Return to site

Transformation Economy Strategy For Tour And Activity Operators

First Published Nov 2019 on Linkedin by Pete Syme

· Tour Operators,Tourism,Leadership

I have been indulging in my addiction over the last several weeks. Seven countries and three continents. I do not need to explain to you all the vast benefits of travel. However, I use all the rubbish part of the trips of sitting in airports and steel tubes to think and take notes. Then, of course, in destination, I get to speak to many operators in tours and activities and their guests. I also experience the local life and how tourism is impacting for good and sometimes wrong on the destinations and the people.

This article is not the result of the last few weeks. It is the output of several years of watching and experiencing the speed of change. Both at a Global Marco level combined with observing how that change plays out on a local level in the destinations, I explore.

Please bear with me on this as the first half of this article is about Global trends. It is also about economic sector development so not directly about tours and activities. However, if you are developing a strategy for your tour and activity business, these things matter a lot!

Six Global Marco Trends That You Should Consider.

The changing of the balance of political and economic power from the West to the East. What will this will mean in the future and all economic activity and especially the travel sector?

China, who is just one country of the many rapidly developing Asia powerhouses, will reach 50% of the GDP per head of the West. When will this happen, I do not know, but it will. When it does China's GDP will be twice as big as the USA and Europe together!

Globalisation will increase at rapid speed. Globalisation has had vast benefits. However, it is also going to result in severe backlashes in many regions of the World.

The continuous rise of populism and authoritarianism will continue. It will only take one major recession or financial crash to see more countries end up with leaders who buy into this dangerous trend.

The Environmental crisis is a talking point just now. We are still trashing the planet at speed. Society will continue to do so until the kickback from the earth starts to destroy economies. We will then take it seriously. Get ahead of this now!

The technologically driven change mainly driven by AI over the next five-ten years will destroy many current jobs. Both blue and white-collar will suffer. Those displaced are not skilled in the new work that will appear. The impact will be felt more in the West than the East.

These six drivers of change are all independently hugely significant. However, it is when they converge both threat and opportunity abounds. It does not matter if you are a small two-person activity business or a global scale travel technology business. These drivers are going to shape your future.

The Five Economies And Why They Are Important To Your Tours And Activity Strategy.

The Commodity Economy.

The Product Economy.

The Service Economy.

The Experience Economy.

The Transformational Economy.

I have tried for thirty-eight years to be productive in the economy. I had a six-year mid-life crisis experiencing a combination of the commodity, product and service economies basically, what most folks call a job.

I can remember thinking at the time this is a battle of never-ending margin erosion. The digitalisation of these economies has made that margin battle go into hyper speed.

We are rushing to digitalise the tours and activities industry. It is essential to be aware of the paradox of the digital era.

Economy sectors that have digitalised with the impact of aggregation of choice and resulting distribution have had the following implications.

A small number of winners take all in the digital space. Resulting in an increased competition focusing on price as the main driver. Resulting in reducing margins for those who provide the product or service.

It was back in 1998 when I had an early mid-life crisis that a couple of smart guys Joe Pine and James Gilmore first described the Experience Economy. When your wife or partner asks you what you want for Christmas, I strongly recommend your answer is their book.

The tours and activities industry has an opportunity to ensure that what we do stays in the Experience Economy. For some, hopefully, develop their businesses into being players in the Transformational Economy.

So what is the Experience Economy?

The guys who coined the phrase define it with regards time. If you are involved in the commodity, product or service marketplace, it is all about saving time. If you are in the Experience Economy, it is all about spending your time well. I add to that it is about being efficient versus effective.

An example from the travel industry is airlines. Back in the1960s, taking a flight was an experience — also, an expensive activity. In the 1970s and 80s, the number of people flying snowballed. The first few flights people took were still an experience. By the 1990s, regular flyers treated flying not as an experience but a period of pain they had to endure. To carry out their work or to experience travel in a different destination, flying became a commodity service.

Flying started in the experience economy. It quickly got relegated into the service economy. It is now a commodity. I have a flight next week that cost £13! The resulting reduction in margin makes the airline industry, in most cases, a destroyer of value. It is now price-driven above all else. Much of the hotel sector is also well on its way along this journey. A hamster wheel environment!

The question tour and activity operators need to ask themselves is.

