Tour operators are the last major travel sector ready for digital transformation

Looking from the outside, the multi-day travel sector can appear to be lagging behind in digital transformation when compared to almost every other travel sector. We don’t see the layers of digital infrastructure and we haven’t seen the money that could flow with it. In airlines, hotels and even day tours and attractions, we have seen the emergence of huge supporting industries such as res-tech, online travel agencies and Meta operators.

In the multi-day segment, not so much. I set out to ask some leaders and startups in the sector if they think this perception is correct and whether the factors the sector specifically faces are making adoption, transformation, and even disruption more difficult.

I was a little surprised to find an agreement.

“I think that’s a fair statement. We are tour operators, not tech companies, and when you look at the pre-Covid period, we (we were) on a nice ride with good growth anyway,” said James Thornton, CEO of Intrepid Travel.

Greg Cormier, vice president of digital and electronic commerce at G Adventures, agreed. “Larger operators have unique circumstances related to their technology, and actual digital transformation is difficult and takes time,” he said.

“Operators with proprietary systems have the more difficult task of evaluating the effort required against the actual impact of the proposed shifts.”

There are a few common themes in this space. Firms are often close to their source market. After establishing a foothold in their home market, a few were able to expand globally to attract customers in other high potential markets.

But for most of them, this is a journey that takes decades. There are few cases of destination management companies or other travel companies that capture a large market share in their area of ​​expertise through their brands and then expand into a new area. Mexico-based Bamba Travel is one exception, which has expanded globally through its unique vaulting model.

Groups of strangers assembling

Multi-day tours are usually small groups of strangers. “Small” can consist of 10-25 participants depending on the company, then these groups are formed around pre-set itineraries and departure dates.

Adequately filling these departing flights is the name of the game with major companies having dedicated business divisions that operate similar to the way a revenue manager might operate in the hotel industry. Firms can adopt price structures only when they form groups, which enables them to know whether the economy is working or not. When these economies work, margins are good, which, combined with basket sizes in the thousands of dollars per customer, makes for some big business.

Outside of creating itineraries and date structures for tours, it has proven very difficult to make groups of people unfamiliar with each other, even in the age of social media. Certainly, gaining consensus about what is and what exactly is in a given itinerary and what people expect from those experiences are some of the challenges. Perhaps there are some brands that are now starting to shift with the rise of social sensibilities like The Travel Squad and start organizing trips for their communities. However, there have been other attempts in the past, with GlobeTrooper and WAYN both gaining traction but never finding a way to make their models practical and profitable.

This seems to be the most exciting area of ​​the current turmoil, as it becomes easy for people to meet each other virtually and then do things together in real life. TravAmigos, a UK-based startup, connects its customers online during the booking phase. This provides the benefit of knowing who is going, not just where and when the tour is. If you haven’t been to many places yet, whoever you’re traveling with can be your point of sale.

TravAmigos CEO Mark Duckmanton’s background is in technology not travel, and he goes after “85 percent of those who don’t currently travel in organized groups” by providing them with essential guard rails for the trip — accommodations along the way and the transfers between those places. The app then suggests options for activities via a feed from Viator. Consumers can also choose to create same-sex or mixed groups, publicly or privately. Everything happens in the TravAmigos app, from choosing flights to making payments that are triggered by facial recognition and two-factor authentication. The company sold 103 tour sites in its first month after launching in April of this year.

“There is no evidence to get you out of bed to go do anything,” said Duckmanton. “If you want to party all night and sleep all day, it’s up to you.”

Upgrading the speed of companies with modern technology

Murray Decker of TourAmigo, a business-to-business company that helps multi-day tour operators connect to the Internet for direct business and gives them access to API connections that facilitate distribution transactions, believes it was a “matter of desirability and inability” in terms of turning medium businesses the size.

“There are still many multi-million dollar companies operating off the boards,” Decker said, adding that only 15 of the largest companies have their own APIs. Even on the distributor end, connecting both takes months and requires constant maintenance.

Distributors need to take ROI into consideration. Many of those API-enabled companies, even large companies, now plug their APIs into TourAmigo, which they then bundle into a single feed for distributors like Kayak.

“We have seen a real difference with Covid in terms of willingness as many companies have started to contact us rather than relying on outbound sales,” Murray said. “The penny has fallen.”

