the hotel booked audience is that it’s just easier from the demand side.”

Booking.com plans to heavily invest in tours and activities this year, said Rijvers. “But it still will be relatively small, of course, to our accommodations business that we’ve had for 20 years.”

“This is driven by the mobile device that allows us to start offering ancillary services and allow us to be more relevant to consumers more often,” said Rijvers. “That’s based on the hypothesis that in the end this will drive more loyalty and build a larger direct brand.”

SPENDING WITH COMPETITORS

Booking Holdings CEO Glenn Fogel recently told Skift that going forward the group doesn’t want to spend as many advertising dollars with competitors as it currently does. The company spent some $4.1 billion last year on performance-based advertising.

Rijvers said being independent is not that simple. “The travel industry does coopetition marketing,” he said. “Everyone meets each other and everyone would like to be completely on their own and independent. But that’s just not possible.”

Booking.com could up its spend with Google and other search engines, or Trivago, or TripAdvisor, but that’s not the preferred route, said Rijvers. “I’d love to be able to give that value to customers,” he said. “This is a segway to becoming a platform where you can book anything you want to do in destinations.

Still, Rijvers acknowledged that Booking.com depends heavily on Google and that the relationship between both companies remains warm.

“I’ll give the example of Google’s dynamic search ads which is a product we co-developed years ago because we wanted to scale keywords where there’s relevance and drive growth,” said Rijvers. “That’s the quality of the relationship we have with Google and that’s also the type of relationship we’re seeking with anyone in the marketing space.”

Booking.com is putting pressure on Trivago, which saw its stock price plummet 26 percent on the day it announced first quarter earnings because Booking.com has pulled back on its spend on Trivago. “Trivago’s brand advertising has inspired us to dig a little bit harder in that segment,” said Rijvers. “I will invest in anything where I can responsibly drive growth and metasearch certainly plays a part in this.

Rijvers, however, doesn’t give Trivago too much credit. He and his team constantly face decisions on where to direct ad spending as consumer behavior shifts and various platforms fall in and out of popularity.

Skift Take

“We’re fairly rational in how we invest whether it’s short-term growth, short-term profits or long-term growth, long-term profits,” said Rijvers. “And I don’t think that’s about Trivago at all. But certainly, we’ve been making changes in our marketing spend and approach and we do so all the time.”

SoftBank has upended the sales of tours and attractions by investing record-breaking sums in GetYourGuide and Klook. That’s boosted valuations to such lofty levels that it may leave only a few options: Merge or go public.

— Sean O'Neill

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.

Skift Take

“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. GetYourGuide may close an approximately $300 million funding round this year with possible participation by new investors like SoftBank and Temasek. If true, investors would be betting that the attractions booking agency can continue to defy several assumptions about young travel companies.

— Sean O'Neill

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The tours and activities sector has some conventional wisdom: The brutal cost of acquiring customers will drive margins down. Curated travel listings can’t scale. Walking tour operators will reject the soft branding of their offerings. Consumers travel too infrequently to become loyal to one online aggregator of experiences. The online travel giants will eat the lunch of small startups.

But GetYourGuide, a Berlin-based travel startup, has often defied that conventional wisdom. Investors seem to like GetYourGuide’s somewhat contrarian path. The startup has raised $175.5 million in funding.

What’s more, GetYourGuide may soon close an approximately $300 million funding round, with participation by possible new investors such as Temasek, a Singaporean sovereign wealth fund, according to multiple news reports. The company had no comment. Yet if the news pans out, such an investment would likely place a billion-dollar valuation on the company.

Sales are up. Between June 2018 and March 2019, GetYourGuide sold 10 million tours. It took a prior decade to sell its first 15 million.

Here are some of the pieces of conventional wisdom that GetYourGuide appears to defy.

BELIEF: MARGINS CAN ONLY GO DOWN

Customer acquisition is the critical piece of the puzzle to some experts.

One reason: Attraction vendors have begun to protect their trademarks. Case in point: the Empire State Building now prohibits paid search advertisers bidding on a large range of terms with its name. Museums and other attractions are jumping on board, too. The trend disadvantages unfamiliar brands trying to get a foothold in customer acquisition. Aggregators with strong demand sources, such as direct, will gain an edge.

In a sense, GetYourGuide and its rivals compete at a disadvantage for customer acquisition with the travel conglomerates. Between a third and a half of visitors to Booking.com, Expedia, TripAdvisor, and Airbnb come direct. When customers come for flagship products like lodging, those giants can easily cross-sell tours to them.

GetYourGuide said it’s holding its own in customer acquisition. It receives more than 20 million unique visitors monthly, up from 9 million a month two years ago, across all its website and mobile app domains, it said.

However, TripAdvisor, for example, gets 490 million unique visitors across its domains that it can cross-sell to.

GetYourGuide has to pay for most of its traffic, either by what is effectively a revenue share with its partners, such as in a partnership with EasyJet, or directly via digital advertising, such as by buying ads on Google and Facebook. An unanswered question is how much of its traffic it derives from partnerships like EasyJet.

This year, GetYourGuide will make a significant investment in brand marketing in Europe, said co-founder and chief operating officer Tao Tao.

“Consumers have a maximum of one or two particular brand associations with particular categories of products and services, such as Uber and Lyft for ride-sharing in individual markets,” said Tao. Whichever company becomes a household name for online tour booking will gain an edge that will be hard to displace, he argued. Cross-selling is also harder than it looks, he said, using this example: If you, as a consumer, have ever gone to a price-comparison engine to book flights but then gone elsewhere to book a place to stay, you’ve shown how consumers develop habits.

Brand marketing may be an uphill battle for startups like GetYourGuide, its arch-rival Klook (which has raised $300 million to date), and other players.

Skeptics say that to afford traditional brand advertising, GetYourGuide would have to cut its margins. Typical industry margins are about 20 percent.

GetYourGuide waves away talk of margin pressure. The global tours and activities market may be about $150 billion a year, estimates Skift Research. Operators still sell about four-fifths of their experiences offline, said tech vendor TrekkSoft. So there’s plenty of attractions inventory for everyone to bring online and sell, as Tao argued at Skift Forum Europe last year. As of today, GetYourGuide’s inventory may represent only 3 percent of the total inventory available.

Consumers make half of GetYourGuide’s bookings today via mobile web and the company’s app, suggesting that the brand already has in-destination awareness among some consumers.

BELIEF: MORE IS MORE

When it comes to online sales of hotels, the conventional wisdom is that “whoever has the most inventory in the end wins.”

GetYourGuide currently offers more than 36,000 experiences in more than 140 countries. However, TripAdvisor and its sister brand Viator which together are the largest drivers of volume list more than 200,000, as of Monday. Klook, the Hong Kong-based rival, lists more than 50,000 activities.

GetYourGuide is selective, depending on the category. For attractions, like access to popular sightseeing spots like the Burj Khalifa or the Petronas Towers, it grabs all the content it can get. It wants a breadth of geographic coverage for every significant tourist attraction worldwide.

“But for walking tours and other activities, we take more of a selective approach,” said Tao. “When we consider, say, walking and Segway tours in Rome, do we think all of them are really great? Probably not.”

However, curation has a mixed track record. Case in point: HotelTonight typically limited search results to 15 hotels per search. While its acquisition by Airbnb is respectable, some critics say the limited offerings contributed to constraints in its popularity.

“This is one of the biggest misconceptions we hear from analysts, this assumption that all travel products are like hotels,” said Tao. “Lodging is an availability-constrained, commoditized product. But experiences are a service, or a more discretionary want.”

“If you need a place to stay, you’ll accept what’s on offer,” said Tao. “When I was a student, I might have paid for the worst hotel in Paris because at least it was cheap and I needed a place to stay. But I wouldn’t pay for the worst walking tour in Paris. To earn repeat customers for experiences, we have to be selective.”

Not everyone agrees. Viator used to have a curated model, but around the time of its acquisition by TripAdvisor, it “went mass.” Its calculation was that breadth is what the market wants. In Asia, Ctrip has been rapidly onboarding attractions content globally. In 2017, Expedia processed more than $500 million in tours and activities, with plans to double that volume soon.

“Many players just want to get as much inventory as possible,” said Tao. “But if you increase your inventory faster than you increase your volume, then that just means you generate less demand for some suppliers. We’re instead prioritizing being better partners for our suppliers.”

Still, the verdict on selectivity is still out. Airbnb’s experiences offering, which is much more strictly curated, has reportedly remained small, contributing less than $20 million to its revenue last year based on roughly 1.5 million bookings, according to The Information.

BELIEF: SUPPLIERS WON’T LIKE SOFT BRANDS

Last June, GetYourGuide began soft branded tours, testing an effort in which it would take tours run by independent operators on a white-label basis and market them under the GetYourGuide brand and vet them according to brand standards.

Since then about 50,000 people have taken GetYourGuide branded tours. GetYourGuide employees handpick tour guides, give them training, and have a say in the content, such as tour length and itinerary.

The conventional wisdom says that suppliers will resist external branding. The types of people who go into the experiences business are often independent-minded people who balk at ceding control.

Ownership, rather than partnering, is a way around this. Taiwan-based KKday, has sold branded, or “KKday signature” tours, since 2017. About 20 percent of KKday’s inventory of 20,000 attractions is made up of its official tours. KKday arranges the itineraries, picks the tour guides that wear KKday vests, and hires and brands the buses (such as on this Taipei tour).

