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Report

Teaser, summary, work performed and final results

Periodic Reporting for period 1 - IMPACT (Integrated Mobile Platform for Activity Commoditisation in the Travel market (IMPACT))

Teaser

Summary

EU tourism and travel sector (worth â‚¬300Bn and employing 9.7M people) faces new challenges to growth (incl. digitisation and diversification) that prevent SME growth:
1) Excessive fragmentation: high diversification (>30 verticals) and hyperlocal nature of the market prevent scalability and innovation (PCWI, 2014).
2) Digital divide: 90% travellers research holidays online (FairFX, 2012), but only 12% of providers have digital reservation systems, skewing demand (PwC, 2014).
3) Price inflation: SME providers are forced to rely on high and overlapping referrals for customer acquisition, causing price inflation (Rezdi, 2015).
The challenges are particularly acute for the guided tour segment, worth â‚¬7bn p.a. and growing at a CAGR of 4%

Touriocity has proven the concept of an Integrated Mobile Platform for Activity Commoditisation in the Travel market (IMPACT), a full-lifecycle platform to generate, book and pay for bespoke travel itineraries directly from providers. IMPACT lowers transactional costs (including customer acquisition and bespoke tour generation) and improves digital access for the long-tail of providers, helping them to gain a growing share of the fast-growing bespoke guided tour segment (40% all guided tours are bespoke).

IMPACT fits objectives of the Business Model Innovation work programme by supporting growth and innovation of 1.8M tour operators (81% have turnover <â‚¬1M p.a., 33% <â‚¬250k p.a), helping them to gain a growing share of the fast-growing bespoke guided tour segment (40% share) and creating a level-playing field with more established competitors that have larger digital budgets. With support from Phase 1 of the SME Instrument we sought to demonstrate technical feasibility and commercial viability of IMPACT in the EU, preparing a detailed business plan and roadmap for exploitation.

With support from SME Instrument Phase 1 Touriocity has demonstrated technical feasibility and commercial viability of IMPACT, undertaking a granular assessment of requirements and risks to technical integration with OTA, reviewing software used in Europe, validating assumptions around market demand and forecasted usage of the service, identifying of barriers to local-isation of content and developing an advanced business plan with growth forecasts in the EU28 (including activities for dissemination within 156 cities in Europe and integration with service providers including InterContinental Hotels, Ryanair and Emirates). With support from Phase 1 of the SME Instrument, Touriocity has also undertaken extensive testing and validation of IMPACT with 6,000+ users from the London School of Economics (LSE) and 10,000 users of MyGatwick, reaching TRL7 during August 2015.

Work performed

With support from SME Instrument Phase 1 Touriocity has demonstrated technical feasibility and commercial viability of IMPACT, undertaking a granular assessment of requirements and risks to technical integration with OTA, reviewing software used in Europe, validating assumptions around market demand and forecasted usage of the service, identifying of barriers to localisation of content and developing an advanced business plan with growth forecasts in the EU28.

The Touriocity team identified and contacted key stakeholders, researched target markets, identified barriers to growth (including technical, commercial and regulatory risks) and calculated cost of rollout in each market, including client acquisition costs. In addition, the team established project milestones for subsequent tasks during rollouts (including technical localisation, regulatory research and compliance, market research, dissemination activities and analysis of data for optimization of technology) during Phase 2 of the SME Instrument. These findings were verified against input from UKTI and other business partners (including Gatwick Airport and Visit London), assessing likelihood of success and refining Touriocityâ€™s commercial risk register. Touriocity laid out actions, milestones and outputs for each of the target markets and devised a tiered structure for the rollout (from most populous cities, with high volumes of tourism, to smaller â€˜secondaryâ€™ urban centres). The findings from this exercise were compiled in the attached feasibility assessment and a separate business plan, with forecasts of revenue and expenditure broken down from Jan 2016 to December 2020.

The business plan also includes a detailed roadmap for commercialisation based on existing price points and new business models examined, incorporating input from relevant stakeholders and current/future business partners and developing a three-pronged strategy for targeted rollouts to 156 cities in EU28.

In addition, Touriocity examined strategies to maximise RoI from targeted rollouts in all critical and applied findings from primary research (including discussions with 200 tour guides in 15 countries) to produce a viable roadmap for European expansion including partnerships with Gatwick, Ryanair, Intercontinental, LoveHomeSwap, DesignHotels, TravelPort.

Finally, Touriocity has also undertaken extensive testing and validation of IMPACT with 6,000+ users from the London School of Economics (LSE) and 10,000 users of MyGatwick, reaching TRL7 during August 2015.

Final results

Feedback from stakeholder engagement and market research highlights material gaps in the bespoke touring market, critical barriers to expansion (arising from the need to engage two types of clients simultaneously in a two-sided marketplace) and complex market dynamics (incl. varied and fast-changing regulatory frameworks).

Despite these challenges, the opportunity remains to offer an advanced solution to connect the myriad of providers in this highly fragmented market, building a solution that improves on added value for end users (visitors) and minimizes cost of acquisition of users at scale. Touriocity believes IMPACT is a commercially viable and impactful solution with significant growth potential (estimated 280% p.a. on avg. to 2020) arising from existing and prospective partnerships (including white-label and GDS partners) and critical spillover benefits for tour operators in Europe.

Based on 18 months of discussions with industry, pilot trials in the UK and Italy, extensive market research and consultation with stakeholders and partnerships with international ser-vice providers (including Marriott and Ryanair), Touriocity forecast a market share equivalent to 0.38% of the addressable market (EU bespoke guided tour market) by 2018 (â‚¬28M revenue), including â‚¬19M commission revenue from booked tours and â‚¬9M in ticketing revenue. Applying a 22% profit margin, this is equivalent to a gross profit in excess of â‚¬6.4M by 2018, which is achievable due to the gradual expansion of Touriocityâ€™s existing services in parallel to product development (business agreements already in place), which will enable fast expansion and quick deployment of the technology once the prototype has been completed (substituting many of the operations that currently take place manually), reaching 0.77% of the addressable market share by 2020 and generating â‚¬63M revenue (â‚¬42M in commission revenue and â‚¬21M in ticketing revenue) and â‚¬14M in gross profit for Touriocity.

Successful development and commercialization of IMPACT is key to achieving these goals, reducing operational costs for Touriocity (gross profit margin increased from current 10% to 23% by 2020) whilst streamlining operations for small guided tour providers and helping to create a level-playing field with more established competitors with larger digital budgets. Positive externalities of the rollout of IMPACT in EU28 include improvement of growth prospects for independent tour guides and SME tour operators, greater convenience for end users and increased exposure to travellers and greater revenue from tourism in secondary urban centres in Europe. With an estimated total cost of â‚¬1.5M for development and commercialization of IMPACT, and taking into consideration these revenue forecasts, this project would yield an RoI of 1,800% by 2018 and 4,100% by 2020.