European travel giant TUI Group wants to play an even bigger role in the growing tours and activities market after completing two big acquisitions in 2018 and seeing turnover in the sector increased 50%.
TUI considers itself to be one of the leaders within the sector and now offers around six million tours and activities a year, 25 million transfers, in 49 countries with a workforce of 9,000 people.
Expanding in the sector will in part drive TUI’s plans for 10% profit growth per year in 2019 and 2020. It is central to the company’s overall tourism strategy.
At a global level, revenue could hit $183 billion by 2020 and in its most recent financial year TUI saw its tours and activities program generate $347 million (€303.5 million) – up from $231 million (€202.5 million) in the prior year.
TUI’s two acquisitions this year served two slightly different purposes. Buying Hotelbeds’ destination services division was all about expanding the product range. Musement, on the other hand, gave TUI the “missing piece” that it didn’t have before.
A known unknown
“They always had tours and activities. It’s just they’ve not seen it as the same kind of business as the digital tours and activities distributors did that you see nowadays,” said Alex Bainbridge, former CEO and founder of tour distribution company TourCMS.
“The real beauty of that, if you take a look at the overall tours and activities market, one of the challenges is customer acquisition cost is extremely high, compared to the margin you make. If you think of it as a zero customer acquisition cost game for us, because the customers have already been acquired,” said Schelp.
“All of a sudden, two of the big difficulties in this market for us are easier to overcome, because we don’t spend anything on customer acquisition for this group and average margin is also better.”
As well as selling more to its own customers TUI sees a couple of other growth areas. One is signing deals with companies who will then use the TUI platform to service their own customers.
The third opportunity comes through selling direct to consumer and TUI hasn’t yet decided whether it will do this under the Musement name, its own or some other.
The bigger picture
TUI’s biggest competitors are perhaps the generalist online travel agencies, such as Expedia Group, Booking Holdings, and Airbnb.
“While the volume of attractions and other travel-related services is still very small compared to the size of our accommodation business, we are happy to report that the foundational blocks are being laid and we believe that in the long-term, providing a frictionless booking and payment experience in this area will be a competitive advantage,” said Booking CEO .
Booking shored up its own position in the market through the purchase of tech provider FareHarbor in April. And TripAdvisor, already big player thanks to its acquisition of Viator in 2014, bought Bokun.
“The big OTAs are going to be there. They are strong under customer facing side of things. For me, the question is can they get the supplier relationship digitized and what are they going to do about the delivery piece,” said Schelp.
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