Outside observers might note that branding by KKday or GetYourGuide or another startup might appeal to investors like SoftBank’s Vision Fund, which has invested in Oyo, which soft brands budget hotels, and WeWork, which standardizes co-working spaces.

Skeptics doubt that branded tours will scale globally. If consumers and suppliers truly liked it so much, all the players would be trying it.

Viator and others have offered branded tours before. For example, Walks, City Wonders, and Context have for years tried variations on building multi-city brands around their walking tours.

GetYourGuide said it’s still early days but that the first results are promising. Consumers rate its tours higher on satisfaction surveys than the industry averages, Tao said.

“Local operators like that we can drive pretty predictable and consistent business volumes,” said Tao.

BELIEF: ONLINE GIANTS WILL MUSCLE IN

TripAdvisor, which sells tours under its own and the Viator brand, remains the leader in producing the most online revenue for suppliers, according to tour operator software providers who made that judgment based on the booking volumes that pass through their systems.

“Looking at the future, it’s worth looking at the Spanish- and the Mandarin-speaking markets, the two most spoken languages in the world,” said Jens Thraenhart, CEO of the consultancy Chameleon Strategies.

“While Civitatis leads the Spanish-speaking market, Ctrip has recently announced a major focus on activities that will appeal to the domestic and outbound Chinese travel market,” Thraenhart said. “Ctrip might be the most interesting player to watch overall.” For context, read “How TUI and Rezdy Fit Into Ctrip’s Growth Strategy Outside China.”

In 2018, other online giants became more serious about attractions. Booking Holdings acquired FareHarbor, an experiences booking-software provider. TripAdvisor acquired Bokun, a tech vendor. In theory, the companies could use their vertical integrations to try to drive a wedge between suppliers and other aggregators. Operator management software typically collects data on activity sold and can reveal customer volume, a supplier’s retention rate, and other data that the tech giants could use for their own aggrandisement.

GetYourGuide said it isn’t worried.

“At a high-level, we haven’t seen any impact to our business yet,” said Tao, referring to the reservation software acquisitions. As of now, both FareHarbor and Bokun continue to offer multi-channel distribution. If that strategy changed, suppliers might revolt, he said.

“It’s not in a supplier’s interest to give all their data to what are basically monopoly companies,” said Tao. “The platform players are incentivized to optimize for distribution through their channels, but you as a supplier ought to be maximizing your volumes, which requires having access to multiple channels.”

Other competitors include TourRadar, Withlocals, Civitatis, Tiqets, Veltra, Exest, Evaneos, wholesaler Hotelbeds’s Isango, and TUI Group’s Musement. Bus tour operators like Grayline also do direct sales. For more context, see Skift’s deep dive “Tours and Experiences: The Next Great Untapped Market in Online Travel.”

More venture capital will flow into the experiences category. Marketplace businesses like GetYourGuide aggregate demand and match it with supply, and venture capital can pour jet fuel on that growth. For example, GetYourGuide’s product is now available in 22 languages, more than any of its competitors, it said. The company’s headcount recently topped 500, and later this year it will move into a new headquarters in Berlin.

“The more scale you have, the more attractive margins you can negotiate to afford more marketing,” said Tao. “Scale gives you a lot of data for product improvements and customer acquisition.”

Last December, Veltra, one of the pioneers of online tour booking, debuted on the public markets. A smallish company, it nevertheless represents the first initial public offering in the space and probably not the last.

GetYourGuide is betting that travelers will prefer to book GetYourGuide-branded tours over locally branded ones. This diagonal integration echoes marketing moves made by Oyo in hotels and RedAwning in lodging rentals. But will it work?

— Sean O'Neill

GetYourGuide, a tours-and-activities booking platform, will begin in August selling tours under its own brand name.

The Berlin-based startup, which has raised $175.5 million in funding, will rely on marketing partnerships with local activity operators.

The company will mine its data on customer preferences from having sold 15 million tours since its founding nearly a decade ago. It intends to use the lessons it has learned to set standardized criteria for how tours should be run.

To be labeled a GetYourGuide tour, an operator must agree to follow its best practices regarding meeting points, check-in processes, starting times, duration, and other factors. In return, the retailer will send more customers the operator’s way.

This summer, five GetYourGuide-branded tours will debut in western European cities, which haven’t been revealed. Next year, the company plans to boost that number to 100 branded tours in 15 global destinations. More details can be found at a promotional microsite that debuted Monday.

CLARIFICATION: This article originally took GetYourGuide’s word and described its move as “an apparent first for the sector.” But TripAdvisor-backed Viator has pointed out it has offered a white-labeled branded private tours product for a while.

Musement, an Italian-based activities retailer, said it has been producing its own tours for about a year by running a platform where a few hundred licensed tour guides in Italy, France, and Spain can be matched at select destinations along with tickets to an attraction — thanks to the startup’s technical integration to the software provider of the attraction itself. Musement said its branded tours account for about a fifth of its business today.

A BRANDED FUTURE?

Co-founder and CEO Johannes Reck said his goal in several years time is for a majority of his company’s revenue to come from selling its private label inventory — at least for tour inventory in the most popular destinations. “But for special experiences away from the top attractions, we’ll continue to see local suppliers dominate our platform,” Reck predicted.

It’s too early to say if the just-debuted branding effort will make some tour operators feel muscled out by a large online player.

Consumers book a majority of activities in-destination. GetYourGuide is betting that having its brand on display on the ground will help with its overall marketing as a more cost-effective way to acquire customers than competing with online giants in digital marketing for less common advance bookings. But the 400-employee company said it doesn’t plan to compete with Expedia and others by opening offline sales kiosks.

WIDESPREAD ADOPTION

Reck said the average traveler thinks of activities booked through GetYourGuide as being GetYourGuide experiences — unlike when they book a flight or hotel through an online travel agency and recognize the operator as being different from a retailer.

If true, other activity retailers may face the same problem and may be inclined to copy GetYourGuide’s branding effort. It stands to reason that tours branded by Expedia, Viator, TripAdvisor, Booking.com, Klook, and others could follow. Rather than fight consumer perceptions, the retailers could accommodate them.

Last November, in one possible hint of changes to come, China’s largest online travel agency, Ctrip, signed an exclusive partnership deal with Big Bus Tours, an activity operator that serves more than 4 million customers a year, where the two companies would work more in tandem on marketing and product development.

When asked about that, Reck said, “Ctrip is definitely a role model company, though it primarily focuses on the Chinese market for demand.”

Many industry observers expect more marketing integrations like this, but professionals outside of the tours-and-activities industry are often skeptical about how such loose branding arrangements might work in reality.

Hotels and restaurants have long had a franchise model which involves more investment by the brands and more cooperation by the operators than marketing partnerships do.

It’s an open question whether a less defined marketing partnership can hold up well when problems arise. In an extreme example, if a consumer is unhappy with something that happens, who would get blamed — or sued?

DIAGONAL INTEGRATION

Reck calls the branding effort as “vertical integration.” But that term usually refers to when distributors actually own the makers of a product or service.

Diagonal integration might be a more apt term.

A relevant example of diagonal integration might be how in India companies like Oyo first offered branding and distribution to small hotels in exchange for minimum guarantees of consistent service. In the U.S., companies like RedAwning have attempted the a similar branding model for vacation rentals.

Yet the verdict is still out on the success of this model. Oyo has since moved to directly leasing the properties it rents as a more reliable way to assure quality and consistency.

Meanwhile Airbnb, through its Trips product, has hesitated to either tell operators how to run their businesses or to request that all marketing be done under its own name.

A negative analogy to GetYourGuide’s private label effort would be with Amazon, which uses customer data to design products that it pays manufacturers to build under its Amazon Basics private label. Some suppliers feel pressured by the giant retailer’s demands or by its competitive force in the market.

Reck disliked that analogy and said that its participating tour operators will like GetYourGuide branding because they will earn more money from activities because they will receive more promotion and more customers.

A positive analogy, Reck said, would be video streaming giant Netflix, whose creation of original programming for its Netflix original division has helped match niche content to relevant audiences more efficiently than blockbuster-driven movie houses and TV networks had. But that analogy stumbles in that GetYourGuide isn’t directly controlling the production the way Netflix does.

Some say technological trends point to more diagonal and vertical integration being inevitable. In a white paper presented at World Travel Market 2017, industry veteran Alex Bainbridge speculated that many big bus tours would be converted to autonomous vehicles and that the online travel giants like Ctrip would have the most resources to invest in that technological switch.

NEW BRANDING, BUT STICKING WITH SAME-DAY

On Monday, GetYourGuide previewed its rebranding with a hipper logo and other details. The company hired DesignStudio for the rebrand, which was the same company Airbnb hired for its own rebrand a couple of years ago.

The company is not planning to change its name, despite some internal debate, Reck said. It is also not planning to add multi-day tours, except for a couple of current exceptions, despite internal debate.

GetYourGuide room believes room for growth is vast. In an interview on-stage at Skift Forum Europe in April, GetYourGuide Co-Founder and Chief Operating Officer Tao Tao said, “TripAdvisor, Expedia, GetYourGuide, Airbnb, all the startups, everybody together comprises maybe 2 percent market share of the global market, in terms of what is actually transacted.”

