“Experiences” are becoming a growth engine for the travel sector. An expanding segment of travelers are demanding immersive, cultural interactions at destinations as an alternative to checklist visits of famous sights.
The tours and activities sector was valued at $239 billion in 2019 and is forecast to hit nearly $300 billion by 2025.
“The biggest trend that affects all of travel — so hotels, destinations, transportation — is the rise of experiences as the driver of the trip,” said Douglas Quinby, the co-founder and CEO of Arival, an events and research business.
“This is especially noticeable among millennials, which is the largest segment of the traveling population right now,” Quinby said.
As experiences boom, executives told Skift they’re watching five key themes emerge. The sector faces consolidation pressures, but fragmentation and specialization provide opportunities. Demographic targeting is on the rise. AI and climate change loom as disruptive forces.
1. A Boost in Mergers and Acquisitions
Deal-making is surging as firms seek scale and nimbler reservation capabilities. This trend could squeeze smaller operators.
Across the travel industry, mergers and acquisitions have been picking up since the pandemic, according to a travel deal tracker by investment firm Cambon Partners and travel research company Videc.
The travel experiences segment hasn’t been immune to the consolidation trend. In just the past five months, GetYourGuide partnered with airline Eurowings, the private equity firm Apollo Global Management acquired The Travel Corporation, Trip.com and Prioticket came together on a deal, and Lastminute.com and TUI joined up.
One of the primary drivers is booking. Quinby said that at least half of the operators do not use a booking system. “This creates all sorts of problems for travelers and for resellers.”
Partnerships can help smaller operators get their businesses noticed and their offerings booked.
“Operators are facing uncertainty in their marketing effectiveness as paid ads Google and Meta] become more expensive and less effective at targeting, and organic SEO is getting harder to compete in with the advent of AI-powered results,” said Mitch Bach, the co-founder of Tourpreneur, a community and resource hub for small and independent tour operators.
“They’re feeling the squeeze and developing B2B partnerships as a workaround,” Bach said.
Consolidation of booking systems — the BookingKits, Palisises, and Peeks of the world — is a specific trend to watch.
“Operators now have almost too many choices among many great, competitive systems,” Quinby said. “The future will belong to platforms that provide enhanced services – marketing, pricing, product design, customer service, and other parts of the next wave of innovation.”
2. Corporate vs. Mom & Pop
The experiences sector is made up of a few big online travel agencies and thousands of small operators. Online marketplaces like GetYourGuide, Klook, TUI Musement, and Tripadvisor’s Viator tend to dominate distribution.
“These are far and away the fastest growing sales channels,” said Quinby. “For many operators, this is a growing cause of concern, as [third-party distribution] has been in the hotel sector for decades.”
However, he added that the industry is so diversified that online marketplaces still account for less than 10% of total experience sales. Often, these marketplaces provide a way for smaller mom-and-pop operators to gain publicity.
“For many operators, the commercial terms can be onerous,” said Quinby. “But operators should view OTAs as a tool in their marketing toolkit to use strategically.”
Bach said that smaller operators are fighting this trend by digging into a niche.
“Faced with the difficulty of competing against OTAs [online travel agencies] for general travelers, operators are turning to more clearly identifiable niche markets that allow for easier customer targeting,” he said. “I’m seeing a surge in women-only travel companies, for example.”
3. Demographic Tourism
Many experiences operators develop niches. In the past, these niches have often been activity or interest-based — such as hot-air balloon rides, bike tours, wine tastings, etc.
But more recently, the industry has seen a rise in demographic focuses. Operators are zeroing in on specific groups – women, LGBTQ+, and Black heritage, to differentiate their offerings.
For example, Christopher Street Tours provides LGBTQ+ walking history tours in the West Village of New York City, and a group called She Shapes History in Canberra, Australia, provides women’s history tours.
One company in South Africa, Curiocity, provides Black history tours to visitors.
“We’re hosting a lot of groups from the Black American community and South America,” said Bheki Dube, CEO and founder of Curiocity. “We’re seeing a massive increase in that market.”
Similarly, a marketplace called Tourifique aims to become the go-to place for Afrotourism bookings. It offers African-themed travel experiences in North and South America, such as walking tours of African diaspora sites in Colombia and Brazilian dance classes with Nigerian roots.
“Tourism is changing,” said Charles Shima, Tourifique’s CEO and founder. “If you look at the Gen Zs and the Millennials, they are looking for culturally infused experiences.”
