Skift Take
Travel venture capital reached a decade-low of $2.9 billion by 2023. However, early 2024 indicates a rebound as increased investments are coming from Asia and the Middle East. There is also a focus on AI and experiences.
Skift Research’s latest Report explores the state of venture investment in the travel sector. Below are 5 key insights.
Insight #1: Venture capital investments in the travel industry have dropped to their lowest level in over a decade.
In 2023, travel received only $2.9 billion in venture capital (VC), compared to $5.9 billion in 2022 and almost $9 billion in 2019. This was the lowest level for 10 years.
The number of transactions has also decreased significantly, from 1,021 in 2019 to 587 in 2023. The number of deals dropped by more than 20% in 2023 compared to 2022, the second steepest drop since the lockdowns of 2020.
The declines of travel investment are in line with the overall declines of VC. This is due to a difficult macroeconomic environment, marked by high rates and declining valuations.
Travel VC was underperforming the overall VC market in 2020 and 2021. In 2022 and 2023 both saw similar declines of about 40%.
Insight 2. Insight 2.
Although start-ups raised a lot of early stage (pre-seed, seed capital) VC in 2020 and 2021, the trend shifted to late-stage funding by 2023.
Last year, VC funding dropped across all deal stages, except for the late-stage Series F. This shows that investors were investing in mature, safe companies.
Insight 3. Insight 3.
Significant investment has been made in the sector of tours and experiences. The largest funding rounds have been made by OTAs Klook, and GetYourGuide. Investors see untapped potential for the tours and experience sector. It is highly fragmented, has a long list of small suppliers, and is rapidly moving online. You can read our in-depth analysis of the Experiences sector at The last outpost of travel: A deep dive into tours, activities and experiences 2023.
Instawork’s on-demand recruitment apps and staffing apps have seen a significant increase in VC funding. Instawork’s funding grew from $8m in 2022 to 60m in 2023, with its latest series-D focused specifically on implementing AI into its operations.
Investors are also interested in AI, automation and predictive analytics for 2023. Chris Hemmeter of Thayer Ventures said that there is a huge opportunity for technological advancements in the travel industry. This gap could be filled by AI.
Hemmeter said, “We are now in a serious problem because, at the same time as our [hospitality] sector has been playing catch-up and layering technology over itself, the traveler’s needs have changed.”
Kurien Jacob, of Highgate Technology Ventures, said that investors aren’t investing in AI just for its sake.
You don’t use that approach, but you do look for companies who can make the most of AI.
According to Hemmeter, Thayer Ventures: “Every quality company will have some sort AI tool integrated into its value proposition”.
Investors are increasingly looking for companies that can integrate AI into their tech stacks, rather than investing in AI firms on their own. For more information, read our in-depth look at AI in travel: The Impact of Generative AI on Travel.
Insight 4 Insight 4. There is a shift to the east in the top 10 countries investing in travel venture funding.
In 2021, they held 91% of the travel venture-capital market; by 2023, it was 85%.
The U.S. will continue to be the largest country for travel VC investments, with $722 million in total by 2023 – 25 percent of the global total. We are seeing a shift to the east with Singapore and India occupying the 3rd and 5th spots, respectively. India has moved from 7th to 5th place.
Insight 5. Insight 5.
We expect investors to continue being very selective based on the preliminary data for the first quarter 2024. This is in line with the ongoing shift towards larger, mature companies.
We believe that the trend will be for fewer transactions, but they will be larger on average than 2023.
This will lead to an increase in travel VC investment in 2024. As an example, at least 10 companies have raised more than 100 million dollars in venture capital funding year-to date (such as Travelperk and Mews).
As interest rates improve in 2025 and 2026 we can expect VC deal flows to improve further. We found a strong inverse relationship between U.S. Interest Rates and the amount VC funding in U.S. Travel Industry. Our analysis shows that for every 0.1% drop in the U.S. Interest Rate, VC funding in U.S. Travel Companies could increase by around $50 million.
The full report contains detailed analysis and methodology of the travel venture capital markets by region, company, and sector.
This Report Will Teach You
The full report contains detailed analysis and methodology of the travel venture capital markets by region, company, and sector.
- The size of the travel startups financing market from 2009 to 2023 with projections for 2020
- 2023 funding by deal stages, region, company, and sector
- Key trends in 2023 for travel startups include: tours & experience, corporate travel & expense management, short-term rental, OTAs, AI automation & predicative analytics, and other thematic buckets.
This is the latest of a series that includes research reports, analyst sessions and data sheets to analyze the fault lines in travel. These reports are aimed at busy decision makers in the travel industry. Take advantage of the knowledge and experience of our staff and contributors. Each report is the result of over 200 hours of desk-based research, data collection and/or analysis.
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