“None of us should be worrying about taking some market share from each other, but rather how to grow the 2 percent to 20 percent.”

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.

— Sean O'Neill

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.

FUTURE ODDS

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.

Hotelbeds, a fast-growing business-to-business wholesaler, has been ramping up its tours-and-activities business and its coach tour business rivals all other players in many markets.

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.

Skift Take

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.

Klook’s rapid growth suggests that a growing number of Chinese and other Asian outbound travelers want to travel independently, instead of in groups, and thus book their activities a la carte. That portends a sea change in the travel industry.

— Sean O'Neill

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This is likely the largest funding round for a tours and activities company to date.

Hong Kong-based travel activities booking platform Klook has completed a nearly $60 million Series C funding round.

Goldman Sachs joined as a new investor, co-leading the round with existing investors Sequoia Capital and Matrix Partners.

The $60 million round overtakes the previous record for investment in tours and activities site, namely GetYourGuide’s $50 million round, in 2015.

It was only in March that Klook raised a $30 million Series B led by Sequoia Capital China. The startup has raised $97 million to date.

Since that time, the website and mobile app have tripled the number of “travel activities and services” that it offers consumers. The company mostly covers Asia, though it technically has inventory in 120 destinations across the globe. It needs to build up its listings of tours, activities, and services in North America, Europe, and Australia.

Founded in 2014, the company said its pace of business has since sped up. It recorded over five million annual trips in 2016. But it said it had one million bookings in September 2017 alone, the company says.

Unlike competitor tours-and-activities products like GetYourGuide, Viator, and Peek, the Klook App includes local transit and has a broader range of inventory at major theme parks. It also focuses on using QR code e-vouchers to match the Asia-Pacific preference for that method of ticketing.

FIGHTING GROUP TRAVEL CLICHES

Klook’s inroads fly in the face of Western cliches about Asian travelers preferring group travel. The bulk of its young users in China, South Korea, Philippines, Thailand, and Indonesia are independent travelers. The company also distributes activities to partners like Cathay Pacific and travel agencies for resale. It also powers some travel search on Tencent’s popular messaging platform WeChat.

Since March, Klook, a shorthand for “Keep Looking,” has doubled its staff to more than 400, who are located in 13 offices across Asia.

Stephanie Hui, head of the principal investment area at Goldman Sachs in Asia ex-Japan, said in a statement: “Our investment, together with the network and resources of Goldman Sachs, will help Klook further expand and provide services globally.”

Goldman Sach also recently invested in another Asia-based travel startup: FabHotels, a branded a budget hotel brand based in Gurgaon, India with more than 225 hotels in two dozen Indian cities. The firm led a $25 million Series B investment that was announced in July.

Eric Gnock Fah, co-founder and president of Klook, said the company would use some of the funding to apply machine learning to facilitate smarter search interfaces, such as visual and vocal search.

But the company has its work cut out for it. TripAdvisor-owned Viator, Expedia, and GetYourGuide remain the largest direct-to-consumer marketplaces for tours and activities. See Skift’s update on the tours-and-activities sector earlier this month.

Skift Take

Kayak’s dropping of tours in its mobile apps shows that the sector may not be as addressable as envisioned and isn’t ready for prime time.

— Dennis Schaal

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This is part one of our three part series on the online tours and activities market, focusing on the buzz around venture-backed startups in the space. Part two here.

The online and mobile tours and activities market may be the most-buzzed-about topic in the world of travel tech, but it has not been buzzy enough to catch on with consumers or with at least one travel meta-search company: Kayak recently ceased offering in-destination activities and sightseeing excursions through its mobile apps.

In so doing, Kayak terminated a year-and-a-half-old experiment and partnership with Berlin-based GetYourGuide, one of the hottest of the many new tours and activities companies.

Kayak’s decision symbolically places a pin into what some view as inflated prognostications about the tours and activities market. That’s especially true when you consider that mobile platforms are the most-suited — or should be — for travelers who are already at their destinations and are looking for something exciting to do.

These tours and activities options, which generally have to be booked a few days in advance, certainly didn’t seem to be a fit for Kayak and its mobile users. That’s because they didn’t book tours when they picked flights or hotels through Kayak, and tend to look to different brands, or purchase a tour offline, once they are already traveling.

“It seems to be a small addressable market, and there’s a lack of consumer dissatisfaction/compromise to improve through mobile delivery,” says one insider.

Hype or opportunity?

Was Kayak’s decision an abberation? Is there the potential to make big bucks in the tours and activities market? Is it hype or the next, still-untapped opportunity in travel?

Much of the interest in the tours and activities market over the last few years has been generated by dozens of startups looking for funding, tech providers seeking new business, and the trade press, most of which cite a 2011 PhoCusWright study on the U.S. tours and activities sector.

A superficial reading of the study would have investors scampering to collar a startup or two for their funding pleasure. The report states:

THIS LANDMARK STUDY UNCOVERS A SURPRISINGLY LARGE MARKET: NEARLY TWICE THE SIZE OF THE CAR RENTAL AND SIGNIFICANTLY LARGER THAN THE CRUISE AND TOUR OPERATOR SEGMENTS COMBINED. TRAVELERS [U.S.] SPENT NEARLY $27 BILLION ON ACTIVITIES, ATTRACTIONS, EVENTS AND TOURS IN 2009.

Digging deeper into the study, PhoCusWright says tight supplier control of activities such as athletic events and theater performances reduces the “addressable travel activities market” to $20.8 billion.

But, in addition to tours and attractions, included in that $20.8 billion number are products ranging from spectator sports to pre-reserved taxis. PhoCusWright then whittles the online travel activities sector to $4.1 billion, pointing out that the vast majority of tours and activity sales comes from suppliers, largely through offline means.

Suddenly, the nearly $27 billion tours and activities market, which was nearly twice as large as the U.S. car rental market ($14.2 billion) and more than double the girth of the U.S. cruise market ($12 billion), becomes just one-third the size of the cruise market at $4.1 billion for online and mobile players.

Still, a $4 billion market in the U.S. alone — not to mention the rest of the globe — is substantial and nothing to dismiss.

A weird sector

The challenges of bringing the tours and activities sector online and into the mobile arena are legion: It is a tremendously fragmented market, and PhoCusWright found that fewer than 40% of the companies in it have an online presence at all, while the average transaction is just a tad more than $100.

Visit your local dive or bike shop, and you’re more apt to see the owner keeping track of available product on an Excel spreadsheet or legal pad than through a sophisticated inventory control system.

Then there’s another factor that sets tours and activities apart, making it distinct from any other sector in travel, says Rod Cuthbert, the founder of Viator, and currently CEO of Rome2Rio.

“There are tens of thousands of small operators, and they don’t think collectively at all,” Cuthbert says, adding that they don’t think of themselves as part of the travel industry or any industry, for that matter. “The owners of hotels and other businesses in the travel industry are often principally business people, but tour operators are often close to their offering.”

Current travel industry players in the tours and activities market include distributors such as Viator and GetYourGuide; a hybrid distributor/operator in Gray Line, tour operators such as Thomas Cook, and TUI; Expedia; tech companies, and dozens of startups ranging from Vayable to Triptrotting and Peek, offering everything from tours to local guides, and events.

It’s tremendously difficult to start from scratch in this sector. New-entrants have to get access to tour products in each new marketplace, and battle for consumer traction.

“It is entirely fragmented, and there are no big brands you can partner with to give you scale,” Cuthbert says.

Like several other analysts of the tours and activities sector, Cuthbert sees a bubble among the startups, and predicts “many of them will see a timely demise.”

That may be particularly true for the myriad of peer-to-peer startups, where margins are thin and brand recognition is fleeting.

Here’s the executive summary of the 2011 PhoCusWright report on tours and activities.

Skift Take

Since Klook’s launch five years ago, big changes have occurred in the sector. TripAdvisor bought Viator, TUI-Musement, and Booking-FareHarbor, and most recently, Airbnb invested in Atlas Obscura. All this, plus competition from online travel agencies, will test Klook’s playbook, even though its strategies seem sound for now.

— Raini Hamdi

Tours and activities seller Klook expects another strong performance in 2019, its fifth anniversary year, despite troubles in north Asia impacting the business.

The Hong Kong-based company is projecting more than 60 million bookings this year and is striving for another triple digit year of growth of gross revenue, just like it recorded in 2018, co-founder Eric Gnock Fah told Skift.

Revenue last year amounted to $1 billion, Klook claims, but declined to reveal the number of bookings, which would give an idea of its average booking value.A projection of 60 million bookings is high when compared to the bookings of rival GetYourGuide, which, like Klook, recently received funding led by SoftBank Vision Fund. The Berlin-based company told Skift it sold 10 million tours, activities and attraction tickets in the nine months between June 2018 and March 2019.

But what counts is not how much Klook is selling but what it is selling and the unit economics, according to tours and activities expert Douglas Quinby.

“If you look at Klook’s listings for top destinations across Asia, some of the top-selling products [WiFi and SIM card packs, transfers and transport tickets, and some sightseeing tickets] are very low-cost products, many selling for less than $10 or even $5,” said the founder and CEO of Arival. “They have also been very aggressive in selling other higher-priced tours and tickets at aggressive discounts. Some operators report seeing pricing on Klook near wholesale rate levels.”

