Ep. 330 — The State Of The OTAs Today & What It Means For Tour Operators

Airbnb spent ten years swearing it would never be another OTA. It just started buying its experiences from Viator.

For twenty years the industry has argued about whether anybody can build a real marketplace for experiences. Mitch Bach and Pete Syme think the Airbnb deal settles it. The companies with the deepest pockets have looked at the category, done the arithmetic, and decided to rent someone else’s supply rather than build their own. The ones still committed to building are running on economics that get worse every year, even while the market underneath them grows. None of that stays inside the marketplaces. A business under margin pressure has only so many places to find money, and the commission operators pay is the one that moves the dial.

Pete’s answer for operators is not a new tactic, and he says so plainly. What has changed is the price of ignoring the old ones. Discovery sits underneath every other question an operator has, and more money flowing into the platforms meant to solve it has made it harder, not easier. His argument is that operators keep chasing discovery where it costs the most to win while walking past the customers already sitting in their own city, the corporates and schools and universities that book fifteen times instead of once. Mitch pushes on what that leaves for anyone running a general tour for a general audience. They land in the same place: the only bagel tour in New York gets found, and the two hundredth walking tour in Madrid does not.

Resources:

• Peter Syme on LinkedIn, where he posts his breakdowns of the Viator and GetYourGuide numbers
• Tourpreneur business retreats in Porto
• Tourpreneur CONNECT

