Industry Brief: Tours
compiled with comments by Alan Rust, CEO of America Tour Company
The tourism segment of Tours and Activities is on a fast growth curve. Today’s travelers are looking for local activities led by engaging people to discover the stories of their communities. This report focuses more on domestic tour trends rather than worldwide activities.
Douglas Quinby, CEO of Arival Conference, shared that the segment of tours alone is now over $30 billion and growing close to 10% annually. He reports that there are approximately 26,000 tour providers across the country. The creation of the Arival Conference is a statement to the importance of this segment in the travel and tourism industry.
Travel activities, the aggregate of traveler spend on tours, activities, attractions and events, reached $135 billion globally in 2016. It accounts for 10% of global travel revenue and outsizes rail, car rental and cruise. Tours, Activities & Attractions is travel's third-largest and fastest growing sector in Travel.
A 2018 Phocuswright report stated that the travel experience market will reach $183 Billion by 2020.
The last two decades in the Transaction Era - making it easier to find and book the elements of a trip. We are now entering the Experience Era - making travel experiences better across the entirety of the journey.
THERE’S ALWAYS A STORY. IT’S ALL STORIES, REALLY. THE SUN COMING UP EVERY DAY IS A STORY. EVERYTHING’S GOT A STORY IN IT. CHANGE THE STORY, CHANGE THE WORLD.
— TERRY PRATCHETT, A HAT FULL OF SKY
Importance to travelers
One in three U.S. travelers indicated that events were extremely important in their overall trip planning, more so than any other component of the trip, including the flight and lodging.
Tours are a key component of the in-destination experience, with 44% of U.S. travelers incorporating sightseeing tours into their travel plans. Actually, Arival reports that 54% took some kind of tour on their last trip. Culinary trips are very popular with 4 in 10 U.S. travelers taking this kind of tour. The fastest growing tour segment are thematic tours like photography or ghost tours.
Two-thirds of U.S. tour takers say that tours are very or extremely important when planning a trip. The greater the importance of the tour within the planning process, the more likely the traveler is to plan and book well in advance.
Travelers are choosing to become more immersed in the local culture when visiting a destination. They want to do what the locals do and eat where locals eat. Walking tours are still one of the leading experiences for anyone visiting a new location. They are a great opportunity to find your bearing, meet other travelers and have all their questions answered by a destination expert.
Not Just One
Today’s travelers aren’t just selecting one activity during their trip. According to Arival and WYSE data, multi-day travelers are doing 6-7 activities per trip. Operators of activities, tours and attractions can work together to complete a traveler’s in destination experience. Travelers will most likely visit both iconic attractions and venture on local tour experiences during the same trip.
Experiences not things
It is widely reported that the millennial generation will spend much more to experience places and life than to purchase things. Choosing experiences is a travel trend that is shown across all generations and demographics. Travelers are opting to purchase experiences over things. Skift Research’s 2018 U.S. Affluent traveller Survey ‘found that 67% of affluent travelers would rather spend their money on activities than on a nicer hotel, up 8% from last year.’ Tour operators are now receiving requests for unique experiences from travelers who want to do something that is a once-in-a-lifetime. Younger visitors don’t just want to be observers but may want to immerse into actually doing something. Experience operators should offer some insider experience like learning how to do something, provide a talk with a local chef or artisan, present a unique treat or provide a backstage/background visit.
Nearly half of millennials consider themselves ‘all-in enthusiasts’ of travel compared to only 25% of the rest of the population.
Hotels are discovering that by working with other tourism business professionals in the area they are able to promote the region as a whole. HotelSpeak.com realizes that hotels are local businesses which is their major advantage when selecting and recommending local activities, restaurants and experiences and this makes them best suited when it comes to offering these to their guests. Hotels can bundle local tours and activities with what to do in a city, and their rooms while negotiating a decent commission with the businesses in question. If a hotel proposes a plan that includes their room, a selected tour and activity, a cozy restaurant, and some places in the city where you can take the best selfies, that will make the difference.
Hotels can proactively offer local tours and activities at all touchpoints throughout the booking phase – from the initial search through to room reservation. This is another reason for tour operators to ensure their listings and bookings are digital so they can partner with hotels. They should connect with the concierge team, sales managers and look for online connection opportunities.
Many other segments of the tourism industry are now offering local tours and activities to their guests. Airlines, Hotels and Online Travel Agencies (OTA) are adding experience services to their offerings to consumers.
In 2018, Marriott invested in PlacePass, a metasearch platform for tours and activities. Hyatt scrapped its old loyalty program and debuted a new one entirely focused on the concept of experiences, acquiring wellness brands and investing in alternative accommodations along the way. AccorHotels is using its properties to not only serve travelers but locals, too, with hyper-local services, all in an effort to keep the brand ever-present in the minds of consumers, whether or not they are traveling.