Most of the big companies in this field are multiple distribution organizations that arose in the pre-internet era, when support from brick-and-mortar travel agents was essential to growth. Since this was the primary way to gain market share, systems were created to facilitate these relationships. The technology here was logging into each other’s intranets to check availability and make updates. We’ve only seen APIs come online in the last couple of years. There are assistants in this area such as TourAmigo, but there are not dozens of them competing in a hot market. However, Cormier believes more is to come.

Tour operator market development

Travis Bateman, CEO of online travel agency TourRadar, sees his company as playing a key role in this transformation. “While we are the disruptors of old technology, what we really are is an ecosystem enabler.”

Intrepid’s Thornton and Cormier from G Adventures seem to agree. Thornton said TourRadar “did it in a nice way” while Cormier said “TourRadar has done a good job” when it comes to tracking and organizing available data and feeds to help the market grow.

Bateman estimates the market for group adventure tours at about $200 billion globally. He also believes that the market itself is still misunderstood by consumers who view group tours as a large party led by a guide carrying a flag or an umbrella. This is the antithesis of the experience most small group tour operators create.

“What we do complements market education and grows the market,” Pittman said.

TourRadar recently shifted its focus from the supply side to the demand side by providing communications and white labeling to businesses such as Helio’s new retail and travel platform Flight Center. Other areas of TourRadar’s focus include helping small operators working for days get online and solve their payment issues with customers in remote source markets. Pittman sees a Shopify or Etsy-style model for land-based operators around the world, giving them equality through elements of social proof such as reviews on top of TourRadar’s checks.

TourRadar has raised $66.5 million and has become the dominant player among online travel agencies. “We’ve had more communication surrounding the investment over the past three weeks than we’ve had in the past three years,” Pittman said. “I also see more (support services) appearing in this sector than ever before. There is definitely something going on.”

However, outside of TourRadar, we don’t hear about a lot of money pouring into this segment which makes it somewhat hidden. Although Cormier suggests that Certares, KKR and Genairgy have placed big bets in the sector, he believes multi-day tour operators have kept financial details more confidential than in the fintech, retail and software industries, where he said assessments are issuing From the rooftops.

Even most large companies were privately owned and reported positive cash balances before the pandemic. In terms of transactions, KKR purchased Travelopia from TUI in 2017 for $404 million, but not all of Travelopia’s brands can be considered multi-day group travel. Hornblower has bought Journey Beyond for $426 million to add to its portfolio, which includes multi-day tour operator Outback Spirit and rail tour operator The Ghan.

In addition, Intrepid Travel and G Adventures each received outside investment although the amounts, valuations, and stock splits are not known to the public except for the original founders who retain the majority stake in both cases.

Opportunities for innovation

The plan and book phase appears to be high on the agenda for making an immediate digital transformation, which Thornton believes has helped create a huge demand for tech workers in every sector.

“At this point, digital transformation is as much about survival as it is about growth and innovation,” Thornton said. “Customer expectations are all about delivering service in minutes, not days, and eventually instantly.”

Thornton sees this as an area of ​​opportunity for third parties to come up with new innovations. Cormier of G Adventures agrees.

“From a technical perspective, some shift is coming to ‘buy versus build,’” Cormier said. “We have implemented Stripe (for payments), Algolia (for site search), Dynamic Yield (for recommendations) and are working with Contentful (for a content management system).”

“These companies are the best in their field. They invest heavily in their areas of expertise and this allows us to focus our efforts on innovation and in areas where there is no configurable option yet.”

On the customer side in the trial phase, many parties just form their own WhatsApp group to communicate throughout the tour experience, including with the tour leader. Before that, people would leave their notes under doors or on hotel message boards. In the dream and co-travel stages, there have been some examples of third parties creating some great solutions. Stackla, until Facebook banned, was one example, where it was effectively used by companies like Contiki to enable their customers to create user-generated content for the brand to share in exchange for rewards during the tour. This user-generated content fuels the dream stage.

While companies like Stackla have cut their teeth in this sector, it has also been used in other areas and in fact out of travel entirely by the likes of McDonald’s. The best marketers scan all sectors and industries in search of new and attractive ideas for the dream stage. Their advantage is that the actual product content here is very inspiring, allowing this sector to become distinct case studies, and thus making the industry a good place for marketing technology providers to start. The role of innovation played by the sector is that of early adopters.

Tony Karn is an Australian-based serial entrepreneur/entrepreneur and a lifelong veteran in the tour operator space. He is currently a resident entrepreneur at Antler Capital Corporation.

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