Key Takeaways

• Airbnb’s supply deal with TripAdvisor is an admission that building an experiences marketplace from scratch does not work. 00:01 to 06:15 Chesky spent ten years promising Airbnb Experiences would find the man in the tree house leading beer tastings and never become another OTA. The company is now taking curated supply from the platform Pete calls its philosophical mortal enemy. Nobody has cracked this category in 20 years of trying, which is precisely why the giants stopped trying.
• The experiences market is growing fast while the economics of running a marketplace get worse, and operators pay for the gap. 02:41 to 04:00 Day tours and multi-day are both expanding at rates other sectors would want. Marketplace financials are moving the opposite direction. A marketplace has two levers when growth slows, more bookings or more commission from the operators supplying it, and only one of them moves the dial.
• Viator’s growth has been declining for two years, and GetYourGuide needed 16 years and about a billion dollars to reach a few tens of millions in EBITDA. 04:00 to 05:45 Viator posted 2 to 3 percent growth, 2 percent after currency, in a market still growing quickly. One soft quarter is noise; two years of decline is a signal. Pete is careful to note GetYourGuide’s figure is EBITDA in a private company, not cash in the bank.
• Airbnb is selecting which Viator products it takes, not all 474,000, and it has not published the criteria. 06:15 to 08:00 Operators who get selected start receiving bookings with none of the usual pain of dealing with Airbnb directly. Operators outside the selection get nothing and have no way to find out which side they land on in advance. Whatever Airbnb negotiates comes off the top, leaving Viator between 8 and 13 percent for handling fulfillment while the operator still pays 30.
• If Airbnb ramps volume, 60 to 70 percent of Viator bookings end up sold through partners rather than Viator’s own app. 06:15 to 08:00 Pete’s estimate flips Viator’s core business from B2C to B2B at much lower margins. The 30 percent an operator pays is then split between two companies, neither of which found the customer the way the operator assumes. OTAs become the fulfillment engine for companies far larger than they are.
• The largest travel companies decided this industry is not something to build, so they rent someone else’s engine instead. 08:00 to 09:48 Bookings, Expedia, Google and Airbnb all sit above Viator and GetYourGuide in scale. Airbnb is valued above $100 billion against GetYourGuide at $2 billion with a gale force wind behind it. Taking 10 to 12 percent without the cost of building is the rational choice when two decades of evidence say building is brutally hard.
• Pete expects average OTA commission to settle at 35 percent, and he has been saying so for nearly ten years. 09:00 to 09:48 That is the level where he sees a marketplace in this category become an economically viable business. An operator budgeting against 30 percent should model what the business looks like at 35 before it arrives. The pressure comes from slowing growth and investor expectations, not from anyone’s ill will.
• GetYourGuide’s brand and app bet fixed the Google problem and ran straight into collapsing app usage. 11:06 to 14:00 The company was routing investor money straight through to Google until performance marketing costs stopped making sense, then switched to brand advertising and getting its app onto phones. Its own numbers claim the first booking pays for acquisition and the second one makes money. App store listings are exploding while actual app usage falls, and travel apps outside Google Maps get opened once or twice and deleted, which is why Pete expects the long tail of apps to disappear within five to six years.
• The tour customer buys once a year, so sell everything you can while they are standing in front of you. 13:02 to 14:00 Someone in Paris for two weeks will buy three tours inside that window. That same person may not be on holiday in another city for 24 months. Paying to recapture them eight months later almost never works, which is why loyalty mechanics behave badly in this category.
• No investor will fund a new experiences OTA today. 14:00 to 15:05 Pete’s test is simple: go try raising money for one. A three times return is below average for a VC, and that is the best outcome this category has produced after a billion dollars of input. Existing marketplaces still hold value, but a category closed to new entrants tells you what the returns actually look like.
• Airbnb’s own statements now rank car hire as a bigger opportunity than experiences for the next two years. 19:12 to 19:40 Car hire is a commodity that pairs with accommodation bookings and makes more money per transaction. The company that called experiences the best part of travel has put a rental car above them in its stated priorities. That ranking says more about Airbnb’s real intentions than any keynote.
• Volume dilutes quality, and an okay tour still sells at $70 but never at $500. 21:57 to 23:00 Pete checks this with customers rather than operators, because every operator thinks their tours are brilliant. A customer who spends $70 on a two hour history walk in Paris, finds it okay, and moves on will still buy. At $500 to $4,000 the same reaction ends the business, which is why the commodity drift only works at the bottom of the price range.
• Operators now need two businesses: one designed to survive inside OTA structures, one designed to run without them. 21:57 to 23:50 Mitch’s framing is that these are separate strategies, not the same tour sold through two channels. The OTA version competes on ratings and scale and gets standardized by the platform’s model of what sells. The direct version is where the higher margin, stranger, better tours live and where the operator keeps control.
• Discovery is the number one operator problem, it got harder this week than last, and the fixes have not changed in years. 23:50 to 25:30 Billions in OTA investment and AI search have made operators harder to find, not easier. Two OTAs give you two chances to be discovered; twenty partners give you twenty. SEO, its AI equivalent, social, and a Google Business Profile updated weekly are still the baseline, and operators turn up in the community every month saying a single Viator ranking disappeared overnight and took the bookings with it.
• The customer relationship is the only thing a tour business actually owns, so design for repeat business at the start. 27:39 to 28:00 A business serving only one time tourists in New York or Berlin needs 200,000 clients a year to work. A product built to make people return and refer needs a fraction of that. This is a design decision that comes before marketing and before distribution, not a retention tactic bolted on later.
• Every city holds roughly 50 local distribution channels that book 10 to 20 times across a decade. 27:40 to 28:01 The top 500 tourist cities are also the top 500 corporate locations, which makes every company in them a buyer if you build something for corporates. Schools, universities and charities behave the same way. Pete has watched operators change their business inside 12 months by working that list, and those are the operators taking two weeks off in August.
• Locals are a separate customer base needing separate products and separate distribution. 28:01 to 29:38 Jeanette Pierce at City Institute in Detroit built an entire day tour business on locals. You cannot sell a local the tour you sell a visitor, and locals do not open Viator to find something to do in their own city. The discovery path runs through Eventbrite, HR departments and community groups instead.
• AI search rewards the operator who is the only match for a specific interest. 29:00 to 29:38 Mitch asked ChatGPT how to immerse himself in bagels in New York and got a direct link to Sam’s Bagel Up, a Tourpreneur member and the only person running bagel tours there. That match happens without competing for position in an OTA ranking where the customer gets distracted by twelve other options. A generalist offering general tours to general audiences has the opposite problem.
• Niches carry higher margin and are far bigger than operators assume. 29:38 to 31:38 Pete’s side project, an academy for people near the end of their lives, has 3,500 subscribers after four weeks with no product, no platform and possibly never a website. Of Tourpreneur’s 24,000 operators he reckons all but roughly 5 percent should be doubling down on a niche rather than joining the 200 walking tours in Madrid. People pay more for the thing they actually care about, so margin follows specificity.