The travel sector is experiencing growth driven by the demand for immersive, cultural experiences by travelers. This shift away from traditional sightseeing tours has led to the tours and activities sector being valued at $239 billion in 2019, with projections to reach nearly $300 billion by 2025. Experiences are now considered the main driver of trips, especially among millennials, the largest traveling demographic. This trend has led to the emergence of five key themes within the sector, including consolidation pressures, demographic targeting, and the impact of AI and climate change.
One significant trend in the experiences sector is the increase in mergers and acquisitions as companies seek scale and more efficient reservation capabilities. This trend could potentially squeeze out smaller operators who do not use booking systems. Partnerships and collaborations are becoming essential for smaller operators to gain visibility and attract bookings amidst rising marketing costs. The consolidation of booking systems is also a trend to watch as platforms look to provide enhanced services to operators and travelers.
The experiences sector is divided between large online travel agencies and thousands of smaller operators. Online marketplaces dominate distribution but account for less than 10% of total experience sales. Smaller operators are finding ways to compete against OTAs by focusing on niche markets and targeting specific demographics, such as women, LGBTQ+, and Black heritage. These specialized offerings provide a unique selling point for operators in a competitive market.
Operators are increasingly focusing on demographic tourism, targeting specific groups through niche experiences. Companies are offering LGBTQ+ walking history tours, women’s history tours, and Black heritage tours to cater to the preferences of different demographic groups. Larger tour providers have also evolved to cater to specific groups, such as Contiki offering trips for neurodiverse travelers. The industry is adapting to changing consumer preferences for culturally infused experiences aimed at specific demographic segments.
The use of AI in the experiences sector is growing, with larger players leveraging generative AI to streamline processes and improve efficiencies. Despite the potential benefits of AI, some small operators remain skeptical of its value beyond basic marketing and business needs. Companies like TUI Musement are using AI to reduce call center queries and improve content creation processes. The industry expects AI technology to continue improving operational functions and providing personalized recommendations to travelers.
Climate change is becoming a critical issue for the travel industry, with shifting seasons and extreme weather impacting itinerary planning and sustainability becoming a key focus. Some organizations are adapting by extending peak seasons, adding air conditioning to accommodations, and changing itineraries to cope with wildfires. Larger corporations are integrating sustainability into their policies, with initiatives like sustainability-linked bonds being issued. Partnerships and collaboration across sectors are seen as essential for achieving climate action goals and promoting sustainable tourism practices in the industry.
