The Changing Landscape of Distribution in the Experience Industry

Simon Lenoir, CEO and founder of Rezdy, shares the latest trends in the attractions and experiences industry. This webinar shows:

Please find the transcript below if you’re unable to watch the video. To access the slide deck with full data comparisons, please click here.



To start with, we’re going to try to define the industry in a nutshell. I’m going to give a brief overview of what we’ll be talking about but also, what we won’t be talking about.

I’ll make some statements about the industry and most importantly, we will share a lot of data. I hope you’re ready to take some notes because we will share a lot of information. We definitely love data at Rezdy.

Okay, so what industry would we be talking about today? It’s a very large industry we’re working in, obviously. What we will be focusing on is exclusively the tour and activities and attractions industry. We will put the events and the ground transportation aside, including shuttles. We have some ferry companies that we will share information about, but today, it will mostly be about tours, activities and attractions.

A quick snapshot of the industry: we believe that unlike hotels and airlines, the tours and activity industry is a little left behind. Today, we’d like to talk to you about that and the reason why.

During the 90’s, the online travel agencies started to take off. Expedia in ’96, Hotel Club in ’98, last-minute as well, Wotif in ’99, on behalf of Expedi. They were starting to process reservations over the phone and fax for confirmation. I’m sure a lot of you remember these days.

The thing is, more and more OTAs in tours and travel started to take some significant market share for hotel distribution and they started to build backend systems, sometimes called ‘extranet’,  where the hotel will have to log into the backend of the online travel agency and load their availability. This would be done on a daily basis, because the inventory and the availability is very volatile.

So, they started to build their own system and thanks to that, they were able to confirm in real-time to the customer.

In the early 2000, when you booked via an OTA website, they were able to give you an instant confirmation and the market extremely quickly adapted to that; very, very quickly. Today, nobody could imagine spending money on booking an airfare or a hotel room online and not get instant confirmation.

In the mid-2000, various companies, including SiteMinder, that we know pretty well at Rezdy, started to build what we call a ‘channel manager’. The channel manager is simply an interface where a hotel can upload the inventory in one place which will be broadcast to all the OTAs websites instantly and in real-time.

This story took a bit of time, to develop the technology for the hotels and tour and activities. This is exactly what is happening right now in the experience industry’ That also proves that the market, the consumer, your customers, are really, really happy to move from– subject to confirmation, so from “Thank you for booking. We will get back to you tomorrow,” or “Please call to book if you want an instant answer,” to real-time confirmation online booking: “I pay now and my seat or spot is guaranteed.”

In a nutshell, that’s what a Channel Manager does. On the left-hand side, you have what we call the ‘suppliers software’. In the middle, it could, for example, be Rezdy booking software, which is very well-suited for small to medium businesses. But, we can also connect our channel manager with 3rd party booking software, commercial booking software that some of you use, that are more suited for big attractions custom-made software for ferries shuttle companies. And, it will also connect to some of the corporate booking platforms out there.

So some of you have built an in-house system for various reasons. You have very, very unique business needs and you built, over the years, your own proprietary system and you maintained that today. That’s also something that a channel manager such as Rezdy can connect to.

On the right-hand side, we have the distribution channels of tourism – the intermediaries – of which there’s a huge amount.

Not just the most famous online travel agencies, but various other types of businesses, basically, that can plug into. Some of them, just a disclaimer, are not yet in the party, such as the three big GDS. They’re not quite there yet, but this is where this is going, basically, so you have the travel agent, the DMOs obviously, all these different types of business use all different types of technology and that’s what the channel manager brings to the market: the ability to connect with thousands of different platforms and intermediaries.

Okay, that’s a brief introduction of what a channel manager is and, now, I’m going to share data with you. First of all, our industry is highly fragmented and we know that very well. A lot of market research institutions talk about it. TripAdvisor lists at least 700,000 attractions and experiences and that’s, obviously, a multitude of segments.

As a matter of fact, on Rezdy, we have more than 200 types of categories, types of businesses. Why is that a problem for the industry? Because hotels are fairly similar types of product. You might have a single or double room. You might have free internet or free breakfast included. But the hotel industry is one big industry. For us, the zip line business in Nevada might not consider themselves to be in the same industry as whale-watching in Australia or as a wine tour in France. They don’t really feel that they belong to the same industry.