Another company, Civitatis, has found success in catering to the Spanish-speaking market.
A luxury travel company called Indagare, tailors experiences based on demographic insights, is capitalizing on this trend, too The company is creating trips based on data that shows what women, men, and couples in their 50s and 60s are looking for.
Larger tour providers are also finding ways to serve demographic niches. Contiki, the largest youth brand with 200 itineraries has evolved from a one-size-fits-all approach to creating trips for more specific groups. They offer vegan food tours, trips for the LGBTQIA+ communities, itineraries for narrower age groups, and some for people with neurodiversity.
“We are becoming more appealing for neurodiverse travelers, particularly those on the autism spectrum,” said Adam Armstrong, CEO of Contiki. “It’s important that they have their independence and have the same access to travel as their peers.”
4. The AI Revolution
Generative AI is already helping operators and OTAs streamline workloads and provide recommendations to travelers. Large players are using AI to cut costs and speed product launches. But some small operators remain skeptical of its value.
TUI Musement, the experiences arm of TUI Group and one of the biggest players in the experiences space, is using AI to reduce queries to their call center by over 40%, according to Nishank Gopalkrishnan, chief commercial officer of TUI Musement.
The company is also using it to help with content creation. “AI has enabled us to launch products 9% faster, and we expect this to improve further as we integrate AI into our workflows,” Gopalkrishnan said.
Experts expect the growing technology to continue improving these functions. Others say the technology’s real potential lies with its creators.
“The continued advancements in generative AI will help our 25,000 experience creators who we partner with more efficiently and quickly run their businesses,” Tao Tao, the chief operating officer of GetYourGuide, told Skift. “To us, AI is most immediately useful for taking away time-intensive administrative work from our experience partners.”
Bach said that there is a feeling in the operator space that AI is being overhyped for now, however.
“Your average small operator is not leveraging the technology to increase operational efficiencies beyond using GenAI as a mildly helpful assistant for daily marketing and business needs,” he said.
5. Climate Change
Shifting seasons and extreme weather are forcing itinerary changes. Sustainability is now “imperative,” not optional, said several industry leaders.
Ben Lyman, head of communications at The Travel Foundation, said that consumer attitudes and travel patterns are changing. But he’s not sure how tour operators will react to increased costs and uncertainty as climate change worsens.
“While legacy experience providers will no doubt maintain business as usual for some years to come, we can expect innovation on the margins,” said Lyman.
Some organizations have extended their peak seasons to Spring and Autumn, adding air conditioning into accommodations and changing itineraries to cope with wildfires.
“The travel industry can’t ignore the climate crisis,” said Justin Francis, co-founder and Chair of Responsible Travel, an online travel company that promotes ethical and sustainable tourism practices. ”We have no choice but to adapt to it. We also have to be part of the solution.”
Bigger corporations are also morphing their policies to integrate some of these changes.
TUI Group issued sustainability-linked bonds in February. However, some of these efforts have been criticized by some activitists as greenwashing.
“Sustainable tourism and destination development are no longer optional for the travel industry—they’re imperative,” said Gopalkrishnan at TUI.
Nina Boys, vice president of sustainability at Preferred Travel Group, a consultancy for travel businesses and destinations, told Skift that partnerships and collaboration across sectors is key to achieving climate goals.
“Ultimately, the only way that travel and tourism will successfully achieve critical climate action goals and reach net zero is through impactful partnerships and collaboration across sectors,” Boys said. “And by educating and empowering all stakeholders to make better travel choices.”
One American tourist died and another was hospitalized after an ice cave in Iceland partially collapsed in late August during an expedition by a 23-person tour group at the Breidamerkurjokull glacier in southeastern Iceland. An investigation is ongoing. Some people saw it as a one-off event.
“I don’t believe this is something that will start happening more often or will happen again,” said Elín Sigurveig Sigurðardóttir, the chief operating officer at Icelandic Mountain Guides. “This will lead to a thorough investigation and more strict follow up that the companies are following rules and regulations.”
But there is general concern about how climate change could exacerbate these incidents, especially as people rush to see glaciers before they melt in a trend called “last chance tourism.”
“This particular glacier is at sea level, so it’s super low, and it’s melting super fast,” Sigurðardóttir said. “Some scientists say that it’s not wise to do an ice cap tour at this time of year.”