As we reach 2016, Tnooz is unveiling its customary series of reflections on the year behind us and what the travel, tourism, and hospitality industry might expect looking ahead.

And, as always, we’ve asked friends and family of Tnooz to help us out.

Here is part 11 of our 12-section bonanza – activities always the next big thing.

Alex Kremer, co-founder and head of product at Actourex, an electronic ticketing platform serving the tours and activities industry. He also worked on market research firm Phocuswright’s latest report on the sector.

As we wrap up 2015, the one word that comes to mind when describing the activities sector is “finally.”

Finally, online travel agencies (OTAs) are putting their massive resources into capturing their share of an untapped gem in the travel industry. Finally, consumers are able to have a better booking experience due to numerous live connectivity efforts. And finally, startups in the sector are attracting the type of funding required to build huge businesses.

But while much plumbing work remains to be done to capture more online sales for the sector, it’s the supplier who will be disrupted the most in 2016.

Now that Viator, Expedia, GetYourGuide and others shifted to the open marketplace model, the supplier will be the one facing the biggest changes in the year(s) ahead.

Here are some of the areas suppliers will need to focus on:

  • Brand and differentiation:

    Suppliers with a well-known brand association will have a huge natural advantage as the open-marketplace efforts of the OTAs come out of their “testing phase” and become permanent.

    But in the long run, that won’t be enough. Product differentiation will also be an area that suppliers will need to increasingly focus on.

    For while brand is important, when there are five identical Eiffel Tower tours to choose from, price will nearly always win. The only way to overcome that is to differentiate and set a product apart.

    Suppliers would be wise to invest heavily in this area in the coming months and years.

  • Technology:

    Suppliers are still overwhelmingly lethargic when it comes to technology adoption. The tech sector serving suppliers has grown – from a funding and product perspective – massively in 2015. But for every 1,000 suppliers, there are 999 unique technology problems.

    At some point, suppliers and the tech vendors serving them will need to come to an understanding that, while it’d be nice to solve every single problem for every supplier, there is no realistic way for most tech vendors to do so.

    The current “answer” of just saying “we’ll stick with our current (paper, Excel, manual) system” is no longer good enough.

    Because while the supplier waits for all their tech challenges to be solved by a single system, their competitor next door — who has re-invented and re-designed their entire operation around existing technology — will be seamlessly and effortlessly serving thousands of new customers with direct integration into most major OTAs.

    It can’t be stressed enough: Suppliers who are still waiting for the magic bullet will see a different type of bullet in the long run.

  • Margins, pricing, and costs:

    Suppliers who are not currently re-thinking and re-engineering their products to accommodate for increasing margins and increasing costs better start now.

    The OTA party is going to come at a price: From commissions, to technology fees, to increased marketing, to branding – competing in numerous open marketplaces will be a major cost center for suppliers.

    Like in most other fragmented travel sectors, it’s the suppliers whose pocket will be picked the most.

Beyond suppliers, the sector should be preparing for a lot more competition on the consumer side in 2016. While the OTAs’ huge spotlight is finally on the sector, there are numerous opportunities left to be explored in effectively selling products online, especially on mobile.

And beyond all of that, a sleeping giant still waits on the sidelines… Will 2016 be the year?

Tao Tao, co-founder and COO of GetYourGuide, the Berlin-based tours-and-activities platform that has reportedly raised more than $ 95 million, to date.

Here are trends we observed this year that are advancing this category’s gradual yet steady evolution:

1. Consumers

Consumers are more mobile. “Instant”, “on-demand” and “added value”: taxi and food delivery apps have established the benchmark against which travel apps will be measured. Consumers are demanding differentiated app experiences that go beyond the desktop functionalities.

Tours & activities companies are adapting but need to do a lot more because the in-destination use-case is predominantly mobile and still riddled with massive friction points.

The average traveler this year was a lot more Chinese thanks to massive Chinese outbound travel growth. These travelers are younger, not traveling in groups, and looking for memorable experiences.

2. Suppliers

Activity suppliers are increasingly moving online. Only two years ago some of our suppliers still had issues to use our extranet because of outdated internet browsers. Today they are asking about management tools that are mobile-optimized.

Suppliers are investing into better customer experiences. There is an acute understanding that a more transparent market will favour those who invest early into service quality.

More suppliers are switching on professional reservation systems. Fragmentation is still huge and adoption is still largely in English-speaking markets.

3. Market

Customers have been booking activities, tours, and tickets for as long as travel has existed. Yet it wasn’t until this year that the category truly entered the mainstream travel conversation.

Outlook 2016

1. APIs & distribution

OTAs without their own activities offering will become a minority as the industry wakes up to the importance of offering activities to add touch points to the customer life cycle, increase loyalty, and differentiate on value.

Given increased margin competition, OTAs and travel publishers will value the additional revenue per customer from enlarging their product portfolio. Toolsets for pre- and post-purchase integrations will improve across the industry.

2. Online, online, online

The activities market is distinguished by a lot of small- to medium-sized suppliers. For a long time, it has been very hard to aggregate these suppliers.

This obstacle will be increasingly overcome in 2016, as online aggregators expand aggressively across geographies and as reservation software companies intensify their fight for market share.

3. Mobile & In-destination

Activities is an intrinsically in-destination product. The industry will invest and drastically improve the discovery, booking, and actual customer experience for the in-destination use-case.

Mobile ticketing and other differentiated mobile features that improve the customer experience will not only move mainstream but become mandatory. The industry will offer more compelling answers to “What can I do right here, right now?”.

Ever since we started in 2009, the question for our industry has gradually evolved from “Will activities be transacted online?” to “When will activities be the next big thing?”.

This change in perception has been gratifying, but it’s also clear that this is only the second inning.

2016 holds massive growth opportunities for all players in the market, and travelers will benefit the most.

Aloisio Moraes, co-founder & CEO at Razoom, a B2B tours and activities platform based in Rio de Janeiro

The tours and activities segment was one of the main topics for travel tech in 2015. I believe that we will see more of interest in the sector in 2016, with success cases, acquisitions, and new companies growing their businesses worldwide.

One of the main challenges for the tours-and-activities segment in Latin America, including in Brazil, where my company is based, is the cultural barrier that still exists among the tour operators — meaning online versus offline.

You can say that many tour operators are surviving offline, selling face-to-face to travelers.

But the reality is that many of the those operators (especially the small ones and the individual guides) have almost 60% of spare time on their agenda. They’re often leaving money on the table, so to speak.

Truth is, this segment still has a lot of opportunities to be explored and a lot of room for improvement, particularly in countries that can skip ahead from offline to mobile-optimized, cloud-based platforms.

There is no player consolidated in the market yet. That’s what makes the challenge even more exciting.

Expedia bets big on tours and activities: Will the industry win?

Our coverage of Phocuswright’s latest report on tours-and-activities

Check out our other 2015 year-end expert views on key travel tech sectors

NB: Diving activities image via Shutterstock.

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As we reach 2016, Tnooz is unveiling its customary series of reflections on the year behind us and what the travel, tourism, and hospitality industry might expect looking ahead. And, as always, we’ve asked friends and family of Tnooz to help us out. Here is part 11 of our...