Are we in an efficient market? One where we want to serve our guests well by saving them time at scale? Or are we in an effective market? One where we serve our guests by enabling them to spend their time well.

It is critical to understand this because if you are in the efficiency game, it is about the scale you have to be and the instant gratification that a guest needs. Think, fights, hotels and taxis. All are essential and have to deliver, but it is about scale, efficiency and price.

I like to think of this as the faster, better bigger market. You are always going to be having to go faster, continuously make incremental improvements to get better and keep growing more than your competition. There is nothing wrong with this part of the economy; it is the nuts and bolts. However, it will be a constant battle, as someone is always going to be disrupting. They will continuously do it faster and better. The digitalisation ensures it will continue to have declining margins.

If you are in an effective game, you are in the Experience Economy. Not about saving your guests time. It is about ensuring your guests spend their time well. Your guests are investing their time with you. They are expecting in return an experience that will satisfy them not just on a functional level but on an emotional one.

The tours and activities industry is in the Experience Economy by default. Therefore we are lucky. When you are in the Experience Economy, you can command a higher price and retain higher margins. You also connect with guests emotionally. An emotional connection results in guests positively sharing their experience. How many people share positive experiences of flying versus negative ones? Look at the reviews of any excellent tour and activities operator. You will see the majority have fantastic reviews.

The fact that we are in the Experience Economy more by luck than design does not mean we can all put our feet up think easy life. The tours and activities industry digitalisation at scale has not yet happened. It is in the early days with maybe 20-25% of the experiences we provide being online. Probably a lot less is distributed in the same way flights, and hotels are. The considerable interest we see in the sector just now and the vast sums of money currently being invested are because intelligent people and companies see a huge opportunity. This opportunity is to aggregate the experiences and distribute them to guests.

I remind you all that what happened to every single industry that has done this before us. Digitalisation has resulted in a marketplace that is in a combination of the service, product and commodity sectors. Resulting in increased competition and reducing margins. Critically it also resulted in how guests view and treat these marketplaces. Do you want Tours and Experiences to be seen by the average guest in the same way they view flights and hotels? Do you want guests to focus on efficiency and time saving over investing time effectively in an immersive experience?

In the Experience Economy, operators and brands curate memorable encounters. These encounters must connect on an emotional level with the guest. The experience is of a higher value than a service, product or commodity.

It is in every operator's interest to ensure that they develop experiences that stay in the Experience Economy. Do not let your tours and activities get relegated to the hugely challenging service, product and commodity sectors of the economy. If you are going to be a cow make sure you are a Highland Cow!

So What Is The Transformational Economy?

The exponential growth in the travel industry and specifically in tours and activities is creating massive choice for the guest. For the operators, it is generating vast competition. So how, as a brand and experience focused operator, do you stand out from the crowd?

Smart operators realise that they are selling more than a product; they know the connection their experience has with the guests is more than just a product. However, astute operators are figuring out they are the enablers for something much bigger. The can be the catalyst for something more profound. They are figuring out they are progressing from operating in the Experience Economy to operating in the Transformational Economy.

The Transformation Economy is not in competition with the Experience Economy. It is the evolution of it. This evolution is driven by the increasing desire of the guests to satisfy their highest tier of Maslow's hierarchy of needs: self-actualisation.

In the Experience Economy, operators curate memorable experiences and encounters. In the Transformation Economy, guests are seeking more than mere experience. They crave something authentic and meaningful. This level of connection is at the most personal level. It touches the guest in many ways and by doing so, enables the guest to undergo a genuine sense of transformation.

Travel guests are desperate to connect with themselves. Operators that can offer them a meaningful route to experiencing themselves in different inspiring environments will be the operators that can manage the challenges of a digitalised and connected World.

Transformational experiences command a high premium and are not margin sensitive. They are personalised to such a level that replication is difficult. Aggregation is challenging as you are not comparing eggs with eggs.

The Transformation Economy is not a one size fits all approach. It will be exceedingly difficult to do at scale. The Transformational Economy is a differentiator. It is hugely personal and relies on two things: An active, motivated and interested guest — a willing operator who will adapt to the guests deeper needs and requirements.

This adaptation can only come from a place of deep and genuine understanding and intent on the part of the operator and its leadership. It is only when this change connects with the guest at a deep, meaningful level can they relate to the operator or brand on a transformational scale.

