Fragmentation Is Not a Transitional State

In a 2011 research report, Cathy Schetzina and Douglas Quinby, writing for Phocuswright, opened their analysis of the in-destination tours and activities sector with a chapter titled “A Market Fantastically Fragmented.”^¹ The chapter title was not rhetorical flourish. The evidence assembled in the report (a supply side composed overwhelmingly of independent operators, a distribution layer without a dominant platform, and no standard architecture for how bookings moved between the two) fit the description exactly.

Fifteen years later, the underlying shape of the industry is broadly the same. Current estimates put the global operator count at approximately 600,000, the large majority running businesses of under $250,000 in annual revenue.^² Roughly half of all operators have been trading for fewer than five years.^³ By current readouts of online distribution share, no single online travel agent commands a dominant share of the industry’s bookings, and the top ten of them together do not. The market’s fragmentation, on both the supply side and the sales side, has been a durable structural feature, not a passing stage of commercial development.

This essay takes up a question the industry routinely mishandles. Is the fragmentation observed in 2011 and still observed in 2026 transitional, a stage the market is slowly working through, or structural, a permanent feature of the market’s supply shape? The answer matters. If fragmentation is transitional, the industry’s strategic posture should be to wait it out and adapt to the consolidated market that will eventually arrive. If it is structural, the industry has been preparing for the wrong event for fifteen years, and should be building for a different future altogether.

The argument this essay makes, on the evidence, is that fragmentation in this category is structural. This is not a prediction. It is a description of a pattern visible over decades, grounded in the specific economic and experiential properties of the product, that the common industry framing consistently underweights.

The “consolidation is coming” framing

The framing assumed by most industry observers is that the experiences market will eventually consolidate in the pattern set by adjacent travel verticals. Hotels consolidated into chain brands through the 1980s and 1990s; airlines consolidated through the 2000s; online distribution in both categories concentrated around a small number of online travel agents. By this account, experiences are at an earlier stage of the same trajectory, and the long tail will contract into a smaller number of larger operators as the category matures.

Concrete evidence is often cited for this view. A visible wave of top-down merger, acquisition and capital-markets activity has unfolded across the distribution layer in 2024–2025: American Express Global Business Travel’s acquisition of CWT, Expedia’s acquisition of Tiqets in late 2025, Klook’s filing for a New York Stock Exchange listing in November 2025, and a $100 million Series F round for Klook earlier in the same year.^⁴ The observations are correct; the inference from them is not. The consolidation currently visible is real, and consequential at the layer where it is occurring. But it is occurring at the distribution and aggregator layer, not within the operator base, and the long-tail supply structure is the question this essay is taking up. The long-tail supply side is not consolidating, and it is not showing the structural signals that precede consolidation in other categories. New operators continue to enter the market at a rate that has, if anything, accelerated since the pandemic.^² The long tail is not contracting; it is regenerating.

The product cannot be standardised in the way services can

Two structural features of the experiences category explain why this is so, and the first is the nature of the product itself. Joseph Pine and James Gilmore, in the 1998 Harvard Business Review article that named the experience economy, and at greater length in the 1999 book of the same name, argued that experiences sit above services on a commoditisation ladder that runs from commodities through goods to services and then to experiences.^⁵ Each step on the ladder is more personalised, more memorable, less fungible than the one below. A hotel room is a service: differentiated at the margin, but fundamentally comparable on a small number of service attributes such as room quality, location, and price. An airline seat is similar. An experience, by contrast, is defined by its heterogeneity. A guided sunset kayak tour through a Costa Rican mangrove and a pastry-making class in a Parisian bakery share the word “experience” in a way that a double room in a business hotel and a double room in a resort hotel share the word “room,” but the comparability ends much earlier.

The consequence of this difference is that the consolidation pressure that produced chain hotels and consolidated airline groups does not act on experiences in the same way. Consolidation in hotels was enabled by the fact that a traveller could credibly substitute one hotel for another on a short list of comparable dimensions; the chain extended that substitutability across a network of locations, and the network effect did the rest. In experiences, substitutability is much weaker. The kayak tour is not the pastry class; a global kayak-tour brand does not offer the pastry traveller anything. The product heterogeneity limits the distance that consolidation can travel.

