Five key trends in travel experiences

Experiences are quickly becoming a growth engine for the travel industry, as travelers increasingly seek immersive cultural interactions at their destinations rather than simply checking off a list of famous attractions.

The tours and activities sector was valued at $239 billion in 2019 and is projected to reach nearly $300 billion by 2025.

“The biggest trend impacting all aspects of travel – hotels, destinations, transport and more – is the rise of experiences as a driver of travel,” said Douglas Quimby, co-founder and CEO of events and research business Arival.

“This is especially true among millennials, who currently make up the largest portion of the traveling population,” Quimby said.

Amid the proliferation of experiences, executives told Skift they see five key themes emerging: The industry faces pressure to consolidate, but fragmentation and specialization are creating opportunity; Demographic targeting is on the rise; AI and climate change loom as disruptive forces;

1. Increased mergers and acquisitions

Transactions are booming as businesses seek scale and agile booking capabilities, a trend that could put smaller businesses under pressure.

The travel industry as a whole has seen an increase in mergers and acquisitions since the pandemic began, according to the travel deal tracker from investment firm Cambon Partners and travel research firm Videq.

The travel experiences sector has not escaped the trend of consolidation: in the past five months alone, we have seen GetYourGuide partner with airline Eurowings, private equity firm Apollo Global Management acquire The Travel Corporation, Trip.com partnered with Prioticket, and Lastminute.com merged with TUI.

One of the main factors is bookings: Quimby says at least half of travel suppliers don’t use reservation systems. “This creates a lot of problems for travelers and resellers.”

Partnerships help small businesses get exposure for their business and get bookings for the services they offer.

“Paid ads on Google and Meta are getting more expensive and less effective at targeting, organic SEO is harder to compete with the advent of AI-powered search results, and travel businesses are facing uncertainty about their marketing effectiveness,” said Mitch Buck, co-founder of Tourpreneur, a community and resource hub for small and independent travel businesses.

“They feel the pinch and are building B2B partnerships as a workaround,” Bach said.

Integrating booking systems (such as BookingKit, Palisises, Peeks, etc.) is a specific trend to watch.

“Carriers today have too many great, competitive systems to choose from,” Quimby says. “The future will be dominated by platforms that deliver enhanced services, including marketing, pricing, product design, customer service and other parts of the next wave of innovation.”

2. Big Business vs. Privately-run Businesses

The experiential travel industry is made up of a few large online travel agencies and thousands of smaller operators, with online marketplaces such as GetYourGuide, Klook, TUI Musement and Tripadvisor’s Viator tending to dominate distribution.

“These are by far the fastest growing sales channels,” Quimby said. “And for many businesses, this is an issue of increasing concern. [third-party distribution] I’ve been in the hotel industry for decades.”

But because the industry is so diverse, online marketplaces account for less than 10% of all experiential sales, he added. Often, these marketplaces are a way for small, independently owned businesses to promote themselves.

“For many operators, the commercial terms can be troubling,” Quimby said, “but operators should view OTAs as a tool in their marketing toolkit to be used strategically.”

Bach said small businesses are fighting the trend by carving out niches.

“Facing the challenges of competing with OTAs [online travel agencies] “For the general travel market, travel companies are turning to more clearly identifiable niche markets where they can more easily target customers,” he says. “For example, we’ve seen a proliferation of women-only travel companies.”

3. Demographics Tourism

Many experiential business owners are developing niches. Historically, these niches have often been activity or interest-based, such as hot air balloon rides, bike tours, or wine tasting.

But more recently, the industry has seen an increased demographic focus, with operators differentiating their offerings to target specific groups, such as women, LGBTQ+ and black people.

For example, Christopher Street Tours offers LGBTQ+ walking history tours in New York City’s West Village, and in Canberra, Australia, a group called She Shapes History offers women’s history tours.

The South African company Curiosity offers black history tours to visitors.

“We’re embracing the Black American community and a lot of groups from South America,” Curiosity CEO and founder Bheki Dube said. “This market is growing significantly.”

Similarly, a marketplace called Tourifique aims to become the go-to place for booking Afrotourism, offering African-themed travel experiences across the Americas, like a walking tour through Afro-descendant ruins in Colombia or a Brazilian dance class with Nigerian roots.