The Transformation Economy guides the guest beyond mere experience to a destination where the guest benefits from a deep relationship with the brand or operator. This level of connection that results in a conversation and often co-creation. The interactions are highly personalised and the subsequent value that is generated bonds operator or brand powerfully with the guest.

The is a never-ending cycle where the guest influences the operators who in turn re-influences the guest. It is cyclical and reciprocal and evokes powerful, genuine change for both parts of the relationship. A resulting transformation continues and evolves to benefit everyone.

Here is a personal example of both an Experience Economy experience and a Transformational Economy experience. Both are from my own tour operations.

Experience Economy Example.

A half-day highly personalised white water rafting experience for small and large groups. The guests have a great experience involving fun, adventure, adrenaline and a little bit of fear. They also enjoy the group dynamic and teamwork. It is certainly memorable and shareable, which is excellent but is it transformational? For a tiny amount of guests, it has been. It acted as an introduction to the outdoors. They went on to do more in the outdoors, and some even became guides. However, for the vast majority of guests, it is just a memorable experience.

The above will have to continue to evolve just to stay in the Experience Economy. It will always be open to growing competition. As experiences such as this are aggregated and distributed by digital means, it will continuously be fighting a rearguard action not to be dragged down into the service, product and commodity economy.

Experiences stir guests at the moment in time that they experience them. It is not impacting on guests when they are no longer experiencing it. Guests want more than to be just stirred for a moment in time they want to have experiences which result in a sustained change in their lives. Enter the Transformational economy.

The Transformational Economy Example

A fifty-day expedition to cross 1100 mile of the Gobi Desert in Mongolia on foot. A level of immersive experience where guests have to survive 24/7 in a hostile environment for weeks on end. At the same time, as burning 8000 calories a day and doing something that most people cannot contemplate delivers a profoundly personal challenge and emotional journey. Pre taking part most focus on the physical nature of a transformational experience such as this, but it is the mental experience that is defining. The uninterrupted time with no phones or internet gives guests something they have not experienced since they were kids. Time to think. A lot of time to think. When people have time to think they make life-changing decisions. I have seen guests decide to get married, get divorced, and change career. The last one is virtually a given which says something about the satisfaction of many peoples daily work lives.

Transformational Economy businesses that are helping guests elevate from experiences that gave mere enjoyment to actual personal transformation. Guests are willing to pay for experiences that have the potential to change the way people live, work, and play.

Examples

The Modern Elder Academy by Chip Conley

Nikes move into the Transformation Economy

Peloton anywhere anytime

Tours and Activity operators when designing new business models or transforming existing business models should consider the following if they want to be in the Transformation Economy.

1. The experience should be Emotional 

  1. The experience should be Holistic 
  2. The experience should be Transformative 

The guest has to be changed forever by the transformational experience

In a previous article, I wrote about how the market has changed from one market to millions of markets of one. In the Transformation Economy, the guest becomes the expert, the authority and the agent of change.

Guests are looking for transformational experiences that will reward them with personal growth combined with experiencing change and being able to look back and say " I have changed"

We are all used to creating guest personas by gender, age, income, location and multiple other boxes. Transformational operators will develop guest personas by their mentality!

"What hamster wheel is our guest on? "

"What are they looking to create in their lives on a constant basis that will help them transform?"

" Where are they in their lives just now?"

" What transformation are the considering undertaking?"

" How do they use our experiences to deliver on their own transformational journey?"

When I travel I ask people a lot of questions. Other travellers, taxi drivers, hotel staff people in bars. Many are on a journey. They are writing a book, starting a business part-time, trying to become an influencer on social media. Trying to figure out what they want to do in life. trying to change jobs.

My point is these people are all looking to personal transformation and are looking for organisations and experiences to help them do that. As tour and activity operators we are in a unique position to not just deliver great experiences in a moment in time but to contribute to changing peoples lives for the better.

If you have read this far, thank you it is really appreciated. As always I love to hear your thoughts and feedback.

Regards

Pete

PS. As part of my own transformational journey, I have decided to only work with organisations going forward that operate at a minimum in the Experience Economy and aspire to be in the Transformational economy

All Posts
×

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!

OK