We are back with our second instalment of our series showcasing the insights and stories from our tour operators. 

In this episode Auður, who took a thriving blog and turned it into the successful 'I Heart Reykjavik’ walking tour, takes a deep dive into the early stages of creating and building a successful tour operator business. 

From idea generation to the A-B-Cs of setting up a business; learn how to build your foundations from an operator who has taken this journey...'

How to Come Up with an Idea

The ideation process of a new business boils down to getting to know your customers. It is easier to start with a need or want and build around this framework than finding users for a product no one asked for.

So how do you create experiences that delight customers? It all starts with research.

Mapping the journey

Drawing on your own experiences is a great place to start. Think about your frustrations and high notes as a traveller. Imagine your customers’ visit to your destination as a journey that starts with the birth of an idea of travel and ends with a plethora of priceless memories and photo sessions with friends at home. 

Think of what emotions may arise at every step of the visitors’ journey, pain points and frustrations they may experience, and how your business can make their life just that little bit easier.

This process is called customer journey mapping. You can do it on a macro level; to find new opportunities where travellers’ needs and desires are not being met. 

Once you’re an established tour business owner, it can also be helpful to map processes for improvement. Like how your guests check in for your tours or how your guides bid them farewell.

But we’re getting a little ahead of ourselves, we’re still just trying to come up with an idea.

Travel forums and social media

Travel forums and social media groups dedicated to travel and/or your destination are full of helpful insights. Think TripAdvisor, The Lonely Planet travel forums and all the destination Q&A groups on Facebook.

Take some time to read through questions and comments from travellers and try to detect some actionable trends based on what travellers really want from an experience. Instagram and TikTok are also great sources of inspiration, especially when it comes to younger travellers.

The analogue approach

Experiences are designed to be enjoyed in-person, don’t forget this during the research stage.

Sign up for some tours on offer in your destination and talk to your fellow travellers to find out what they like and don’t like. Notice what the guides and operators do well and what they could improve.

If you don’t have the budget for testing out tours yourself, get to know what is on offer in your destination through tour companies brochures, websites and tools such as TripAdvisor. Strike up conversations with travellers in local bars and cafes to gather their insights.

Making sense of it all

Now that you’ve done a ton of research, it’s time to find your idea. There are millions of ways to analyse research, and everyone has their favourite.

One helpful technique is brain dumping. Set a timer and write down everything that comes to mind after reviewing all your data. Once you’ve dumped all your ideas on paper, sort through them and try to find the swan among the ducklings.

Another popular method is mind mapping. Start writing down one central idea and add new and related ideas that radiate out from it. Writing down ideas and forming connections helps to sort through all the stuff you gathered during your research phase and make sense of it.

The First Steps

Whatever the business, the first step for a new idea is to figure out its viability. You will also need to give some thought to your business model, how the business will operate and what service providers to partner with. 

The A-B-Cs of your business

Start by asking yourself a lot of questions: Does something like your idea exist already? What makes it different enough to make travellers choose your idea? Who are your main competitors and potential partners? And finally, does your market allow you to charge enough for the tour to cover your fixed and variable costs?

When you’re inspired by an idea and ready to run with it, practicalities may seem tedious. The harsh reality is, however, that you will quickly run into issues if your earnings don’t cover your costs. Save headaches down the line with thorough research.

Doing a break-even analysis is one method to test an idea’s viability. If this all sounds foreign to you, there are a lot of great break-even calculators available online. It takes some practice to get the hang of using them but before you know it, you will be doing a break-even analysis for your whole life.

To write a business plan or not to write a business plan

Depending on your plans for financing, you will likely have to write a business plan, since most banks and investors require it. If you plan to self-fund or bootstrap, you don’t need an official plan, but you should always create a structured process to work out kinks.

The Business Model Canvas is a handy tool for first time founders. Filling it out is simple enough to figure out without a business degree, but thorough enough that it covers most of your most important considerations. 

Writing a detailed business plan is a big task but they mostly include similar information and there are formulas available online that you can follow.

Staying on the right side of the law

Laws and regulations differ between countries so it’s important to get acquainted with your local requirements. In Iceland, for example, you need a licence to conduct tours and another type of licence to resell tours. You might also need a general business licence and specific types of insurance may be required.

Different forms of businesses

Deciding what kind of enterprise to start is also important and it may be worth investing in outside counsel to choose the right one. For a small operation, sole proprietorship may be an obvious choice but as soon as you assume any financial risks, the limit risk for owners should be considered.

The dreaded GDPR

The European Union requires all companies that do business within the EU or EEA, or with their citizens, to comply with the General Data Protection Regulation. Most websites and booking systems will need to consider GDPR and failing to do so can result in hefty fines so is not an area you want to take your chances on. 

Your booking system

Customers today expect to be able to finish their online purchases in a quick and painless way. Email and a paper diary are not going to cut it: you need to find a booking system.

Your booking system needs to fulfil two needs: allow customers to make their bookings online and help organise your schedule and avoid double bookings. There are plenty of booking systems out there so it’s important to do your research. Bókun’s intuitive design, ease of use and convenient connections should send it straight to your short list. 