Here’s a quick comparison between hotels and tours & activities. HotelsCombined, a Metasearch website similar to Trivago, list about a million hotels on their website. At Rezdy, we believe there’s at least 2 million tours & activities suppliers. The big attractions, the big names, as well as the very long-tail small businesses; a very fragmented industry. And that’s the reason why we feel like the tours and activities is left behind. It’s an industry that is highly dominated by all sorts of small businesses today. 1 in 3 activity suppliers reports less than $250,000 of turnover per year.

It’s also a low or no-tech industry. 60% of activities suppliers reported their investment on technology to be less than $10,000 per year. That’s not a lot to work with for tech companies like Rezdy.

There’s also no standard in the industry. A standard could be, for example, in the hotel industry, OpenTravel. OpenTravel has been here for years. It was actually created by the airlines back in the days and got adapted to the hotel industry, so when two tech companies, a channel manager and an OTA, for example, work together, talk to each other, they use the same language called OpenTravel; that’s an example.

In the tours and activities industry, we’ve been working closely with a lot of our distribution partners, your agents, your channels, to really set a standard here, and it’s still a work in progress. We’re not fully done and ready for that. They’re still learning and must take the trial and error approach that is happening as we speak.

Online booking software. Capterra, a website that lists and collects reviews of technology companies, counts at least 290 booking software for hotels. There’s about 10 to 15 active ones for tours and activity operators, so less choice as well in that space. Less companies that are really trying to build software that works for a truly unique type of business, which is tours and activities operators.

Another reason is that there’s a lot of hotel booking software that previously tried to adapt their technology to tours and activities over the years and totally failed. So there’s very few or none that I know that has been really, really successful in being a hotel booking software and tour booking software. Trying to adapt the technology for tours and activities is hard because they’re simply two different types of business with different needs, different features, different algorithms behind, different scheduling systems, etc.

Finally, the channel manager. There are more than 50 channel managers, such as SiteMinder in the hotel industry, and less than 3 in our industry. And that’s the reason why we believe that tours and activities are left behind . Because there’s not a lot of associations. Thanks to US travel, there’s now the Experience network, I’m very happy to be here today with you. There’s nothing like the AHLA(or AHA in Australia) right now, at this stage. Some are trying to merge, but an association is yet to be established in our industry.

The very last reason is the very obvious one: inertia. People don’t like changes. That’s something that can apply to every single technology change across any industry. A quick number here, there’s 300 OTAs or distribution channels of all sorts connected to SiteMinder (we just use them as an example).

Tours and activities industry, there’s about 5 to 10 online travel agencies that are connected to Rezdy with significant volume at this stage. So there’s still a long way to go. A lot of online travel agencies are still not selling tours and activities. It’s emerging, but still way behind hotels.

And  – commission. I’m sure this one will make a few of you jump in your seats, but the hotels’ sort of standard commission rate floats around 15%. In Rezdy, commission on tours and activities goes between 10% and 35%. We know because we have quite a significant amount of data that I will share in a second with you. It’s an extremely wide range, which, again, creates a different sort of confusion and lack of standardization in the industry.

I’m sure some of you have all seen this Rogers’ bell curve – the chart that defines technology adoption in 5 stages. That graph, that chart, can be used for anything. It can be used for mobile phones.

Let’s take the first iPhone as an example. The Innovators, will be the people that woke up at 2 AM to stand in line in front of the Apple Store when the first iPhone was released. They’re the crazy ones.

The Early Adopters will come at 8 or 9 AM to get the phone, but they’re not totally crazy or they might wait a week. When the shop has restocked the iPhone, might wait another week. Maybe an update has been released by Apple because of a problem, but actually that was broken, so they have the version 2 of the IOS and the Early Adopter will buy an iPhone in this stage.

The Pragmatic, the early majority, is where your mass market is when a new technology emerges on any market. So these people are more pragmatic. They won’t necessarily spend a lot of money, for example, on an iPhone, but they know an Early Adopter or an Innovator, and they understand that these people moved from a classic phone to a smart phone, such as the iPhone. That’s probably good for them, for they will be following, but in the early stage; not necessarily with understanding of why a smart phone is better, but with the strong feeling that, “Okay, if it’s good for my friend that I know is a tech guy, I know he’s an early adopter who tells me it’s good, now it’s time for me to do it.”

The Conservative or the late majority are at the further end of the market. Finally, you have your Laggards, so we all know one of them – those are the people today that still don’t have a smart phone. There’s one of them in every family.

Now I’m going to show you some trends, some data. We’re very lucky at Rezdy. We have 5,000 strong businesses in our database, basically, that are active. A little bit less than half of that are tours and activity providers/suppliers and a bit more than half of that are travel agents, hotel concierges, OTAs, the intermediaries, the distribution channels. We have customers in 88 countries, which gives us quite a lot of data to play with.