“Klook appears to be pursuing a growth strategy smartly tailored to the Asian market. They have focused on products that are relevant to younger, cost-conscious travelers from the region – products you don’t always see on other global OTAs. The big question is whether those customers purchasing $4 SIM cards today will book $50 experiences next year…But we have seen this playbook before across Asian markets: invest first in acquiring customers, and profits will come later. And there appears to be plenty of capital, patience and appetite from investors,” added Quinby.

According to leading tours and activities meta-search engine TourScanner in its just released annual report 2019, the average booking value of players in the sector is $157. Assuming Klook achieves a triple-digit 100 percent growth in revenue this year, over 2018, it will rope in $2 billion in revenue. Based on 60 million bookings, its average booking value will be $33.33.

Klook needs to achieve a much higher triple-digit growth in order to reach the sector’s average of $157.

STICKING TO THE PLAYBOOK

But given the Hong Kong pro-democracy protests, China’s economic slowdown, South Korea’s brawl with Japan, that’s a moot point. Gnock Fah, however, said bookings remain strong for the Hong Kong-based company because, unlike a crisis like SARS, travelers are continuing to travel, just to different destinations.

“South-east Asians are going to Japan and Taiwan [instead of Hong Kong], while North Asians are going to South-east Asia. And we’ve seen a pickup in South Koreans, who are quite a meaningful source for us, going to Taiwan and Vietnam [instead of Japan],” he said.

Eric Gnock Fah, co-founder, Klook. Photo credit: Klook

“China is our number one outbound market, however, the trade war is impacting the manufacturing sector the most and this affects mostly group tours, whereas on the FIT [Free Independent Traveler] side, which is coming more from the services industries, we haven’t felt so,” he added.

Skift Take

For the first time, an Asian startup, Klook, is attracting the highest funding ever in tours and activities. For the last time, can skeptics of this travel sector please bow out?

— Raini Hamdi

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SoftBank Vision Fund is investing $225 million in Hong Kong-based Klook, the largest financing in the global tours and activities sector to-date.

This brings Klook’s Series D funding raise to $425 million, and the company’s total raise since inception in 2014 to $521.5 million. Softbank Vision Fund led the round with participation from existing investors Sequoia China, Matrix Partners, TCV, and Our Crowd.

Klook would not disclose the valuation basis of the latest round but for certain it fortifies its unicorn status while tours and activities itself gains added legitimacy. Doubting Thomases who are still in two minds about the real size of the sector, the lower prices of local tours and attraction tickets compared with flights or hotels, the discounting by players to win share, the highly fragmented marketplace, may be silenced.The latest deal is also significant as “it is a sign of the times that a startup built in Asia is leading funding for a major global travel industry sector — sayonara Silicon Valley,” said Douglas Quinby, founder and CEO of Arival, who is bringing the tours & activities event to Asia from this year in Bangkok in June.

“The $200 million [Series D] raise last year was a milestone. This is a further affirmation of the opportunity in the sector,” said Quinby. “It definitely ups the ante, again, for everyone involved. Other players with regional or global ambitions, such as KKDay and GetYourGuide, will have to raise. TripAdvisor and Expedia will see more competition on their doorstep.”

GetYourGuide is said to be closing a $300 million funding, as Skift reported, with potentially new investors such as Singapore’s Temasek.

With the additional funding, Klook intends to scale its operations in Europe and expand further in existing Asian markets such as Japan, Klook’s COO and co-founder Eric Gnock Fah told Skift in an interview.

MOBILE FIRST

To some, Japan’s growing popularity among Asian and global travelers, the 2020 Olympics, the 40 million arrivals anticipated next year, and lending support to the home base must be a reason for SoftBank’s interest in Klook. Just last week, SoftBank and SoftBank Vision Fund inked a joint venture with Oyo to flood Japan with budget hotels.

This is just a piece of the puzzle. The bigger piece has Softbank’s hallmarks of investing generally in a player that it sees is the emerging category leader in each industry, with the potential to scale further globally.

Klook got there because it is “a leader in taking a mobile-first approach in the sector,” said Lydia Jett, partner at SoftBank Investment Advisers.

Added Jett: “The company has seen great success in scaling its business across different geographies and cultures, and we are excited to help them drive further innovation in the global travel industry.”

Last year, bookings on mobile devices tripled and accounted for more than 75 percent of total bookings, according to Klook.

“I continue to be a strong believer that in-destination booking [majority on mobile] is a different game than pre-arrival booking. In-destination has an ecosystem of its own,” said Klook’s Gnock Fah.

More than 50 percent of bookings now are in-destination and he expects this to rise further with Klook pushing for mobile-first in Asia and the three continents outside Asia it entered last year, Australia, Europe and North America.

“I see a role in companies driving such consumer habits and innovations. Traditional booking of flights and hotels is not mobile. We are telling consumers that it makes a lot more sense for them to be booking a tour, activity, attraction when they are in the destination. It’s a true hassle-free booking and they have a more flexible schedule. That’s where we do best.

“That’s why we see a pickup in mobile booking in the Western markets, even though the mobile usage is lower than in Asia,” he said.

It’s also why although everyone from online travel agencies to review sites and alternative accommodation platforms is jumping on the tours and activities bandwagon, Gnock Fah thinks it’s good for Klook.

“OTAs getting into the business helps consumers understand that they don’t need to be booking a mom-and-pop tour down the road that may not give them the best service or price, that they can rely on a platform.

“But once a consumer book online pre-arrival, that same consumer will start switching to mobile as soon as he or she realizes it’s so easy to book digitally . The question then is who can win the game on mobile. I think we’re a strong contender,” said Gnock Fah.

Likewise, Arival’s Quinby said, “To succeed, players in this sector need to be mobile first and bookable last minute with direct-to-gate ticketing; they must have access to the major attractions in key markets at competitive pricing, which is not easy, and they need to be prepared to get bloody with well-funded companies and lots of discounting.”

Klook said it made $1 billion in gross bookings last year, representing a triple digit growth over 2017. It is expecting another triple digit growth this year. It would not reveal more financial figures.

The platform now boasts more than 100,000 tours and activities in around 270 destinations worldwide. It works with no fewer than 10,000 industry partners. It claims over 25 million visitors monthly across its web, mobile web and app.

SCALING UP

Gnock Fah said there is much to do in order to scale up. In a market like Japan, for example, merchants are still reliant on “legacy technology.” He gave the example that Japan’s trains still use paper tickets, hence the need to work with rail operators and merchants to digitize the tickets into QR codes so customers can simply scan and go.

“We have been investing in Japan and with SoftBank as backer, we look to do more on digitizing services in Japan,” he said.

“The tough part of our business is we cover so many services [tours, activities, attractions, train tickets, dining experiences, et cetera] that no one size fits all. You can create an airline booking engine and apply it to all airlines, same goes for hotels or ride hailing. The inconvenience of our business is it is fragmented not just in merchants but in category of services. So we pick our battles, for example, we digitize Japan rail while with Euro rail it could be about something as basic as the user experience with Wi-Fi connectivity,” he said.

Klook will focus on scaling up demand and service offers in Asia this year. Asia will remain its key market but Europe has strong growth potential.

“The upcoming Tokyo Olympics will result in travel from west to east, which is a market we’re going after. As the network effect grows stronger, we will also be valuable for European inter-regional travel. In fact, we’re already seeing a promising upward trend on Europeans consuming our services within Europe,” he said.

In North America, Klook already has a team on the ground who will continue working with suppliers and help them understand how the new millennials, especially Asians, are traveling and booking independently.

Gnock Fah described Softbank as “a strategic investor.”

“They do take a longterm view of how this industry will grow and what role the company would play in the Softbank ecosystem, which includes the likes of Grab, Uber, Oyo,” said Gnock Fah.

“These are not random investments. When we speak to Masa [SoftBank’s CEO Masayoshi Son], we can see the vision of what he’s trying to build and how we could fit into that.”

Skift Take

Hotel chains and tours and activities are converging again as Shangri-La Hotels & Resorts and Klook strike a partnership. The deal, following Marriott International’s stake in PlacePass last year, has its potential pitfalls but the upside could be huge for both parties if they can make it go smoothly.

— Raini Hamdi

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One is exclusive, the other inclusive. Jet set versus young set, legacy versus cutting edge. Shangri-La and Klook may seem to be strange bedfellows but their partnership of a hotel company and a tours booking outfit announced Wednesday shows their objectives are not incompatible.

Both want to reach out to new customers, Shangri-La the younger affluent clientele, Klook the luxury market. Shangri-La wants its Golden Circle members to earn and burn more points and, after adding merchandise from bathrobes to iPhones to the redemption list, sees tours and activities as the next big thing, which it is.

Klook constantly wants to expand not just its user base but the number and quality of offerings, which Shangri-La hotels, with its CHI, The Spa network, over 500 restaurants and other attractions, provide, said its chief revenue officer Anita Ngai.

