Skift Take

The tour operator sector feels like the hotel industry of yesteryear. With billions in market value hiding in plain sight, it seems primed to have its decade of intense innovation.

Tony Carne Bringing the Global Tour Operator Sector Into the Future

The vast and global packaged-tour operator sector is one of the last travel sectors yet to be fully digitally transformed. Much like the intense tech and investor activity happening in the day-tours-and-activities sector, the multi-day packaged tour sector is potentially on the cusp of seeing the same set of forces hit it and transform it from inside-out. This column will offer outside voices to help you understand the sector’s challenges and the transition.

Peering in from the outside, it can appear that the multi-day tour sector is lagging in digital transformation when compared to almost every other sector of travel. We don’t see the layers of digital infrastructure and we haven’t seen the money that can flow with them. In airlines, hotels and even day tours and attractions, we’ve seen huge supportive industries pop up like res-tech, niche specific online travel agencies and Meta players.

In the multi day-sector, not so much. I set out to ask some of the leaders and emerging companies in the sector if they thought this perception was correct and if the factors the sector specifically faces make adoption, transformation and even disruption more difficult.

I was a little surprised to find agreement. Free Daily Newsletter

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

Greg Cormier, the vice president for digital and e-commerce at G Adventures also agreed. “Larger operators have unique circumstances related to their respective technologies, and actual digital transformation is hard and takes time,” he said.

“Operators with proprietary systems have an even more difficult task in evaluating the effort required versus the actual impact of the proposed transformations.”

There are a few common threads in this space. Companies almost always form close to their source market. After establishing a foothold in their home market, a few have managed to expand globally to capture customers in other high potential markets.

But for most of them, this is a journey lasting decades. There are few instances of destination management companies or other travel companies capturing significant market share in their region of expertise via their brands and then expanding into a new region. Mexico-based Bamba Travel is one exception, having expanded globally with its unique hop-on hop-off model. Assembling Groups of Strangers

Multi-day tours are generally small groups of strangers. “Small” can be anything from 10 to 25 participants depending on the company, and those groups are then formed around pre-set itineraries and departure dates.

Filling those departures sufficiently is the name of the game with the bigger companies having dedicated commercial departments operating similar to how a revenue manager might work in the hotel industry. Companies can only adopt price structures when they form groups, which enables them to see if the economics work. When those economics do work, the margins are good which, combined with the basket sizes in the thousands of dollars per customer, make for some sizable business.

Outside of establishing itineraries and date structures for tours, it has proven extremely difficult to form groups of people unfamiliar with each other, even in the era of social media. Getting a consensus on what exactly is in and out of a specific itinerary and what people’s expectations of those experiences are definitely has some challenges. There are perhaps some signs of this now beginning to shift with social sensations like The Travel Squad emerging and beginning to organize trips for their communities. However, there have been other attempts in the past, with GlobeTrooper and WAYN getting acquisition traction but never finding a way to make their models operationally and profitably.

This seems like the most fervent area of current disruption, as it becomes easier for people to meet each other virtually and then do things together in real life. TravAmigos , a United Kingdom-based startup, is working to connect its customers online during the booking phase. That provides the benefit of knowing who is going and not just where and when the tour is. If you haven’t been to many places yet, then who you travel with can be the […]

source Tour Operators Are Travel’s Last Big Sector Ready for Digital Transformation

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