Payment providers

Accepting bookings is one thing, accepting payments is a different matter. You need to find the right payment provider that allows you to maximise traveller bookings with reasonable fees. One of Bókun’s advantages is the extensive connections with multiple payment providers across the globe. 

When choosing the right payment provider and which payments to accept, it’s important to keep your target audience in mind. Americans, for example, often choose to pay with American Express where the fees tend to be higher. You might also want to consider broader ways to pay like Alipay for Chinese customers or Apple Pay. Make it easy for your customers to do business with you!

How to Attract Customers

Now that you know what product you want to sell and what kind of company you want to create, it’s time to find customers. 

In the 1989 movie, Field of dreams, Kevin Costner’s character hears a whisper in a cornfield: “If you build it, he will come”. That may be true for dead baseball players that need a field to play in, but in the real world that’s simply not going to work. You can build the world’s most useful product but if you don’t let people know about it and if customers can’t find you, failure is inevitable.

For a long time, marketing a travel business was pretty straight forward. A nice-looking brochure, a connection to the right travel agency and some ads in local establishments and you were good to go. Well, maybe not quite, but you get the gist. 

With the internet, things have become a bit more complicated. The good news is that the internet also levelled the playing field. There are endless opportunities for small travel businesses to compete with their bigger operators, and a little bit of creativity goes a long way.

Know your customer

The first step to any kind of marketing is to know your customer. It can’t be stressed enough how important this is. You can’t be everything to everyone. You need to figure out who to serve, how to reach that customer base and how best to serve them.

Offline marketing

Although these days many travel businesses are online-first, there can be some real advantages in mastering your offline marketing. 

Work with travel agents/agencies

Working with travel agencies is one of the quickest ways for travel businesses to reach more customers, whether we’re talking traditional agencies or Online Travel Agencies (OTAs). 

It’s especially beneficial to ride their marketing coattails when you are starting out. When you calculate how much you would need to spend to reach the same amount of travellers as big players it makes sense to market with larger OTAs. However just keep in mind that you will pay commission on bookings. So it’s important to make sure you don’t neglect your own commission-free channels.

Travel agents often have favourite tours and experiences that they recommend more than others. Because of that, it helps forming a personal relationship with travel agents if you can. Make sure you also offer them a chance to experience your tours for themselves; it’s easier to sell something you have experienced yourself. Organise a familiarisation trip (FAM trips) for agents in your area to cultivate strong relationships. 

Hotels and tourist information offices

There’s a surprising number of people that still use hotel concierge services and tourist information offices to book their tours. If you need more bookings, make sure to check these out too. It may help to offer the staff of these places extra incentives to sell your tours as they often don’t benefit from the commission their employers get. 

Participate in industry events and work that network

Joining big industry shows like ITB Berlin may be overwhelming when you’re just starting out. Instead, try to opt for smaller events offered by your local tourism board or regional clusters to get more eyeballs on your products. Smaller events like that are also great to build a network with other business owners in the area. 

Participate in local start-up communities. Many founders often help each other to reach bigger audiences as well as giving you an opportunity to network with people who have experienced similar issues when starting a tour or experience company. Joining local business associations can provide an opportunity to collaborate with tour operators in your vertical or location.

Online marketing

Understanding online marketing is key for travel businesses these days. 

In digital marketing we sometimes talk about three types of media: owned, paid and earned media. Without going into too many details, your owned media are areas such as your website and your mailing list. Paid media is advertisement of all kinds, including boosted social media posts and paid search results. Earned media is word-of-mouth recommendations, online reviews, media coverage and all types of PR. 

In general, you will need a combination of all three to reach your potential customers.

Owned media

A mistake many young businesses make is not spending enough money and effort on their owned media, such as their website and mailing list. It’s called owned media because no matter what happens, you own these entities, and you don’t have to rely on the whims of social media algorithms or 3rd parties to retain your place in your customers' awareness.

Your website

For most tour companies, your website is the most essential part of your marketing strategy. The website is your storefront, if you will, and it’s where your customers look for information and where they make their purchases. Therefore, it’s important that you think about user experience and ease of use, along with making sure your website looks and feels trustworthy. You are asking your customers to trust you with their credit card numbers, after all.

Content marketing

Your website is also the home of one of the greatest weapons in the tour businesses marketing arsenal: content marketing. Because most people start their search for information online, it’s vital that your website shows up when travellers search for related experiences in your destination.

Informative and relatable content is not only great for Search Engine Optimization (SEO), it’s also a great tool for brand building and establishing trust with your customers. Other types of content marketing are Facebook posts, Instagram Reels and TikTok, to name a few, and they are all very important to travel businesses. 

The key is to always link back to your website to give people an opportunity to buy what you’re advertising.

Mailing lists

A good mailing list is an often-underutilised tool in online marketing. Mailing lists generally offer great return on investment because the opening and click-through rates tend to be higher than through other mediums. 

Mailing lists are especially useful for travel businesses as they help build your brand, establish a connection with potential customers and with automation you can target customers based on the different stages of the customer journey. To get people to sign up for your mailing list it can help to use enticing lead magnets, such as free e-books and courses.