Rezdy process, $1.2 billion per year for our customers. It’s quite a lot of bookings on a daily basis. As a matter of fact, during the 45 minutes of this webinar, Rezdy, on behalf of our customers, we will have processed more than $100K in bookings.

So, it’s not our revenue. It’s our customers’ revenue generated through the platform, just as an indication. The reason I’m explaining this is because Rezdy is in a very lucky position to share some trends and data because we have more information than any OTAs. We have more information than any supplier and more information that quite a lot of OTAs combined together, actually.

First of all, because today it’s about the landscape of distribution for the tours and activities industry, I wanted to share the comparison between 2014 and 2016.

Across Rezdy, in 2014, 87% of the bookings were directly via the Tours and Activity suppliers. I’m just going to say suppliers for now; direct to the suppliers. You have direct bookings. It could be online; it could be over the phone, etc. 13% were through distribution channels. The online travel agencies, one channel, travel agents, hotel concierge that are pushing brochures, etc. And that went up to 17% in 2 years, which is a pretty significant jump. But still far behind the hotel industry.

If we drill down into this 13 or 17% in 2016, we see the all of the different types of businesses and bookings. So the hotel concierge slightly decreased from 14% to 8%. We can see very, very clearly that the online travel agencies have been taking significant market share already. In 2016, 34.5% of the 17% are coming from the distribution channel. All the categories haven’t changed much. The most significant is the hotel and the travel agent have slightly decreased and the OTAs have increased.

Here are a few facts about the industry. Last minute bookings, so you probably heard about that quite a lot during conferences. We surely talked about it quite regularly at Rezdy because we’re all about real-time availability. We are basically a real-time engine. We have big calendars, if you like.

So, in 2014 compared to 2016, we call it the “book ahead time,” that’s how far in advance people book. So, for example, the booking, more than two weeks in advance, that would be your typical multi-day tour. I’m going to Alaska. I’m planning a bit in advance. I want to do trekking. It’s a higher ticket. I plan a little bit more. That hasn’t changed much. In less than one week, that might be the local activities, when you’re already in your chosen destination. That’s slightly increased.

Let’s drill down to see what happened in this less-than-one-week booking window. If we look per day or per hour, for that matter, there’s a very, very clear trend here that the booking, less than 24 hours in advance went from 27 to 32%. And, again, we’re talking about– we analyzed hundreds of thousands of bookings here.

So, there is a very clear pattern. More than 96 hours in advance, that segment actually didn’t change much. It’s only really the very last-minute 24 hours or less in advance bookings that have increased significantly. As a matter of fact, it increased 5% in only two years. There is something here to take away. Your customers are booking more last-minute than they used to only two years ago.

Now this is a fact across all bookings, but if we drill down for distribution versus direct, direct vs distributed bookings, in 2014, within the 24-hour window–so I’m booking now for something tomorrow morning at 8 AM kind of thing – 17% of those bookings came from distribution channels, from your intermediaries. In 2016, it was only 12%.

The number of people that booked just 24 hours in advance increased. However, your agent, your distribution channels have decreased the number of bookings they sell in that same timeframe, to the exception of the OTAs. So we’re going to talk quite a lot about that.

The big losers here, unfortunately, are the hotels and concierges. The OTAs are growing significantly in the less than 24-hour booking window, from 5 to 20%. So, they quadrupled in only two years, the number of bookings they send you in a 24-hour window. And there is a reason for that.

The next sort of angle that we look at is mobile vs. desktop. Again, it’s a well-discussed topic. I haven’t yet attended a travel tech conference in the last 10 years where we didn’t talk about mobile technology. But what does the data tell us? What do the bookings tell us, besides “mobile to attract customers is great”?

Rezdy is not a marketing agency. We are all about transactions. We are all about bookings.We had an exchange of money and the booking is made, this is what our technology is powering.

Again here, mobile vs. desktop for direct booking or distributed booking, for absolutely all the bookings, has significantly grown. In 2014, 27% of all the bookings came from a mobile device, and that went up to 35% in 2016 – a very, very clear trend here. Again, this is not a survey. We didn’t call 100 people to help them. This is hundreds of thousands of bookings we analyzed.

Rezdy has been growing significantly over the last couple of years. Over the last 5 years, as a matter of fact. But if we compare the same time zones, the same time periods, from 2014 to 2016desktop bookings in Rezdy grew a bit more than 200%. For the same period of time, mobile bookings grew by 400%. So that’s an exponential growth by definition. The mobile bookings are growing exponentially.