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The partnership also creates new revenue streams for both parties,

HOW DOES IT WORK

Shangri-La guests can book Klook experiences throughout their stay, even at the last minute, at the concierge desk via a tablet uploaded with a Klook app that has been tailored for the chain. The booking is redeemed via a QR code or an e-voucher. Now available at Shangri-La hotels in Singapore, Bangkok and Hong Kong, the Klook Concierge will be rolled out to the chain’s over 100 Shangri-La, Kerry, Jen and Traders hotels in 76 destinations globally next year.

The bill for the tour or activity will be included in the guest’s total check upon checkout. Golden Circle members will earn points for each booking made through the Klook Concierge.

Shangri-La is effectively selling Klook’s tours and activities and earns a cut. But the chain’s vice president of loyalty partner and marketing, Wee Kee Ng, told Skift this revenue is “secondary” to his chief goal of increasing the share of redemption, even if it’s by just 5 percent. Members typically redeem free nights, upgrades, dining at Shangri-La hotels but increasingly want “personal experiences beyond the hotel product,” Ng said. And a loyalty program that isn’t engaging for them is one that isn’t working, he added.

Ng isn’t worried if a Shangri-La guest ends up booking a cooking class at a competitor hotel at the Klook Concierge instead of at a Shangri-La, saying “we are now focusing on the customer, not on what we have,” emphasizing a shift within the group towards being customer-centric than chain-centric.

The collaboration also sees Shangri-La hotels going beyond selling rooms to curating new experiences to be offered on the Klook platform for anyone to buy. Thus, a customer can buy a Dine Like A Royal experience at Shangri-La Kowloon, comprising dinner in the presidential suite featuring the hotel’s specialty cuisines, or enjoy a champagne sunset on the balcony of a suite at Shangri-La Dubai which overlooks the Burj Khalifa, the world’s tallest building, without staying at the hotel.

It’s a way for the chain to gain new Golden Circle customers, as each booking earns points, and to showcase a Shangri-La hotel to new clients, Ng said. The potential revenue is not bad either. The dining package, for instance, costs $602 for two persons and is for a minimum of four persons maximum eight.

These unique experiences aren’t available for Golden Circle members to redeem. However, Golden Circle members can redeem points for Klook experiences across Asia, and worldwide by Q3 2019, which will include over 60,000 tours, must-eats and attractions.

LET THEM EAT CAKE

Klook’s Ngai said Shangri-La and Klook are “totally aligned on one thing — serving customers,” with their discussions in the past six months focusing on areas such as “what kind of activities should we show, what’s the user flow, are there customer service issues?”, rather than on the commercial aspects of the deal.

Skift Take

Given its new lofty valuation of more than $1 billion, Klook has become too expensive for most online travel companies to justify as an acquisition. But would a possible IPO within a few years be successful?

— Sean O'Neill

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In what appears to be the largest funding round for a activities booking agency to date, Klook has closed a $200 million Series D funding round.

Sequoia China, Matrix Partners, Goldman Sachs, Boyu Capital, TCV, and other investors participated in the round. The Hong Kong-based startup has raised $300 million to date. The current infusion gives Klook an estimated valuation of more than $1 billion, the company said.

The $200 million round overtakes the previous record for investment in a tours and activities agency, namely GetYourGuide’s $75 million round in October 2017.

Klook was founded in 2014 by CEO Ethan Lin, a former investment banker at Standard Chartered and Citibank; Eric Gnock Fah, chief operating officer, who was previously a banking analyst at Morgan Stanley and Atlantis; and Bernie Xiong, chief technology officer, who had previously been an engineer at MPayMe.

Will Klook embrace TV brand advertising? “We are open to using a mix of channels that yield the best results in terms of engaging travelers,” Anita Ngai, chief revenue officer, said. “We always make sure that our mix is adapted to different markets, based on how consumers spend their media time and the maturity for the online travel landscape.”

Klook has succeeded in Asia Pacific. But Western markets may have nuances in how they book differently. It remains to be seen how Klook will tailor its approach to its expansion in the U.S.

That said, Asia Pacific is not one region but a collection of more than 20 markets and currencies, and even more cultures and sets of consumer preferences. So the company has experience with localizing.

The U.S. is a much more mature market in terms of online travel compared to Asia, on average and speaking generally. Familiarity and trust with online travel platforms, credit card, and high-speed mobile data penetration, etc. all contribute to the forming the differences in traveler booking preferences. This means the marketing channels that are most effective in activating and building trust with travelers will be different, and the focus and formats of Klook’s messages that will be most successful in engaging customers will also be different.

Ngai said, “Domestic travel is important for many markets, but particularly in the U.S. The proximity between the US and other countries differ quite a bit compared to most markets in Asian, so whereas the average Asian traveler from a higher income country may be traveling more than 3 or 4 times average in a year, the average American traveler will likely be focused on their one big trip per year. This will have all kinds of implications for booking preferences, such as how early they start planning for the trip, average booking value, etc.”

Given its Hong Kong origin, the startup has its strongest inventory in Asia Pacific. Unlike most tours-and-activities services, Klook’s mobile app often includes local transit ticketing and has a broader range of inventory at major theme parks.

It also focuses on using QR code e-vouchers to match the Asia-Pacific preference for that method of ticketing. It also offers instant booking, instead of requiring users to book more than a day in advance — as is more common among its rivals.

Klook’s new funding will enable it to expand its inventory in North America further. Beginning in spring 2018, the company began offering more diverse offerings in the U.S. to Asian customers. The company believes that it can also gain an edge among U.S. travelers headed to Asia with its direct and occasionally exclusive partnerships with local suppliers.

That will cause it to rub shoulders increasingly with rivals like Airbnb Experiences, TripAdvisor-owned Viator, and Expedia. Booking.com appears to be increasing its activities inventory from a low base after its April acquisition of FareHarbor, an activities distribution startup with commercial relationships with many operators in North America.

Klook claimed to be on track to hit $1 billion in gross bookings processed this calendar year, but it didn’t disclose its revenue. It drives some of those sales through partnerships rather than strictly consumer-facing marketing. That’s important because the cost of marketing to acquire customers can be high.

Is the company’s goal to list as a public company on a stock exchange? “We are always preparing and ready for potential listing,” said Anita Ngai, chief revenue officer. “What we are prioritizing at this moment is user experiences and continuing with robust growth.”

Skift Take

Hong Kong-based Klook has selected the Americas as its first stop for expansion outside Asia. To beat the deeply entrenched competition, it will have to find partners that can adapt to the needs of Asian travelers.

— Raini Hamdi

Editor’s Note: Gateway is a Skift series featuring first-hand, original stories from our correspondents embedded in cities around the world. The logo reflects where the correspondent is based and not necessarily the article’s focus. Read about the series here.

Travel activities booking platform Klook, which recently took on Goldman Sachs as a new investor, will open an office in the U.S. after sensing a rising tide of Asian independent travelers to the U.S., Canada, and Latin America.

Klook plans on having a U.S. team operational from January in either San Francisco or New York. The team will source travel activities in the Americas that fit Asian travelers’ interests, and ramp up outbound marketing.

Klook’s president and co-founder Eric Gnock Fah would not go into details on how big the team will be, only saying “the U.S. market is so dynamic, our local team will be moving rapidly and work in an agile way.”

“We hope to create a notable impact to both activity providers and travelers in the U.S. by the end of 2018,” he added. “Our [Asian] travelers will start to see more diverse offerings in the Americas from the end of Q1 in 2018.”

The company also aims to tap the U.S. market heading to Asia. Klook currently has offices in 13 cities including its headquarters in Hong Kong.

‘RIGHT TIMING FOR THE AMERICAS’

Klook is entering a market ruled by giants like TripAdvisor-owned Viator and Expedia, but Gnock Fah believes the timing is right for Klook to expand.

The Series C funding of nearly $60 million led by Goldman Sachs should help open doors for a U.S. expansion. After amassing over nine million visitors each month to its website and app since launching in 2014, Klook wants to open doors for U.S. travel providers to reach the fast-growing Asian market.

Klook’s success in Asia has hinged on helping Asian travelers book services at the last minute or upon arrival in destination. These include local transportation, Wi-Fi, single-day tours, outdoor excursions, and food and dining options. Other platforms often require users to book more than 24 hours in advance and don’t offer a best-price guarantee.

As Asia’s largest in-destination travel activities booking platform, Klook’s goal is to help U.S. travel providers tap into the fastest-growing travel markets in the world like Greater China, South Korea, Indonesia, and Thailand.

BUT DON’T THE LIKES OF VIATOR AND EXPEDIA DO THAT ALREADY?

There’s a gap where U.S. travel companies “are unable to effectively reach out to users in Asia-Pacific region,” according to Gnock Fah.

While the U.S. has vibrant resources in terms of travel partners, and many popular destinations for many Asian travelers, Gnock Fah said there is a lack of experiences tailored for the Asian market.

A deeper understanding of the home market is where he thinks Klook can make a difference for travelers.

“On the supply side, it will be our priority to find service providers who are able to adapt to the diverse Asian traveller interests,” said Gnock Fah of his strategy. “It will be our priority to find partners who are able to adapt to accommodate the varying languages, socio-economic levels, payment channels, and dietary restrictions of Asian travelers.”

At a glance, it may seem that Asia’s outbound travel market, estimated at over 180 million travelers per year, is distributed rather evenly, with mainland China taking up 37 percent, the rest of North Asia totalling 31 percent, and Southeast Asia and India at 32 percent. Gnock Fah points out, however, that Asia isn’t homogenous; it consists of numerous markets with their own distinctive languages, cultures, and religions.

