The area of day tourism and local activities had a long shadowy existence. The focus in the sales channels and in the local destinations was on travel, overnight stays and possibly flat rates.
But the market is changing radically: large tour operators and start-ups are focusing on “local activities”. There are clear parallels to the hotel industry ten years ago. Booking.com purchased the American booking solution Fareharbor, while TripAdvisor bought the Icelandic startup Bokun – both software-as-a-service (SaaS) companies that – similar to Regiondo – support tourism service providers in digitizing their offers. The focus here is on technology.
Specialized online startups such as GetYourGuide or Klook have successfully established themselves in this market. New providers such as Airbnb are also successfully developing the segment with Airbnb Experiences and individual offers that match the brand and target group.
More traditional players such as TUI are also investing in this market: TUI has bought back the activities of Hotelbeds and intends to invest more. This includes sales as well as the production of offers on-site.
Only the DMOs (Destination Management Organizations), which traditionally have the pole position in local activities, find it difficult to digitize their existing know-how and their strong contacts with suppliers. There is a risk of losing the digital connection and thus the customer at elementary points.
What does this mean for the market?
We will not be able to measure the effects of these disruptive dynamics in the activity market for another 1-2 years. But it is already certain that:
- Activities on site are “the next big thing”.
- Existing and new players are investing massively in the market.
- Technology will be the decisive success factor.
- Access to offers and directly bookable inventory is the key.
Thanks to our customers throughout Europe, we at Regiondo have a good overview of the status of digitization in the various markets. And unfortunately, we see that the German-speaking countries still have a lot of catching up to do in terms of digitization.
What is the “activity market”?
The market for activities is difficult to grasp and there are no reliable figures. Estimates assume up to 1 million providers worldwide and a market volume of €140 – €200 billion. This includes the Merlins and Europaparks as well as the numerous small and medium-sized companies that offer city tours, hiking or quad tours, and cooking courses. Depending on the market research institute, we talk about the touring and activities market, day tourism or leisure market in general. The content of all boundaries is similar. The only difference is often the extent to which local demand from local residents and guests from the immediate vicinity is taken into account or not.
The main characteristics of this market are:
- Strong fragmentation: simply because of the enormous variety of offers and the different categories and target groups.
- Local: similar to the hotel market, over 90% of demand is national and international tourism plays a lesser role.
- SMEs: most providers make less than €1 million annual turnover and are usually owner-managed. Companies like Merlin or Disney are the exception.
- “Under-engineered“: due to the high fragmentation and the many small companies, there tends to be too little investment in technology and process automation.
- Offline and short-term: the customer still buys (more than 2/3) offline and at short notice on site.
DMOs must act now
While some customers book a trip and the associated travel and accommodation months in advance, activities are short-term decisions that are made on site. Often even on the same day, after looking out the window and depending on the weather conditions.
This is still the core business of the local organizers! Because destinations are in pole position, nobody has a better overview of the portfolio in their own tourist destination. You have the network and the contact to the providers. In addition, the guest and his short-term booking play into the hands of the destinations: Over 70% of the activities are booked locally.
But this pole position is in danger. The greater the digital coverage of Groupon, Booking.com, Airbnb & Co. in the activities market, the less relevant the destinations become as intermediaries for the customer.
What are the concrete next steps?
Destination and tourism organizations must act to avoid being left behind digitally and to defend their market share in the future. In my experience, the following procedure has proved its worth:
- Analysis and recording of the current situation and the existing portfolio.
- Workshop and development of a project outline with all relevant stakeholders (service providers, hosts, etc.).
- Selection of the right technology or technology partner to implement the project on-site.
- Setting up a project with service providers, all local sales partners, and the technology partner.
- Establishing a long-term initiative: Digital change is a change process of time.
Destinations can, for example, enter the market themselves and bundle activities on-site, or only act as intermediaries to digitize the service providers on site.
At Regiondo, we have implemented numerous successful projects with destinations. From 10 to 400 top performers and for destinations characterized by urban or leisure tourism. There are various models of concrete implementation on site. Please, do not hesitate to contact us.
This blog post is part of our series on destination marketing. You can find the rest of the articles below:
- 10 Destination Marketing Strategies to Help You Grow Quickly
- 8 Tips for Successful Destination Branding
- How to Use Social Media for Destination Marketing
- The Top Destination Marketing Trends in 2020 and Beyond
- How to Get Destination Marketing Right in a Digital World
- 4 Destination Marketing Campaigns to Inspire You In 2020 and Beyond
- The Most Useful Destination Marketing Tools for Any Budget
- 5 Reasons Why DMOs Should Work with Bloggers
- Storytelling for DMOs: Make Your Destination Come Alive