A host of startups focused on reselling activities have launched and online travel's biggest brands – including Expedia, Airbnb, and TripAdvisor – have moved into this space. AirBnb CEO Brian Chesky said that by 2020, he expects more than half of Airbnb’s revenue to come from businesses that the company currently isn’t operating in. OTAs like Booking, Expedia and TripAdvisor acquired tour booking platforms in 2018. They have added ‘experiences’ as part of their travel offerings which are promoted on reservation emails.
The online reservation world is combining as reservation brands purchase tour brands to expand their offerings. For example, TripAdvisor purchased Viator and branded the tour service as TripAdvisor Experiences.
However, the future of previous OTAs and listing services is unclear. Alex Bainbridge from Destination CTO reports: “More recently I have been more positive about GetYourGuide, Klook and Airbnb’s position because they are vertically integrated – both retailing to consumers and delivering experiences on the ground in their own brand. This will give them the advantage of fast innovation. I am a fan of vertical integration in our sector, although perhaps experience suppliers are not.”
Airbnb has a unique advantage in the future landscape because they already have a loyal base of travelers and can upgrade their experience by adding activities. They will continue their brand by making the experiences personal and local.
Even Google’s own travel offerings now go beyond the search box — in Google Hotels, Flights, Maps, Trips, and Home, to name a few — highlights the fact that the product teams are winning out over the Google ad sales team.
Google previously moved reservations of hotels and airlines to “off page.” Off page refers to Google’s increasing quest to have visitors get information and bookings on the Search Engine Results Page (SERP) instead of visiting the actual website page. Another new service by Google is Reserve with Google to make direct reservations for Dining, Activities and Classes. This directly competes with services like Yelp, OpenTable and the OTAs. There are many booking partners connecting to this service but the major players are currently missing from the list.
Google tested Touring Bird to test direct off page bookings for tours and activities. The successful test has been incorporated into Google Travel and Reserve with Google.
What does this mean for tour operators? Google is actually helping savvy tour operators get noticed and booked more. Tour operators have to choose their online partners carefully so that Google can access the tour information available to local travelers. I imagine that regular listings on Google SERPs might change which leaves non-digital unconnected tour operators behind.
In the 12 weeks leading up to a trip, there are:
3X more experience searches than hotel
8X more experience searches than airline
A challenge for tour operators is entering all the information for their products into various sites and OTAs. These activities can be very time consuming yet important. It is reported that 80% of tour operators are still not using digital systems for booking. As this becomes more important to survive, the time challenge becomes real.
A startup named Magpie launched in November 2018. Magpie Travel is a content management system for tours and activities. The startup enables suppliers to upload and manage their content while distributors can tap into the service and keep their listing up-to-date. At this point, the service doesn’t accomplish its goal to feed an operator’s tour database into all OTAs; however, they are working toward that.
There are some segments of the population that are more likely to take certain types of tours.
Young & Old: Tour plans are included for all ages; however, travelers under 35 or over 55 are most likely to tour. Plans change between the ages of 35 to 54 possibly because they are raising families. Tour takes under 35 are driving the growth in thematic and culinary tours.
First Time & Returning: First time travelers tend to book general sightseeing tours. Those who return to a destination still take tours; however, they are likely to take a smaller, specialized tour that goes deeper into a cultural experience or activity.
But Wait: More than half of U.S. tour takers book larger groups of 10 or more. However, in surveys they say they want to book smaller more intimate tours. This may be due to the lack of availability in smaller tours for many destinations.
48% of tour bookings are happening once travelers arrive in their destination and over half of those searches occur on mobile.
More travelers are booking in destination with a very short lead time for short local experiences. Skift’s Research found that 35 percent of travelers have used mobile phones to book a tour or activity while already in destination for a vacation, whilst Phocuswright found that 38% of bookings are made on the same day or two days before a trip is made. There is a shift with multi-day tours and activities being booked further in advance and being a preferred option for travelers. Convenience is a key selling point as travelers no longer need to spend time planning various activities.
Think with Google reports that mobile searches for “things to do/activities” + “near me” have seen a 6X increase over the last two years. This makes it clear that tours and activities marketers shouldn’t neglect those in their immediate vicinity. If you are selling museum tickets or food experiences, consider widening the scope of audiences you target beyond the travel audience.
The industry is reacting to many trends that are coming with its growth. Some trends are technology but many are a result of the desire to connect with people. The overall theme in tours is a ‘customer first’ approach. Tour operators need to consider how to make experiences and activities customized, approachable and engaging for travelers.