This is not a claim that no consolidation can ever occur in experiences. It is a claim that the unit of consolidation is different. Consolidation can occur at the aggregator layer, where platforms such as Viator and GetYourGuide consolidate access to experiences while leaving the supply side fragmented, and at the destination-specific operator layer, where a single operator in a single city may grow large. The pattern, in which a multi-sided platform grows by aggregating access to a fragmented supply base it does not own, is the canonical platform-economy form described by Parker, Van Alstyne and Choudary in Platform Revolution.^⁶ What this pattern cannot easily do is produce a chain-equivalent structure that spans the category, because there is no category-wide comparable product to chain.

Demand is compound-segmented, not axis-segmented

The second structural feature is on the demand side. Travellers do not choose experiences along a single dimension. Destination, activity type, budget, timing, motivation, group composition and personal preference combine into specific demand pockets. Swarbrooke and Horner, in Consumer Behaviour in Tourism, and the more recent review by Cohen, Prayag and Moital, describe this formally as a compound set of motivators and determinants acting together,^⁷ with demographic, psychographic, behavioural and benefit-seeking axes combining into segments that cannot be collapsed onto a single dimension. The well-worn industry segmentations (leisure versus business, domestic versus outbound, adventure versus cultural) are axis-level simplifications of a segmentation that is in fact compound. The consequence for supply is that a market serving compound-segmented demand cannot collapse into a small number of mass-market products without leaving the long-tail demand unserved. In hotels, compound segmentation produced brand families. Marriott now operates several dozen brands, each aimed at a distinct compound segment, but the products are still drawn from a manageable vocabulary of service attributes. In experiences, the same compound-segmented demand produces something more granular: an effectively infinite catalogue of specific products, each serving specific compound segments, and each resistant to absorption into a larger vehicle.

Analogies in other categories

This pattern is not unique to experiences. Several adjacent categories show the same structural behaviour, and the analogies are instructive.

The restaurant industry has been described as “about to consolidate” for several decades. Chain restaurants exist, and some are large, but the independent-restaurant base has been remarkably stable over time. Most cuisine, most dining occasions and most local restaurant economies are still delivered by independents.^⁸ Consolidation has occurred at the franchise layer and at the supplier layer, not within the operator base. The structural feature responsible is the same one Pine and Gilmore name: restaurants sell an experience, not a standardised service.

Independent retail survived the rise of Amazon not by consolidating against it but by specialising under it, with the long tail of specialist independent retailers stable or growing in many segments.^⁹ In each case, a category with irreducible product heterogeneity has resisted the consolidation that analysts predicted and that seemed structurally comparable to the consolidation occurring in adjacent categories. Experiences sit cleanly within this pattern. It is not coincidental.

The right question

If the long tail is the permanent shape of the supply side in this industry, the question the industry has been asking for fifteen years is the wrong question. “When will fragmentation end?” has no useful answer, because fragmentation at the supply base is not going to end in the way the question implies. A more useful question is: how does an industry serve its market at scale through fragmentation, rather than around it? The two questions imply very different architectural decisions. The first points towards waiting for a dominant consolidation event that will not arrive. The second points towards infrastructure that makes a fragmented market navigable (connectivity, distribution, discovery, trust, settlement) without requiring the supply side to collapse into a smaller number of operators. That is a different kind of problem. It is also a harder one. It does not resolve itself by waiting. It requires deliberate design, and it requires the industry to accept a set of constraints it has so far preferred not to accept.

Fifteen years is long enough to notice a pattern. The 2011 Phocuswright description of a “fantastically fragmented” market is not a snapshot from an earlier stage of the industry. It is a description of a structural equilibrium the industry has been in for at least that long and shows every sign of remaining in. The interesting work is no longer to argue for or against consolidation; it is to describe what operating at scale through fragmentation actually requires. The future of this industry is not a consolidated supply base; it is the infrastructure that makes a fragmented one navigable. That is what the rest of this book is about.