Online start-ups target $120bn travel activities market
Newcomers backed by SoftBank, Sequoia and others take on Airbnb, TripAdvisor and TUI
A group of start-ups led by a Hong Kong-based company Klook and backed by investors such as Japan’s SoftBank are expanding internationally in the $120bn travel activities industry, the fastest growing segment in the tourism sector.
The companies, which offer services ranging from amusement park tickets to cooking classes and walking tours, are targeting millennials, particularly in the rapidly expanding Asian travel market, forcing traditional travel agencies to invest more heavily in the sector.
“Asian inter-regional demand itself is as sizeable as the US or Europe, then you add on the growth,” said Eric Gnock Fah, co-founder of Klook, which claims to have raised the most capital of any tours and activities company globally. “In five years' time I think Asia as a whole will be bigger than the US and Europe. That’s why I think investors in general are optimistic about this sector.”
Klook received a $225m cash investment from SoftBank this month, bringing the total it has raised to $520m from investors that also include Goldman Sachs and Sequoia Capital and giving it a valuation of over $1bn.
Founded in 2014, the company offers more than 100,000 activities in more than 270 cities. Mr Gnock Fah said it had taken advantage of explosive growth in younger Chinese travellers with 85 per cent of its customers Asia-based.
Klook, which claims it accounts for half of Asian online sales in the activities sector, is forecasting triple-digit growth in its $1bn volume of transaction revenues last year. With the new capital injection, the company said it would expand into Japan, as well as boosting its presence in Europe and the US.
Klook enters capital cities first, then expands into more niche areas. In Khao Yai, a town outside of Bangkok, customers can visit farms and vineyards.
“Tour and attraction companies are going to become a travel essential,” said Neel Laungani, head of telecoms, media and technology coverage in Asia Pacific for Deutsche Bank.
“These young companies have become full-service platforms, from recommending the best attractions in a city to processing the booking and generating an electronic ticket instantly. They have figured out that if you can engage on a much more regular basis with customers it increases the engagement and ultimately allows these companies to cater to and transact more frequently with that customer.”
Similarly, Berlin-based GetYourGuide, backed by investment firm Battery Ventures and private equity group KKR, has raised $170m and is focused on growing further in the US after cementing its position in Europe.
“GetYourGuide was the first digital company to start bringing a fragmented, decentralised, analogue global market online,” said chief executive Johannes Reck.
Phocuswright, the travel industry research company, said turnover in the tours and activities market would reach $120bn in 2019, with more than a third of that being spent with Asian suppliers. The opportunity for growth for online players, particularly with mobile platforms, was huge given that only about 20 per cent of sales in the industry would be online this year.
“Whether there will be one dominant player in the future is of course a question we always ask, but so far that’s not happened in any aspect of travel,” said Phocuswright analyst Maggie Rauche. “No one can claim to have created travel activities.”
Traditional operators are increasingly moving into the space. TUI Group last year acquired Milan-based tours and activities start-up Musement.
The original disrupters in online travel are also trying to gain market share in the activities sector. TripAdvisor bought tours and activity agency Viator in 2014 and last year acquired activity reservation tech platform Bokun. The world’s three biggest online travel agencies — Booking, Ctrip, Expedia — all sell tours and activities.
Airbnb, meanwhile, launched its Experiences platform in 2016.
“Much of this growth is coming from emerging markets in Asia that are powering the growth of global tourism,” said Parin Mehta, Director, Airbnb Experiences, Asia Pacific.