Building an activities OTA is not easy - even for Booking.com

Published April 2018

By Douglas Quinby

Last week saw back-to-back acquisitions of two leading reservation systems in the tours and activities sector – FareHarbor in the U.S. by Booking Holdings (formerly Priceline Group) and Iceland's Bokun by TripAdvisor (parent of Viator and the largest online seller of tour and activities today).

This analysis in PhocusWire by the prolific Alex Bainbridge heralds the development as a "tectonic shift" as Booking.com, the global leader in online hotel booking, sets its sights on in-destination experiences. Well, maybe. But that is a longer-term strategic outcome. There are other, more immediate implications that our industry should consider:

  • What Booking bought
    Everyone is suddenly focused on Booking.com as the next big activities OTA. But first and foremost, Booking.com has entered the software-as-a-service sector for tours and activities. And they bought a great business. FareHarbor has demonstrated rapid growth with a profitable software-as-a-service model in a market that remains significantly underpenetrated. There is enormous growth potential still left for FareHarbor (and its many worthy competitors).

    The current and preceding CEOs of Booking Holdings (formerly Priceline Group) have long laid bare their M&A vision of acquiring great businesses, retaining the founding teams, and giving those businesses the freedom and support to continue that growth (see Group CEO Glenn Fogel's interview at the 2017 Phocuswright Conference). This acquisition will be accretive to Booking's financials – not dilutive for the sake of some long-term strategic fit.

  • Building an activities OTA will be just as hard for Booking as for everyone else
    Of course, there is a clear strategic fit. Connecting FareHarbor's supply content is an obvious step. But don't hold your breath. Booking has been working on a solution for offering tickets to attractions for several years, and it's been slow going. Building a great online consumer experience in this sector is really hard, and for many reasons. Here are three of them.

    Just because Booking.com has crushed it in hotels doesn't mean its experiences initiative will be a runaway success. In fact, Booking has struggled to find its next big thing. The company was forced to make a write-down on its acquisition of OpenTable, and its businesses in travel metasearch and ground transportation, while important and successful, remain a shadow of its core accommodation business.

Here are four things we can all take away from last week's news:

  1. Reservations tech matters a lot:
    We have long believed that the emergence of new technology for tour, activity and attraction operators has been the most important development over the past five years, and the lack of new technology is the biggest impediment to a better customer experience and overall industry growth. These two acquisitions make clear that the big online travel companies are putting technology and connectivity front and center in their strategy. For those operators still not using (or upgrading to) modern tech, time is running out.

  2. TripAdvisor throws down the gauntlet with new Bokun pricing:
    Perhaps the biggest and somewhat under-reported development was TripAdvisor's new pricing to attract users to the Bokun system – booking fees of 0.1%. TripAdvisor is going all-in on distribution and is willing to lose money on the software in order to get suppliers on technology and connected to the Viator platform. This also puts lots of pressure on other reservation systems to think about how they compete with what is heavily subsidized system pricing.

  3. Suppliers that don't use FareHarbor or Bokun needn't worry:
    TripAdvisor, Booking and the systems they acquired will not disadvantage suppliers that do not use their technology.

    The tours and activities marketplace is too big, too fragmented and too dynamic. There are more than 120,000 suppliers worldwide, scores of reservation system providers, and hundreds of distributors, according to Phocuswright Research. Over time, alignments will emerge. But all of the online sellers and all of the reservation systems need each other … for now. (And they need suppliers most of all.)

  4. It's still early.
    Very early. Expect more consolidation, sooner than later.

Join us in Amsterdam at Phocuswright Europe for an in-depth session on the latest developments in the tours and activities sector. Learn more.