The reason why the OTAs have been investing in mobile apps, you’ve probably seen them. If you haven’t downloaded them or installed them on your phone yet, I will recommend you to do so because they’re very, very good apps and your customers book via them as we speak. So, a mobile app allows OTAs to ‘capture’ the customer wherever they are, to book last-minute. They’re already in the destination, they’re having dinner and they want to book there and then for something tomorrow. They want an instant confirmation.

That’s one of the reasons why most or all of our biggest partners have been investing quite heavily in very sexy mobile apps.

Another angle to talk about today is the booking value. How much does the average booking cost? We apply the same comparison here between 2014 and 2016, but this time per dollar value. What’s the average value of abooking in Rezdy?

Very, very clearly, tours and activities that cost less than $100 have significantly grown: from 20% to 30% of total online bookings in less than 2 years. As opposed to products worth more than $1,000, which would, for example, be a trip to Alaska, 10 days trekking. Tours with a higher price point haven’t grown so much.

If we look further into the less-than-$100, in 2014, 9% of those came from travel agents, OTAs, concierge, DMOs, etcetera, and in 2016 it’ grew to 13%.

The winners are, obviously, the OTAs. So in the same period of time, 2014 to 2016, the traditional travel agents lost a significant market share. I think that totally makes sense when you think about it. We go to a travel agent for probably a higher end product or tours that last longer, multi-day treks for example; not necessarily for your $50 walking tour or your $80 park attraction.

Now we’ll look a little bit more into the data that we have from the US only. The rest was very global across 88 countries. So USA, on the left-hand side here, we’re looking at the worldwide stats that exclude the US market and the three columns on the right-hand side are US-only. So left is worldwide, right it’s US.

The distributed bookings worldwide between 2014 and 2016 grew from 16%, then 18%, and finally 21%. So we had a significant growth across Rezdy outside the US, basically, for bookings coming from distribution channels. That also means more bookings for the outbound and inbound operators that are working with distribution channels, obviously. It’s not only losing general bookings, it’s growing the business.

In the US, it’s fairly flat. As a matter of fact, it’s kind of reduced, and here are the details per state. There are some states that are doing better than others, clearly. For example, Washington DC is one of them, with the upcoming IPW beast of a conference. It’s definitely a destination that is leading in terms of distribution. There might be different reasons for that. I’m not going to go into details, but, yeah, it’s a small city. We have a customer that’s been doing segue tours for example. They really, really nailed the last-minute, less than $100 kind of thing, that the distribution channels are extremely good at selling.

Another big one that makes sense is Alaska, but for a different reason. Alaska, as I mentioned earlier, you want to prepare a little bit more in advance. You’re probably going to go through a travel agent and you don’t want to arrive in Alaska and have no idea what to do once there. You want to plan in advance, so you will most likely use a travel agent to do that.

Different states are at different levels. It’s very, very different across different states. And there are some big states like Florida that in many ways are really left behind.

So what’s coming up, what’s next? Well, we’re looking at quick facts. I mentioned earlier, we have quite a lot of categories in Rezdy, in our database. There are two types of tours and activities in our customer base, One is the ‘all-time favorites’: attractions that generate a consistently high number of bookings each year: boat cruises, scenic flights, obviously, the helicopters, the planes.

Whale watching is also a huge all-time favorite in Rezdy database. As a matter of fact, I’m a scuba diver. We don’t really need to put GPS on whales anymore. We can just look at the Rezdy database and look at the bookings, to know when the whales are in California or when they are on the coast of Australia, because the bookings go through the roof for particular destinations during the whale migration season. Rezdy bookings can show us where the whales are at any point in time!

And there are also ‘rising stars’, a recently-became-popular favorite. Niche businesses are already rising, such as food tours. There’s another clear reason for that. A lot of touristic organizations, DMOs or national tourism organizations have invested quite a lot in food as a way to promote the country or a region as a destination.

Escape room is also a rising star. As a matter of fact, if you saw my presentation at the Expedia Partner Conference last December, pretty much every single day there’s an Escape room signing up with Rezdy. Tourists from Asia are totally crazy about them. It’s a great concept and it’s definitely one of the booming new types of activities out there, as well as brewery tours. There are micro-breweries opening everywhere in the world. We should be happy about that. And it’s clear they need a booking software so we can see, also, quite a lot of brewery tours joining Rezdy.