“Tourism is changing,” says Charles Sima, CEO and founder of Turific. “If you look at Gen Z and millennials, they’re looking for cultural immersion experiences.”

Another company, Civitatis, has had success catering to the Spanish-speaking market.

Indagare, a luxury travel company that customizes experiences based on demographic insights, is also capitalizing on this trend, designing trips based on data showing what women, men and couples in their 50s and 60s want.

Larger tour companies are also finding ways to cater to specific demographics. Kontiki, the largest youth brand with 200 itineraries, has evolved from a one-size-fits-all approach to curating trips for more specific groups. The company offers vegan culinary tours, trips for the LGBTQIA+ community, itineraries for narrower age groups, itineraries for neurodiverse people, and more.

“We’re becoming increasingly attractive to neurodiverse travellers, particularly those on the autism spectrum,” ConTiki CEO Adam Armstrong said. “It’s important for them to have the independence and be able to travel on an equal footing with their peers.”

4. AI Revolution

Generative AI is already helping operators and OTAs streamline their workloads and provide recommendations to travelers. Large companies are using AI to reduce costs and speed up product launches. But some smaller operators remain skeptical of AI’s value.

Nishank Gopalkrishnan, chief commercial officer at TUI Musement, the experience division of the TUI Group and one of the biggest players in the experience space, said the company is using AI to reduce calls to its call centres by more than 40%.

The company is also using AI for content creation: “AI has helped us launch products 9% faster and we expect further improvements with the integration of AI in our workflow,” Gopalkrishnan said.

Experts expect these capabilities to improve even further as the technology develops, but others say the technology’s real potential lies with its developers.

“The continued advancements in Generative AI will help the 25,000 experience creators we partner with run their businesses more efficiently and quickly,” Tao Tao, chief operating officer at GetYourGuide, told Skift. “For us, AI most directly helps remove time-consuming administrative tasks from our experience partners.”

But Bach said the impression among operators right now is that AI is overhyped.

“The average small business owner isn’t using the technology to make their operations more efficient beyond using GenAI as a somewhat helpful assistant for their everyday marketing and business needs,” he said.

5. Climate Change

As changing seasons and extreme weather events force travel itineraries to change, sustainability is now a “must” and not a choice, several industry leaders said.

Ben Lyman, director of communications for the Travel Foundation, said consumer attitudes and travel patterns are changing, but it’s unclear how tour operators will respond to increasing costs and uncertainty as climate change worsens.

“Traditional experience providers will undoubtedly maintain business as usual for the next few years, but at the margins we can expect to see innovation,” Lyman said.

Some groups are extending their peak season into the spring and fall, installing air conditioning in accommodations and altering itineraries to deal with the wildfires.

“The travel industry cannot ignore the climate crisis,” said Justin Francis, co-founder and chairman of Responsible Travel, an online travel company that promotes ethical and sustainable tourism. “We have no choice but to adapt. We have to be part of the solution.”

Larger companies are also adapting their policies to incorporate some of these changes.

TUI Group issued a sustainability-linked bond in February, but some of these efforts have been criticised by some activists as greenwashing.

“Sustainable tourism and destination development is no longer an option for the travel industry, it’s a necessity,” TUI’s Gopalkrishnan said.

Nina Boys, vice president of sustainability at Preferred Travel Group, a consultancy specializing in travel companies and destinations, told Skift that partnerships and collaboration between sectors will be key to hitting climate targets.

“Ultimately, the only way travel and tourism can achieve key climate action goals and reach net zero is through effective partnerships and collaboration across the sector,” Boys said, “and by educating and empowering all stakeholders to make better travel choices.”

In late August, an ice cave partially collapsed while a 23-person tour group was exploring the Breidamerkurjökull glacier in southeast Iceland, killing one American tourist and hospitalizing another. An investigation is ongoing. Some believe this was a one-off incident.

“We don’t expect this to happen often or again,” said Elin Sigulveig Sigurðardóttir, chief operating officer of Iceland Mountain Guides. “This will likely lead to more thorough investigations and stricter scrutiny of whether companies are following rules and regulations.”

But there are growing concerns that climate change could make these incidents worse, especially as a trend known as “last chance tourism” sees people rush to see the glaciers before they melt.

“This glacier is at sea level, so it’s very low and melting rapidly,” Sigurðardóttir said. “Some scientists say it’s not wise to tour the ice cap at this time of year.”