Paid media

Paid media is usually what people think of when they hear the word marketing, and most people are well versed in the topic. Therefore, little time will be spent on it here. It is important though that you choose your mediums wisely to get the most out of your budget. 

You won’t reach the youngest audiences on Facebook. If you plan to serve a niche audience, it’s worth doing some research into niche websites or publications. If your target group is German bicycle travellers, for example, it may be worth it to see if there's a community online where they congregate.

If you plan to use travel influencers, it’s important to choose influencers that align well with your brand and the objectives of the campaign. Traditional wisdom indicates that you may get more for your money using many micro influencers over big macro influencers and superstar celebrities, but operators should test and optimise marketing based on individual results.

Earned media

Travellers tend to trust 3rd party reviews over what you promise in your own marketing materials. Earned media, such as reviews, are also essentially free so it’s important to pay attention to customer feedback. Doing it well can cost you some time, though. 

Making a profile on TripAdvisor and monitoring the company’s reviews should be high on your list of priorities to start with. Look into whether there are other review sites you should also consider and make sure your Google Business Profile is up to date.

Be generous to journalists and travel influencers, within reason of course. You never know what you will gain from the free seat on your tour you give away. Be proactive in reaching out to people and publications you want to work with. Send out press releases when you have something noteworthy to share. Twitter and Instagram are great places to foster relationships with journalists. Collaborate with your partners and take advantage of cross promotion.

It all starts with a good product

Finally, make your experiences noteworthy and worthwhile. Word-of-mouth marketing could become your secret weapon. Hairdressers that join your tour tell their clients if they are happy. A delighted customer today may result in their extended family joining the tour tomorrow. Think about unique and interesting branded souvenirs; and it never hurts if the tour includes a unique Instagrammable moment or two!

Keeping your Customers Happy

Experiences are unique products in the sense that they are a service, and unlike physical products they are intangible, perishable, variable and the value of the product is created at the same time as it is consumed, by both the operator and the customer.

Although this may all sound a bit academic, it’s very important to remember this difference when figuring out how to manage your customers.

Your customers are not buying a product like a smartphone that they take home with them and return if it’s faulty or they don’t like it. The product is an experience that every single customer will judge based on their own values, expectations and previous experiences. 

So how do we make sure all our customers get a good experience throughout the entire journey?

Hire the right people

Your employees play a key role in keeping your customers happy. They are the ones who interact with your guests, who carry out the customer strategy, and who will ultimately feature heavily in the customers decision when it comes to review time.

You need to hire the right people or if you can’t find the right people, because staffing can be notoriously difficult in the tourism industry, at least try to find the least wrong people. You may need to follow some governmental regulations that require you to hire licensed guides and/or drivers so make sure you get acquainted with those as soon as possible.

Although it is important to follow rules and regulations, it’s also important to find people that are right for your business, who can deliver on what you promise in your marketing material and who can engage your target audience. Sometimes it’s better to hire for the talent and develop the skills, especially if you’re lucky enough to find people that have that extra star quality. 

Nail down your cancellation policy early

Your cancellation policy can make or break you. You need to decide what kind of cancellation policy to offer and how strictly you plan to follow it. If you live in an area with volatile weather conditions, some leniency may be necessary as circumstances can change quickly. Due to higher fixed costs per customer, you may also decide that a small boutique tour with limited spaces requires a stricter cancellation policy than a 70-seater bus tour.

It’s important that the cancellation policy is clear, so it leaves no space for interpretation. Thinking of a number of likely scenarios where your cancellation policy might come into effect and how you might respond to them could prove to be extremely helpful. Of course, you can’t decide on every possible scenario beforehand, but this will help you, and more importantly your staff, make better decisions and keep your customer service consistent. 

Processes

Consistency is key when it comes to service because service is inherently variable. It’s important to define all your processes and preferably write them down so your staff always know how to behave and what is expected of them.

Should your guides always introduce themselves with a name? Write it down. Do you have a contingency plan in case of accidents (you should!)? Write it down. Is it important that your employees never trash talk the competition? Write it down!

Writing down all your processes and making them available to your employees makes training easier, helps with service consistency and minimises the danger of so-called service failures.

An example of a process would be your response to service failure. What are you going to do if someone complains about a tour? Are you going to apologise, offer some kind of compensation or do nothing? Guests from one culture may respond better to monetary compensation while others just want recognition that something went wrong and a little bit of empathy.

If you want to stay consistent, you can’t make these decisions on the fly based on your interaction with each individual customer. 

Don’t Forget to Take Care of Yourself!

This article is in no way exhaustive when it comes to things to consider when starting a new travel business but hopefully it has given you some idea about where to start. 

Before you embark on this journey, it’s important that you ask yourself whether you’re genuinely ready for what lies ahead. Are you willing to make sacrifices and do the hard work that it takes to get a new business off the ground? 

There’s no doubt that you can do it! Just make sure it’s your heart’s desire because starting a new business requires a lot of grit and conviction, especially during the initial stages. 

Want to Start & Grow Your Own Tour Business like Auður? 

Try out Bókun’s 14-day Free Trial to discover how we can help with operational processes, managing your business and getting your product in front of travellers to grow your bookings.