There’s an example of an escape room with the Rezdy team a couple of years ago. The Sydney Team on the right-hand side. If you’re not familiar with a concept of an escape room, you’re locked for an hour in a room and you need to use different types of clues or technology to escape the room and the first team that escapes wins. It’s pretty good for corporate team building. I strongly recommend; good fun.

We’re going to talk about the current Innovators and I’m just going to share some examples of people that have been in our point of view, Early Adopters or actually, the Innovators of technology.

The Early Adopters are sort of who we’re working with right now. This is where we are. Some examples are Luna Park here in Sydney. They’ve never really done distribution before, never really had the time to do it, so now they’re selling through Rezdy’s Channel Manager.

Papillon, most of you will be very familiar with this iconic airline in Vegas, the famous red helicopters. Papillon is currently working with Rezdy to connect their own bespoke booking system. It’s a very complex unique need they have, sightseeing, availability, etc. They understood very, very early on that by connecting to a channel manager, they will remove the need to manually connect with everyone else.

Another iconic company, Sightseeing Tours, this time in San Francisco.

Also, Rottnest Express, so it’s a ferry company from Western Australia that takes people from the big island called Australia to a small island called Rottnest. The very same scenario as Papillon: they have their own proprietary system. It took them 20 years to build, very, very unique for their own need. And we also connect with all the companies that are doing booking software for ferries, but in this case, they have their own system built to API and all the bookings are automated now.

Finally, a very iconic one, this one, Opera Australia, so just to give you an example of the different types of businesses that are innovators, early adopters of the channel manager.

Okay, so what are these businesses actually looking for, really? Maybe the ability to more efficiently manage the distribution channels, maybe to be able to update the availability, the rates to be in only one place and to broadcast that to all the channels, to all the intermediaries instantly. Maybe they just want to expand their reach and increase the number of intermediaries they can work with because even the larger attraction will have an entire team dedicated to contracting with travel agents.

But if you don’t really give a tool like a CRM to your team to contract with agents, to empower your agents,  to work more efficiently, they will only be able to work with the top tier. You’re going to neglect the long tail, that smaller agent that might send you five bookings per month. You don’t really want them, but you kind of do, so you don’t really want to spend a lot of time with them, you don’t really want to negotiate too hard with them, but you will love to have these five bookings if you don’t have much work to do to get them.

If you can take away one thing today, it’s this one: always think about the true cost of distribution because working with intermediaries separately forces you to go into the backend and upload a big inventory manually every day or every week, so that the database is up to date. This will cost you a lot more money than a flexible system that is, for example, connected with Rezdy, where you don’t have anything to do and it’s all automated, so your staff can focus on bringing more channels, connecting more with distribution agents, etc.

The true cost of distribution is something that very, very few of you think about. And in my humble opinion and obviously, Rezdy is not a wholesaler. We are just a software provider. We provide the tools for you to find your own solution that works for you. We try to build a flexible technology. We know the wholesalers so you can assign whatever percentage of commission you want and we don’t interfere with the contracting.

The technology is really here to empower, basically. So if some channels actually cost you more money to work with, I personally believe you should give them less commission. That’s a hard one. That’s a big one, but that’s a fair one as well for the industry because the true cost of distribution might not be what you think.

Empowering your staff to have a CRM such as Rezdy where they can have all the agents, seal the contract, and make sure the agents have the right price, have access to real-time availability so they can book more, and tools to discount and last-minute and distress inventory, is where we’re at right now; we’re building all these features.

We’ll basically help to grow your bottom line. So, here, I’m just going to throw big words at the hotel industry you know very well, but you know, variable pricing, yield management, distress inventory, last minute booking, all these things are now happening for the Innovators and the Early Adopters in the tour and activity industry.

So, really, what we’re trying to do here and what the innovators and the early adopters try to do here, it’s to bring the industry up to speed with the hotel and the airline industry. It’s as simple as that. We’re not inventing anything crazy. We’re just trying to bring the tours industry up to speed with the other industries, such as hotels and airlines.

Okay, so when you look into the future, I guess it’s time to ask yourself what you want to be. Do you want to get on the train? Do you want to be an innovator or an early adopter? Maybe not, maybe you want to be pragmatic here, basically, an early majority; it’s totally fine. Not everybody will want to be using the first iPhone. I personally didn’t. Pragmatism is good, it’s okay, there’s nothing wrong about that, but you also don’t want to be left behind. You don’t want to be that guy that stays on the dock waving at the boat to come back.