TripAdvisor wades into the Tours & Activities Sector

Nasdaq-listed TripAdvisor has announced it has entered into an agreement to acquire specialist tours & activities provider Viator in a transaction worth up to $200m, payable mostly in cash.

Tours & Activities (T&A) has arguably been the hottest sector in travel in the past three years, with a flurry of tech-focused start-ups securing venture capital investment in order to capitalise on a US market worth about $4bn in 2011, according to PhoCusWright Research.  Though somewhat smaller, the European market has also proved equally attractive; Swiss-based GetYourGuide (GYG) raised $14m 12 months ago – one of the biggest “Series A” funding rounds in Europe – and raised a further $25m this week in a Series B round from its existing investors.

A sector in its relative infancy

The rush of entrants to the sector has been prompted by two key issues:

  • A tremendously fragmented supplier base; and
  • T&A being the last major area of travel to embrace electronic distribution.

Specialists have had free rein in the sector, utilising technology to develop delivery platforms, whilst simultaneously building their inventory of T&A across destinations worldwide (for example GYG claims to offer more than 23,000 products in over 2,300 destinations).  Most large-scale tour operators and OTAs have therefore being inclined to sit back and let the specialists either supply the product, or more comprehensively by using white label platforms, as provided by Viator.

TUI is one example of a major player that has decided to directly enter the T&A sector, acquiring Isango! in February 2013, though it has been relatively low-key regarding its performance post-acquisition.  Another is Expedia, which introduced its Local Expert (LX) hub in late-2012, offering a proprietary reservation system to T&A suppliers with real-time availability based on similar technology to that used in the hotel sector.

A strong platform for growth

TripAdvisor (TA) has secured a first-mover advantage through this acquisition and is an excellent home for Viator.  We expect it to leverage its strengths in marketing and technology to further enhance Viator’s offer; integrate it comprehensively within the main TA website; and further strengthen the mobile / real-time booking capabilities Viator has developed to date.

Beyond the apparent benefits of the acquisition, there are also a number of commercial areas that require addressing.  Despite being 15 years old, Viator’s brand is more widely recognised in the trade, rather than by consumers, so a question mark hangs over whether TA will continue with the Viator name in the long term.  Rival OTAs Priceline and Orbitz are two of its largest B2B customers, and whilst competing operators utilising each other’s technology is not unheard of (think Google / Kayak), it will be interesting to see how these agreements will be restructured going forward.

This acquisition is unlikely to lead to a flurry of M&A in the T&A sector in the short-term – simply since the sector remains at an early stage of development and, besides Viator and leading independent UK operator Attraction World (backed by Maven Capital Partners), there are precious few truly independent operators that command genuine scale.  However, as the sector evolves, and key issues such as ensuring suppliers fully utilise the technology on offer and the conundrum of real-time availability is finally conquered, the likelihood of a wave of M&A activity becomes a more distinct possibility.

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