The tech trends are looking further into the future. They are self guided audio tours and autonomous vehicle tours. Travelers who want freedom to tour on their own schedule are looking for self guided options. Audio tour apps are the solution. As we look further into the future, autonomous vehicles will have audio tracks that replace the tour guide. The vehicles are programmed with a tour route and the recorded dialogue to again satisfy the desire to offer tours on the traveler’s schedule.
Studies show that customers prefer personalization as a time-saving tool. According to Google Research, ‘57% of travelers feel that brands should tailor their information based on personal preferences or past behaviors.’ The same research also confirmed that ‘if a travel brand tailored its information and overall trip experience based on personal preferences or past behavior, 36% would be likely to pay more for their services.’
An important trend is toward realized inclusion and diversity. Tours need to create tours to accommodate various travelers. The two biggest trends in this topic are women and solo. Around 67% of solo travelers are female, claims Lonely Planet. ‘Solo travel was once seen as brave and risky for female travelers, but a shift in attitude has meant that it is now viewed as an adventurous, exciting experience for women. Tour operators need to have activities that make them feel safe as well and appeal to their interests.
There is an increase in solo travelers of both genders and all generations. According to Travel Agent Central, 25% of Millennials in the Future of U.S. Millennial Travel report said that they plan to travel solo in the next 12 to 24 months. Tour operators need to offer opportunities for solo travelers to be able to participate in. These travelers can participate in group public tours but many now want one on one opportunities to tour. The diversity trend also relates to tours that feature diverse cultures as well as including all peoples in tour opportunities.
The big words in tours are: local and storytelling. Tours needs to focus on telling the story of the local community as told by locals. This connects the community to the traveler on a personal level.
Overtourism is a world concern which leads to a trend in Sustainable Tours. Many of the top world destinations, like Rome, have so many tour buses and groups that it is damaging the destination. 10,000 people arrive in the Mayan Riviera every day – a destination where there is still no proper recycling. Sustainable tours are more conscious about the physical space. Sustainable tourism is about re-focusing and adapting. A balance must be found between limits and usage so that continuous changing, monitoring and planning ensure that tourism can be managed. Ecological tours are the most popular tours offered by many tour & activity operators who responded to our 2018 Tourism Survey. These are usually rare experiences that educate and share inside information on the area, and how to protect it for the future. Tours that use proceeds to fund ecological projects such as forest or animal habitat restoration are chosen above alternatives without a cause.
Growth in family bookings has outpaced non-family sales since summer 2012, with the sector now accounting for almost 40% of summer bookings compared with 20% of winter sales. According to CNN travel, ‘single-parent families are changing the way we travel.’ Until recently, the travel industry wasn’t keeping up that two parents and two children families were no longer the norm. CNN recently reported that families headed by an individual now make up almost 30% of families worldwide. Tour and activity companies are removing family tickets or are offering a large variety of options - and this is a good move! Given the change in family structures, operators who continue to adhere to more traditional family structures could be alienating a potential market.
It is becoming more common for business travelers to utilize the opportunity to take time for themselves, explore and travel. According to a report by Expedia Media Solutions, around 60% of business trips in the last year included a leisure portion. The concept ‘bleisure’ has been created to describe the combination of a business trip with a leisure aspect.
Expedia recently published a survey held with 500 American travelers and found that the average bleisure trip ‘adds 2.6 vacation days to a business trip of 3.7 days. Globally, two thirds of those trips were for conferences, 46% were for business meetings, 42% were sales trips, and 30% were internal meetings.’
Finally, there is a psychological shift from the Experience Economy to the Transformation Economy, where the tour product that is purchased is not an experience, but rather the improved self that results from it. Stemming from consumers’ desire to move up Maslow’s Hierarchy of Needs, luxury has moved beyond the second tier of the hierarchy, “esteem,” to the inward-looking, highest tier of “self-actualization.”
Future of Tours
Arival has identified 3 themes that will shape the future of tours.
Growth in Experiential Tours. These tours feature a specific topic or activity led by an expert guide.
Smaller Tours that Exceed Expectations. Tour takers will want a more intimate tour experience that go deeper into a theme or area of interest.
Rise of Brands. There is a lack of service level standards to give visitors what they want. There is a need for branded tour experiences to take hold.
Special thanks to the Tourpreneur Daily Brief for constant tour industry news and information.
Arival Conference data
Phocuswrite Tourism report 2018
Skift Megatrends Defining Travel 2018
Think with Google, Jocelyn Delgado May 2019
TrekkSoft Travel Trends Report 2019