Start-ups in Germany are successfully targeting the lucrative market for destination activities such as excursions and tours by offering cheaper advance bookings.
The market for destination leisure activities is massive, according to US market researchers Phocuswright. In Europe alone, travellers spend about €37 billion a year on activities such as excursions, tours and tickets for attractions. The destination activities market is thus “three times larger than that for car rentals and nearly half the size of that for hotels and accommodation”, according to the firm. “About one third of the travel budget is spent in the destination,” says Johannes Reck, founder and CEO of Berlin-based firm Get Your Guide.
Traditionally, many such activities are booked directly in the destination, for example through a hotel, tour operator representative or local agency. But with margins of up to 80% these are often highly over-priced. A new generation of specialist start-up firms is now targeting this sector by offering lower prices for advance online bookings.
Get Your Guide has some 25,000 offers in 2,400 different destinations that holidaymakers can book through its portal. “Demand is developing unbelievably,” Reck said. “We have destroyed the margin structure.” His fast-growing company now sells products worth “a three-digit million euro sum” and generates average revenues of €150 per customer. The company sells mostly directly to consumers but also to tour operators and travel agencies. Last year Get Your Guide raised US$25 million in a financing round.
TripAdvisor has also discovered this business and last year bought the US portal Viator for €175 million. “We are developing from an evaluation portal into a travel companion,” said Germany chief Tom Breckwoldt.
Another player is Kuoni subsidiary GTA which markets similar products through its Travelcube product directly to some 4,500 travel agencies in Germany. “We already have about 15,000 transfers and sightseeing tours in our programme and want to double our offering by 2017,” said Nils Proschek, managing director Germany. “With us, the offers are up to 30% cheaper than when you book in the destination.” TUI subsidiary Hotelbeds has a similar offering.
These destination activities offerings are increasingly attractive for travel agencies as a source of additional sales and commissions. “Until now many products could only be booked in the destination. But thanks to this cooperation (with Get Your Guide) the revenues are now directly generated in the travel agency,” said Andreas Heimann, managing director of DER Reisebüro, Germany’s largest travel agency chain.