“There isn’t one formula that fits all as each country comes with its unique travel preferences and purchasing behavior,” he said. “We foresee we may spend more time to help enhance U.S. operators’ understanding of Asia including knowing the priority of which market to target for their offerings.

“Since our launch in 2014, we’ve seen success in forming merchant partnerships in Asia. Our team has helped merchant partners to successfully tap into markets they knew little about by leveraging Klook’s expertise of Asian travelers. We hope to ensure that merchants in U.S. will also have the chance to take advantage of Klook’s market knowledge and tech solutions to diversify and optimize their revenue source.”

THE U.S. OUTBOUND OPPORTUNITY

Gnock Fah believes its strong supply network and exclusive benefits from direct partnerships will give it an edge for U.S. travelers headed to Asia. As of October 25, it claimed over 30,000 attractions, tours, activities, and essential travel services offered in more than 120 destinations, with over 3,000 industry partners.

Upcoming international events like Winter Olympics and Summer Olympics held in South Korea and Japan in 2018 and 2020, respectively, pose another opportunity.

“We are expecting a further influx of travelers from the Western countries into Asia,” said Gnock Fah. “As Asia’s largest in-destination travel activity booking platform, we hope to attract these travelers with our wide variety of activities in Asia and our user experience is also designed for native English speakers.”

Klook is also cementing its mobile-first and instant confirmation solutions, and creating personalized experiences through artificial intelligence tools since demand for spontaneous travel will keep growing. Its statistics show that 50 percent of users book Klook upon arrival, and 70 percent of those bookings are made via mobile.

Skift Take

The company is investing in voice search technology along with personalized experiences for users. Some of these features will likely be rolled out by mid-2018. Klook’s rapid growth suggests that a growing number of Chinese and other Asian outbound travelers want to travel independently, instead of in groups, and thus book their activities a la carte. That portends a sea change in the travel industry.

— Sean O'Neill

This is likely the largest funding round for a tours and activities company to date.

Hong Kong-based travel activities booking platform Klook has completed a nearly $60 million Series C funding round.

Goldman Sachs joined as a new investor, co-leading the round with existing investors Sequoia Capital and Matrix Partners.

The $60 million round overtakes the previous record for investment in tours and activities site, namely GetYourGuide’s $50 million round, in 2015.

It was only in March that Klook raised a $30 million Series B led by Sequoia Capital China. The startup has raised $97 million to date.

Since that time, the website and mobile app have tripled the number of “travel activities and services” that it offers consumers. The company mostly covers Asia, though it technically has inventory in 120 destinations across the globe. It needs to build up its listings of tours, activities, and services in North America, Europe, and Australia.

Founded in 2014, the company said its pace of business has since sped up. It recorded over five million annual trips in 2016. But it said it had one million bookings in September 2017 alone, the company says.

Unlike competitor tours-and-activities products like GetYourGuide, Viator, and Peek, the Klook App includes local transit and has a broader range of inventory at major theme parks. It also focuses on using QR code e-vouchers to match the Asia-Pacific preference for that method of ticketing.

Klook’s inroads fly in the face of Western cliches about Asian travelers preferring group travel. The bulk of its young users in China, South Korea, Philippines, Thailand, and Indonesia are independent travelers. The company also distributes activities to partners like Cathay Pacific and travel agencies for resale. It also powers some travel search on Tencent’s popular messaging platform WeChat.

Since March, Klook, a shorthand for “Keep Looking,” has doubled its staff to more than 400, who are located in 13 offices across Asia.

Stephanie Hui, head of the principal investment area at Goldman Sachs in Asia ex-Japan, said in a statement: “Our investment, together with the network and resources of Goldman Sachs, will help Klook further expand and provide services globally.”

Goldman Sach also recently invested in another Asia-based travel startup: FabHotels, a branded a budget hotel brand based in Gurgaon, India with more than 225 hotels in two dozen Indian cities. The firm led a $25 million Series B investment that was announced in July.

Eric Gnock Fah, co-founder and president of Klook, said the company would use some of the funding to apply machine learning to facilitate smarter search interfaces, such as visual and vocal search.

But the company has its work cut out for it. TripAdvisor-owned Viator, Expedia, and GetYourGuide remain the largest direct-to-consumer marketplaces for tours and activities. See Skift’s update on the tours-and-activities sector earlier this month.

Tags: funding, Klook, tours and activities

Skift Take

FareHarbor and Bokun act as if they’re unstoppably on the way to becoming giants. But the market for booking systems for sightseeing and experience operators remains very much in flux.

— Sean O'Neill

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One of the toughest decisions facing operators in the sightseeing and experiences sector is which reservation and distribution system to use. So the biggest software providers are competing aggressively on price to woo them.

Since early 2018, when TripAdvisor bought one system, Bokun, and Booking Holdings bought another system, FareHarbor, the two brands have ramped up marketing campaigns while also pushing discounts.

The systems providers believe that the sector will coalesce around a handful of players. They want to be among the winners who grab the most share

The world has dozens and dozens of reservations systems, which fall into a few buckets. Maybe a hundred or so are essentially mom-and-pop software businesses, with basic functionality often targeted for a specific product, such as, say, heli-sking.

Another set of systems have taken venture capital money to grow faster. Peek has taken at least $39 million. BookingKit has raised tens of millions of undisclosed funding, including a Series C announced in May. Rezdy has taken about $6.5 million, while Xola has collected about $6 million, and Checkfront has received about $1 million.

Lastly, FareHarbor and Bokun represent companies tied to online travel agency groups, which provide capital and expertise but also, deservedly or not, have a reputation for greediness and shadiness. (FareHarbor had raised about $7.5 million from investors and millions more from friends and family before selling.)

Low-cost, niche, and profitable system players like Bookeo and Rezgo could hum along for years. But the venture-backed companies like Peek may have a clock ticking. They need fast growth to be able to justify an initial public offering or to sell at a high price to a potential acquirer.

“All the exit opportunities have pretty much dried up,” said Max Valverde, CEO at FareHarbor, during a panel talk on Wednesday at the Arival conference in Orlando, Florida.

“You can be a local, lean business, or you can go to be a big company,” Valverde said. “It makes me think of something Mark Cuban told me when we were talking about FareHarbor and he said, ‘When you run with the elephants, there’s the fast and there’s the dead.'”

Perhaps. But it isn’t entirely obvious that Airbnb, Expedia Group, Trip.com Group, or a less obvious player like a Hotelbeds or a Sabre might not be interested in acquiring a booking management service for sightseeing and experiences — or at least acquire one that’s on a path to profitably. The news Tuesday that Airbnb led an investment round in Tiqets, a ticketing and reservation system primarily for attractions like museums, hinted at some remaining opportunities.

In fact, online demand generators like Airbnb, Ctrip, and Expedia Local Expert have incentives to try to help reservation systems grow, especially in markets where they have gaps in supply, such as for Spanish-language operators, where Civitatis is a significant player.

“We bought Bokun last year because we were responding to the observation that most of the industry is not online,” said Dermot Halpin, president of attractions and vacation rentals at TripAdvisor. “We wanted to help catalyze this with a low-cost offer that lets operators manage their businesses and distribute their product.”

Klook, to cite another example, has built software to help operators handle online booking and digital payments with about 10,000 signed up so far. Perhaps it wants to get more business-to-buiness technology into its system.

“In any region of the world, there’s not enough supply available via professional reservation systems,” said Lukas C.C. Hempel, managing director of BookingKit, in an interview.

In other words, the majority of operators of sightseeing and experiences businesses still are working with paper and pencil and Excel spreadsheets.

Until more operators more quickly adopt state-of-the art reservation systems, demand generators like Booking.com, Traveloka, and all the other usual suspects will struggle to offer travelers a full array of the best-matched experiences.

DO FAREHARBOR AND BOKUN PLAY FAIR?

Since Booking Holdings bought FareHarbor and TripAdvisor, with its sister brand Viator, bought Bokun, several industry players have said to operators that it’s risky in the long-run to work with a reservation system owned by a distributor.

“Operators are concerned about the pricing power that OTAs [online travel agency systems] have exerted in other sectors,” said Ruzwana Bashir, co-founder and CEO of Peek.

Independent reservation systems can decide to optimize based on what their operators need, said Jason Morehouse, co-founder and CEO of Checkfront, during a panel talk. “But the systems tied to OTAs are somewhat driven by OTA needs. We think there’s a conflict of interest.”

“It’s fear-mongering at this point,” responded Valverde of FareHarbor. “We have data privacy lawyers surrounding us.”

As Skift has previously reported, Johannes Reck, co-founder and CEO of Berlin-based GetYourGuide, has disagreed. “We’re not fear-mongering, we’re stating the obvious,” said Reck in August. “TripAdvisor and Booking.com are running these systems at a loss in order to capture and monopolize data from tour operators. This is not in suppliers’ best interest.”

When asked on-stage if FareHarbor shares operator data with other Booking Holdings companies, Valverde said, “Absolutely not. We’re built on a completely different tech stack. We have a Chinese wall. We have competition lawyers surrounding us and watching our every move.”

