UNDERSTANDING THE EXPERIENCE ECONOMY AND THE DEMAND FOR THE ROAD LESS TRAVELED
©Nikki To (Broadsheet)
Thanks to technology consumers are spoiled for choice and access at ease. As users create a lot of data points, it offers companies valuable insights to better understand their customers and improve future experiences, in turn boosting their image, client loyalty, and reputation for the brand. The key is to balance experience management with intelligent enterprise technology.
In a July 1998 Harvard Business Review article, “Welcome to the Experience Economy,” authored by B. Joseph Pine II and James H. Gilmore summarized this concept: “From now on, leading-edge companies – whether they sell to consumers or businesses – will find that the next competitive battleground lies in staging experiences.” Today, the experience economy is expected to be worth USD 12 billion by 2023 and with 78% of millennials choosing to spend money on an experience, it is clear the value of experiences has taken precedence.
According to travel research firm Phocuswright, the tours and activities market could be worth USD 183 billion by next year, and according to the United Nations World Tourism Organization, those travelers are spending more money on things to do than on car rentals, train tickets, or cruises combined. Of those activities, eating and drinking are the most prized. In a recent survey by Arival, 68 percent of travelers said food and drink were the most important elements of their trips. 32 percent among younger travelers between the age 18 to 34 are even more likely to have done some food-related experience during their most recent travels. It is perceived to be more valuable to meet with locals and break bread than it is to buy a bunch of souvenirs.
While event-based experiences are quite clearly defined with The Yacht Week, Coachella or Tomorrowland being in high demand among the millennial generation, urban city guides, as well as the tours and activities market as a whole are still a highly fragmented part of the travel industry. It is still not uncommon for people to book an excursion after learning about it from a brochure they found in their hotel lobby, or seeking local advice from friends via WhatsApp and Instagram, or the barista in the café and sales assistant in the boutique next door. Sites like GetYourGuide, Eatwith and CityUnscripted, offering local experiences, while established online travel sites like Tripadvisor, Yelp, Foursquare, Expedia, and Booking have commoditized the hospitality and gastronomy business.
While Airbnb started as a marketplace for apartment rental, after the acquisition of HotelTonight, a last-minute hotel booking platform, the company led a USD 60 million investment round in Tiquets, a ticketing platform for major tourist attractions. Even though, Airbnb Experience were coined as something very different from your typical double-decker bus tours, instead focused on local cooking experiences or exploring the street art in the neighborhood, the recent move is underlining the fact that Airbnb has understood that there is appetite for all kinds of experiences, with plenty of room for differentiation and uniqueness.
With that being said, the company recently announced the launch of Airbnb Adventures. “Airbnb Adventures takes Airbnb Experiences one step further by introducing guests to epic, off-the-beaten-path locations,” Caroline Boone, head of Airbnb Adventures, told MarketWatch. The adventure travel business grew by 21% to close more than USD 700 billion in recent years according to the Adventure Travel Trade Association. “Everything is now an adventure because that’s what’s appealing,” Jeff Russill, a Senior Vice President at the adventure travel company G Adventures, told MarketWatch.
In addition to the established event providers and travel sites, media brands including Afar, Eater, and Fathom are also starting to sell their own branded experiences. Eater announced the debut of Eater Journeys, powered by professional tour operator Black Tomato. In addition, service providers like Uber Eats has tested to sell cooking classes and dining experiences, or customer-centric companies like Rapha or Outdoor Voices are offering community hubs and local activities. Even the old economy, have started to enter the experience economy, as car manufactures have begun to offer guided adventures, e.g. Porsche’s Ice Experience in Finland or Land Rover’s Experience Tours in Africa. Experience is something that companies from various industries have been tapping into, allowing them to only create additional revenue streams, but more so to build brand awareness and create brand advocates through engaging experiences, thus creating a strong customer lock-in.
Spool back a couple of weeks, I received The Weekend Edition from Monocle including Tyler Brûle, the founders’ weekly column called The Faster Lane. This time he was talking about a Swiss couple, who asked him for a highly personal, super-tailored tour of Tokyo. Off the back of that column, Monocle received a series of requests asking for what the business would charge for a couple of hours of shopping or an itinerary for a two-day cultural romp around the Japanese capital. While I wonder what would people pay to have access to a list of selected places to perch, drink and dine, I wonder whether exclusive experiences shall be a luxury good that come at a high cost?
In this rapidly evolving world of media, where brands always need to swerve and flex (Read my blog about the transformation of Monocle and Highsnobiety: Click here), offering experiences could certainly open up an extension of existing business models and create a whole new level of personal interactions with their customers. It also reminded me of Spotpeek, the first venture that I have co-founded during my studies, as requests for travel recommendations still pop up with daily frequency in my WhatsApp or Instagram feed with friends seeking tips for the next city getaway or vacation. While I try to be prompt to reply and offer my best advice to help my friends have unique experiences, I am aware that there are always two sides to a coin. As Brûle has also pointed out that there is backstory to this is. While it is easy to share your favorite places and promote the local economy, we shall be a cautious about sharing some restaurants as we have seen what too much attention can do in this era of social media and over-tourism. May it be the case of your favorite tapas bar in Barcelona or a hidden izakaya in Tokyo, the likes of Instagram had largely taking away the charm of many bars and restaurants that had previously been well-kept secrets, as the regulars depart and all the Instagrammers pile in.