Tourism 2.0 and the (re)Designing of Experience Economics
"the size of the queue is how we know we're doing well".
This is something I got taught when I first started working in tourism.
We always wanted a queue snaking it's way out the door. Hungry for more - this was the reality of tourism in the early 2000s. Disregard how the guests felt being corralled into the gauntlet - it meant money was coming in and that was good. We needed it and it meant success. Who cares if they came back as long as that day was a busy one. Who cares if they would've spent more if it wasn't so busy as long as they spent something.
We didn't know any better.
Ever since I entered the industry (and long before it), tourism has been dominated by a singular belief: more visitors is best.
The foundations of this mindset were set in the 80s and 90s when tourism growth was gradual and uncertain.
Entering into the period of 2010 - 2020 fueled by new growth: new airline routes, a rising global middle class, the internet, third party intermediaries and bulk pricing strategies we saw numbers grow like never before.
From mass tourism to massive tourism.
The system was flowing with change and online tools were an incredible solution. Businesses were getting bookings years ahead with OTAs doing the distribution work for them, trade partners could guarantee bus loads of visitors and hotels were opening up new destinations with airlines following suit.
I'm not opposed to tourism capitalism and tourism done well. But that era is coming to an end.
It's inevitable.
The cracks in the foundation have been getting wider and deeper:
increasing customer acquisition costs (a never ending funnel of sales channels with decreasing amounts of certainty)
rising reliance on discount driven distribution and external loyalty programs (and no direct reltionship with your customer)
overabundance of undifferentiated offerings (the original, best in class tourism businesses in a destination get copied)
Add in macro economic shifts, geo politics and ever changing visitor preferences - it's bloody tough to figure out what's next or what to do or how to react.
But there's a shift that's been murmuring away in the background. Not front of house or centre stage but quielty doing its thing while trying not to get too much attention.
It's the v2 of tourism.
If Tourism 1.0 is mass tourism based on mass numbers, tourism 2.0 is about businesses that succeed with new metrics; it optimises for yield per guest, not foot traffic volume. For 5 star reviews not 5 course meals for trade partners. It runs with fewer, highly trained and highly empowered staff (and more who want to work there) not armies of process oriented, 'smile and be nice' cookie cutter crews.
Fewer visitors, experiences that evolve, higher yields, retained staff, productive growth. Tourism done well.
The shift is underway - here's how it looks:
Experience Led Pricing
The tourism operators that are quietly thriving (unlike old school businesses who gloat about their visitors numbers, these businesses don't want you to know how successful they are) are refining their pricing structures, moving away from volume and toward value. Being unchained from third parties they can change their pricing as they wish.The best businesses are constantly figuring out how they can have less visitors while maintaining net profit (not just revenue). We're even seeing the big tourism businesses do this through M&A simply because they're too big to figure out how to do it themselves. Whenever a Tourism 2.0 business gets to busy it puts it's prices up to reduce demand and maintain equilibrium between busy-ness and the quality of it's experience. Every smart business (and destination) knows that too many people = lower guest satisfaction.
Scarcity = Power
Imagine a hotel that always only shows 2 rooms left. Create a FOMO mindset - "it must be good", "if i don't book it I might miss out" - in the traveler that they must book now! The most profitable tourism businesses aren’t chasing endless bookings but they’re controlling inventory and creating perceived exclusivity. Whether it’s limiting daily capacity, implementing dynamic pricing (yes any tourism business can do this the way hotels and airlines have done forever) or offering tiered premium experiences (why not give your guests an expensive option?). These types of operators are watching their pricing like a boomer watches a luggage carousel at the airport - they're focused and standing right over it, ready to grab their bags. They understand that scarcity increases demand and pricing leverage.
The New Growth Lever
Legacy operators move slowly. They rely on their same ol' business, exit-through-the-gift shop, process orientated, 'wait til next financial year then we'll look at it' ways of doing things.
While Tourism 2.0 operators capture emerging trends and opportunities quickly. They're willing to test new products and empower to their staff to deliver on moments that make a differencs. They dedicate roles to new measures of success and hold them to account to deliver on development that keeps them relevant in the continual shift of ever changing visitor preferences.
This is the beginning of a redesign of tourism: where the measure of success isn't how busy you are but how much fun it is to run a business that does well without relying on a queue.