When asked if TripAdvisor gives sort-order preference in the listings consumers see to operators who use Bokun, Halpin said, “No.” Operators using Bokun were for a while able to get preference for prominent placements for sponsored ads in the search listing, but the company has stopped doing that.

Valverde said that the fear that Booking Holdings would use FareHarbor to do something “sketchy” has proven to be unfounded and that it’s “playing fair.”

Some operators still feel ill-will toward FareHarbor. Lisa Lavelle of Catalina Food Tours claimed that FareHarbor had “held its reservations hostage” when her company tried to switch away from FareHarbor to another system. When Catalina Food Tours told FareHarbor it was leaving, FareHarbor locked it out of the system and told it that reservations would be refunded, disrupting its business, Lavelle said.

The claim drew scattered but significant applause from the crowd, suggesting the situation resonated in some way with other operators.

Valverde said that FareHarbor didn’t want to be on the hook for reservations in case the operator was going out of business.

“We solved the situation to your satisfaction,” Valverde said.

“No, you didn’t,” Lavelle said.

“Well, we resolved it,” Valverde said. “There may be ill will, but we resolved it.”

TOUGH CHOICES

Today, many operators are heavily swayed by price in picking a reservation system. While understandable, that’s not the common practice in other, more-established sectors, where shopping for systems on the value provided and its relevance to an operator’s business is more standard.

In response to an operator focus on price, several companies have been pricing aggressively to gain share.

Exhibit A: After TripAdvisor acquired Bokun, it offered a 0.1 percent fee per booking. It later changed to a 2.9 percent per transaction fee on bookings an operator takes directly and that pass through the system. Bookings through TripAdvisor and Viator are free to manage in the system. Bokun has a separate credit card processing fee.

The focus on system price has led to a confusing set of pricing structures. Some systems charge a percentage fee per transaction, but pass along another fee for, say, credit card processing. Others charge monthly subscription fees. Others offer a hybrid of subscriptions and per-transaction fees.

Each model has pros and cons. Systems dependent on the monthly subscription models, for example, may be perversely incentivized to limit, say, operator customer service interactions because each additional interaction is a cost.

But some operators dislike booking fees because they already have slim profit margins on each transaction. A subscription model might let them grow their customers without growing their system costs, at least up to a point. For example, if an operator runs a seasonal business, they will dislike paying fixed monthly costs off-season when they’re having few customers.

Given these tensions, the market seems to be shifting now to hybrid models of subscription plus transaction-based fees. But not for all players. FareHarbor has stuck with its per transaction model.

Yet operators arguably need to get beyond the fixation on fees, which can start low but ramp up later. Finding a system that closely meets their priorities and can handle their type of product is probably more important, as is choosing a system that will likely stay in business for a long time, given that migrating between systems can be a headache.

As operators start looking to value rather than price, systems will likely change their marketing, too.

“In three years, booking systems will stop saying they can do it all and will instead have clear pitches, like ‘We’re the best for observation desks,’ or ‘We’re the best for food tours,’ or ‘We’re the best for handling local regulations and taxes in your particular geographic market,'” said Hempel of BookingKit.

Tags: arival, attractions, booking holdings, checkfront, distribution, experiences, fareharbor, peek, reservation systems, rezdy, startups, tourist attractions, tours and activities

Skift Take

Airbnb may never become a clone of its online travel agency competitors, but it will eventually go more mainstream to attract a wider range of travelers and locals, as the Tiqets investment suggests.

— Dennis Schaal

Airbnb led a $60 million investment round into Tiqets, a signal that the homesharing giant realizes that unique experiences only address the needs of a limited segment of travelers and locals.

With the Series C financing round, backed by existing investors HPE Growth Capital and Investion, Airbnb becomes a minority investor in Amsterdam-based Tiqets. Since its founding in 2014, Tiquets has raised total funding of $105.5 million, according to Crunchbase.

Tiqets, which tilts toward mainstream attractions from museums to iconic destinations such as the Statue of Liberty/Ellis Island and the London Eye, said it will use the financing to widen its distribution, and improve its product for both consumers and attractions venues.

Airbnb prides itself on offering so-called unique experiences, ranging from a Hasidic rabbi’s walking tour of Brooklyn to Mezcal tastings in Mexico City, and a picnic and horseback ride in the bush near Mount Kenya.

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But as the Tiqets investment suggests, Airbnb must realize that it is only addressing the needs of a limited segment of travelers with off-the-beaten track tours. Lots of tourists like to visit the Vatican, if they travel to Rome, for example.

Airbnb didn’t immediately respond to a request for comment.

That Airbnb would eventually become more of a conventional travel seller is no huge surprise — these kinds of things happen all the time.

For example, after TripAdvisor acquired tours and activities seller Viator in 2014, the first order of business was to broaden Viator’s offerings from a curated set of attractions to a much more expansive range of listings.

Booking.com in its early days focused almost exclusively on hotels, but eventually expanded into alternative accommodations, car rentals, tours and activities, and recently flights.

And even Airbnb, which initially focused on apartments, mostly in urban areas, has broadened out into vacation rentals in resort destinations, as well as boutique hotels with its acquisition earlier this year of HotelTonight.

Some things, such as Airbnb going more mainstream in both lodging and attractions, are not necessarily inevitable, but very likely.

This is especially true as Airbnb ponders becoming a public company in 2020, and will need to show the stock market that it has ample room for growth — beyond short-term rentals.

Skift Take

Aleaner and freshly funded BeMyGuest is in a stronger position to harness the growth of Asia’s tours and activities sector. But competition is also mightier.

— Raini Hamdi

BeMyGuest, the tours aggregator that slashed costs at the end of last year, has announced a new round of Series B funding, largely from existing investors.

The Singapore-based company that connects operators of tours and activities to distribution partners in Asia would not disclose the funding amount. Its co-founder and CEO Blanca Menchaca told Skift it is “more than sufficient to support the company through its next phase of growth.”

BeMyGuest last closed a Series A funding of $8.5 million in July 2017. Its top investor remains Raffles Venture Partners Singapore. Other parties in Series A included technology investor Koh Boon Hwee, Spring Seeds Capital, Chan Brothers Groups and individuals from famous Asian hotel families, Meng Xiong Kuok and Leland Kwee.

The latest Series B funding comes six months after founder and former CEO Clement Wong stepped down for personal family reasons. But the company also had to cut costs, sources said, letting go its chief commercial officer Graham Hill (now head of Asia for Luxury Escapes) and several other members of the team.

“All companies go through restructuring stages with a goal of maximizing business performance,” said Menchaca when asked by Skift about this.

“At the conclusion of 2018, decisions were directed toward establishing a more focused strategy supported by a cost-efficient and performance-driven team. We have been doubling revenue for several consecutive years; automation plays a big part in being able to achieve results.”

She would not disclose revenue figures.

TECH LEAD

Investors are betting on a trend of customers migrating from booking tours and activities offline to online, forcing tours and activities players to follow the tide, said a BeMyGuest statement.

BeMyGuest recently launched a SaaS (Service as a Software) platform to connect these fragmented players with low level of technology adoption to its distribution network. According to BeMyGuest, this network includes 50 of the largest online travel agencies in Asia such as Ctrip, Yatra and Travel.jp.

As of July 2018, BeMyGuest claims a roster of more than 500 distribution partners and 4,500 suppliers of 25,000 activities, attractions, day tours, ground transfers and events in 900 destinations.

Menchaca said the new funding will be used to strengthen its “tech lead.”

BeMyGuest’s API, which connects tours and activities players to distributors, is the first of its kind with a data structure designed specifically for attractions, tours and activity products, and designed specifically for the Asian region.

It connects directly with online travel agencies, delivering booking capabilities and electronic voucher delivery in multiple Asian languages. “The complexities include full pricing, availability, categorization of activity types, cancellation policies and price parity restrictions,” said Menchaca.

“Connectivity is one thing but account management and deep/seamless integration play a major role in producing a thriving partnership,” said Menchaca. “And, finally, our expertise and experience is 100 percent Asian-focused.”

BeMyGuest will need all that to harness growth, as competition in tours and activities has intensified. Ctrip, a BeMyGuest partner, for example, inked two new partnerships in March, one with TUI Group’s Musement and the other with Rezdy.

Rezdy gives Ctrip’s Chinese customers and Trip.com’s international ones access to around 80,000 new travel products and services across the world, while Musement, 150,000 products.

Competition arises even from direct consumer sites. Hong Kong-based Klook in April received $225 million from SoftBank Vision Fund. It believes the future of tours and activities lies in in-destination than pre-arrival booking which online travel agencies do.

Then there are unlikely newcomers, such as AirAsia, which aims to tap into its base of more than 100 million customers to sell in-destination activities and tours, part of the airline’s move to be an online travel player.

In the last three years or so, AirAsia has built up an offering of 15,000 experiences in 80 destinations served by AirAsia directly. The content comes both through contracts with operators and partnerships with online travel agencies and content aggregators, according to a release by Arival, a new event in Asia dedicated to tours and activities.

Skift Take

Give Airbnb credit for sticking to its blueprint by offering Airbnb Adventures in its own image, avoiding typical mainstream expeditions. Whether this will develop into a reliable service and big business for the homesharing company will be proven on Colorado cliffs and at Galapagos coffee farms.

— Dennis Schaal

Two-and-a-half years after debuting Airbnb Experiences, Airbnb is putting itself into direct competition with traditional tour operators with the launch of a multiday tour service called Airbnb Adventures.

In its announcement Thursday about the expansion of its single-day tours, Airbnb Experiences, the company pointed to examples of Airbnb Adventures, including a three-day trip tracking lions with Samburu warriors in Kenya ($515 per person); a six-day Slow Food Safari in the Galapagos ($3,500); a five-day Mystical Oman Trek ($1,000), and camping on a cliff overnight in Colorado ($1,000).

These tours do not include flights.

In contrast to single-day Experiences, most of the multiday Airbnb Adventures are run by local tour operators.

“Adventure itineraries hosted on the platform are either entirely exclusive to Airbnb or provided by local operators that are not typically found on any other major booking platform,” an Airbnb spokeswoman said.

At launch Airbnb said it has more than 200 tours available. Local hosts arrange and control each tour, including the itinerary, accommodations, the services they provide, and the price. Airbnb said it worked with the Adventure Travel Trade Association on safety issues and best practices for the tours.

As is its habit Airbnb is running Airbnb Adventures in its own way to a great extent. The hosts responsible for the tours are individuals or local operators rather than well-recognized brands. Hosts of Airbnb Adventures include “Nabeel,” a tour guide who’s certified by the Oman Ministry of Tourism; Slow Food Galapagos, described as a grassroots organization geared to preserve local culture, and “Dustin,” “TJ” and “Kyle,” of the Kent Mountain Adventure Center in Colorado, for example.

PLENTY OF COMPETITION

While Airbnb’s single-day activities put it in competition with online tour aggregators such as TripAdvisor, GetYourGuide, Klook, and tons of local operators, Airbnb Adventures faces off against traditional tour operators like G Adventures, Contiki, Collette, Intrepid Travel, Topdeck Travel, Trafalgar, and Uniworld, and online travel agencies such as TourRadar.

Dan Christian, chief digital officer of The Travel Corporation, offered some skepticism about Airbnb Adventures.

“In order to run and sell tours properly they should be licensed by the U.S. Tour Operators Association, and they will have the same issue as their current experiences (day tours), which is that small local operators can’t scale and offer the same value, peace of mind, and consistent high-quality branded experiences that are key to the continued success of trusted and seasoned tour operators such as our Trafalgar, Contiki, and Insight Vacations,” Christian said.

He added: “We appreciate that Airbnb has recognized the multiday opportunity, and we finally look forward to the larger online travel agencies recognizing what an exciting opportunity of expanding distribution with well-recognized global brands.”

Many of the traditional operators take much of their bookings offline because of the complexity of the trips. On the other hand, all communications and bookings for Airbnb Adventures take place online through the Airbnb platform, although the company doesn’t get involved in booking participants’ flights or making any pre- or post-tour arrangements.

Scaling the multiday excursions could be a challenge for Airbnb because it would appear to involve a relatively manual process.

GETTING READY FOR STOCK EXCHANGE DEBUT?

Still Airbnb has managed to grow its tours and activities business, having officially launched with around 500 in 2016, fairly rapidly. It now counts some 30,000 activities globally. The number of people booked to participate in an Airbnb experience increased nearly sevenfold in 2018 compared with its first full year, according to Airbnb.

A ticket for an Airbnb multiday adventure ranges from $79 for a one-day trip to $5,000 for a 10-day tour, the company said. The median price for these expeditions, which are limited to a dozen people each, is $588 for a 3-day excursion, Airbnb said.

Airbnb Adventures is another example of the company diversifying its revenue beyond homes and apartments as it gears up for an expected initial public offering. Earlier this week Airbnb published an advertisement for a director of investor relations, another signal that a potential initial public offering is in its plans.

Whether Airbnb Experiences and the new Airbnb Adventures will be profit centers for the company remain to be seen, and the financials of the venture will likely be detailed during the process of going public. In the early days of Experiences, Airbnb reportedly experienced significant losses.

This story has been updated to reflect a comment from an Airbnb spokeswoman that that many of the tours include exclusive inventory but many are run by local operators.

Skift Take

We said there would be more consolidation in the tours and activities space, and the ink was hardly dry when TripAdvisor announced the acquisition of Bokun. This enables TripAdvisor to provide an end-to-end solution without having to rely on third party vendors to bring tours and activities suppliers on board.

— Dennis Schaal

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A day after Booking Holdings announced it was buying tours and activities tech provider FareHarbor, TripAdvisor answered the challenge as it announced that it, too, entered that connectivity space with the acquisition of Iceland’s Bokun.

TripAdvisor did not reveal the terms of the deal, which closed in the last 24 hours. A spokeswoman said TripAdvisor plans to expand the roughly 20-member Bokun team.

Until now, TripAdvisor’s Experiences unit relied on third party integrators such as FareHarbor, Peek, and Bokun, which has been working with TripAdvisor since 2016, to connect tour suppliers to its platform, but now it will be able to handle booking, inventory management and tour operations through its in-house tech company. Bokun, founded in 2012, has a dominant presence among tour companies in Iceland, and also has a customer base beyond the country, as well.

“As the industry leader, our opportunity in this space is enormous,” said Dermot Halpin, president, TripAdvisor Experiences and Rentals, in a statement. “We’re committed to taking the experiences sector far beyond its current online penetration of just 20 percent, and Bokun will play a critical role in this mission.”

TripAdvisor bought Viator for $200 million in 2014, and is the dominant online player in tours and activities. Skift broke the news that it has rebranded the business to the industry from TripAdvisor Attractions to TripAdvisor Experiences. In 2017, TripAdvisor’s non-hotel segment — including attractions, vacation rentals and restaurants — grew 24 percent to $360 million.

In a Skift interview, Halpin said of Booking Holdings’ acquisition of FareHarbor: “There is no surprise that everyone is interested,” adding that the entire sector is emerging. “My reaction to that deal is that it is validating, and it is a good team. None of this is a particular shock to us. We know we have to be competitive to stay in front.”

Halpin said TripAdvisor’s acquisition of Bokun “will help cement our lead. We never take our business for granted.”

He said that experiences providers will not be disadvantaged if they use integrators other than Bokun. “We’ll do business with you on your technical terms,” Halpin said but if you don’t have a provider then we can offer Bokun.

“The idea is not to exclude companies but to accelerate market adoption,” Halpin said. “Nothing will happen with other integrators. We won’t dictate terms.”

Halpin said the deal just happened, and there are no plans to eliminate the Bokun brand. He added, though, that TripAdvisor is the brand that consumers and suppliers know on a global basis.

One big change that TripAdvisor is making is changing Bokun’s business model from a subscription basis — it currently offers subscriptions for about $123 per month (euro 100) — to a per-booking model. It is now offering a free three-month trial, and Bokun plans charging clients a 0.1 percent commission per booking in a bid to take share.

Bokun will remain based in Iceland, the companies said.

Asked about TripAdvisor’s purchase of Bokun and Booking Holdings’ buy of FareHarbor, Stephen Joyce, the CEO of tour operator software vendor Rezgo, said he has “mixed feelings” about the developments because it skews the competitive dynamic.

On the one hand, it’s really exciting to see this kind of activity in the space,” Joyce said. “It means the larger players are diving in with both feet. On the other hand, it leaves the market unbalanced with a few well-funded and now publicly owned applications on the one side, and a bunch of small independents on the other side trying to compete. When all the applications were in the same boat, we were competing with similar resources for the same relatively large customer base. This move gives a couple of players a huge advantage in terms of customer-acquisition capabilities.”

TripAdvisor’s decision to provide Bokun software to tour companies at a steep discount only makes it more difficult for the rest of the players to compete on price, Joyce said.

“The challenge now is how do we continue to compete in the face of these changes in the marketplace,” Joyce added. “I don’t have the answer to that yet, but as I’ve said many times, this is a long game. There are no winners, just players, and we’re still in the game.”

Meanwhile, Ruzwana Bashir, CEO of Peek, likewise sees validation of the sector in the latest crush of deals.

“All the recent demand in the space is validating our model and approach — consumers expect online availability and as the largest U.S. provider of real-time activity inventory, we’re excited about our position,” Bashir said. “As an independent company backed by top tech investors, we will remain 100 percent focused on helping tour operators and leading product innovation. Our latest additions include abandoned shopping cart tools, the first fully integrated POS (Point of Sale), and a powerful rentals platform.”

Peek’s investors include Eric Schmidt, Jack Dorsey, Brad Gerstner, David Bonderman, Ray Lane and Pete Flint.

According to Crunchbase, Bokun had received about $420,000 in grants, but it’s unclear what it’s total funding has been. While the company had a great footprint in Iceland, it struggled to expand meaningfully outside its base.

“We’re thrilled to join the world’s largest attractions, tours and experiences business,” said Hjalti Baldursson, co-founder and CEO of Bokun in a statement. “TripAdvisor gives us the opportunity to serve customers in every corner of the world, and we’re excited about the significant growth that’s to come.”

Tags: bosun, experiences, fareharbor, mergers and acquisitions, tours and activities, tripadvisor

Photo Credit: Dermot Halpin, president of TripAdvisor Experiences and Rentals, thinks the acquisition of Bokun will help TripAdvisor increase online penetration in the tours and activities sector. TripAdvisor