The latest “Travel and Mobility Tech Sector Attractiveness Report”, from Lufthansa Innovation Hub, provides an in-depth study of investment activity among 60 travel and Mobility corporations from 2018 to 2030.

The report highlights notable trends and investment priorities for aviation, ground transportation, hospitality, and on-line travel, providing insights into how these sectors navigate changing market conditions and economic challenges.

The report highlights a sharp drop in venture capital (VC), investment in travel and mobility startups in 2023. This fell to less than 10 billion dollars, less than a third of the peak in 2021.

This decrease is attributed by VC firms to the rising cost of capital and global interest rates. Despite the downturn in the industry, the need for innovative ideas persists.

The report also highlights that, in contrast to the VC landscape, corporate investment in travel and mobility has shown resilience. Despite a sharp drop in investment in 2020 due the pandemic. Investment levels rebounded in both 2021 and 2022 to reach pre-pandemic levels. In 2023, however, the economy experienced a slight decline, owing to broader economic uncertainty.

While VC funds have declined, corporate investment remains robust. AI and Machine Learning remain key investment areas reflecting their transformative power across the industry.

Sector-specific Trends

The report categorises investments into four main sectors: aviation (air and ground), hospitality (hotels), and online travel.

Key Findings include:

• Aviation and ground transportation: These sectors account 60-70% of annual deals. Stability is achieved by corporate venture capital funds, structured investment strategies and asset-heavy industries. Over 180 deals have been made in aviation by major players including Boeing’s AEI, Aerospace Xelerated and JetBlue Ventures.
• Online travel and hospitality: These industries are less involved in investing, with fewer institutionalised fund. Investments are often opportunistic and dependent on financial availability.
• Sustainability and operational efficiency. Regulations and public scrutiny are driving a focus on sustainability in aviation and ground transportation. Investments are aimed at enhancing operational efficiency through digitalization and technological innovation.

AI and Machine Learning Investments

The report shows that Artificial Intelligence and Machine Learning (ML), which are at the heart of all sectors, have attracted two-thirds (or more) of investment deals in 2018.

Key applications include

• Autonomous driving Investments in computer vision systems and LIDAR for autonomous vehicles.
• Drones and robotics : Automating manufacturing processes, and refining delivery system
• Predictive Analytics : Optimising process and increasing operational agility.
• Customer Support – Enhancing interactions by using natural language processing and large languages models.

The continued focus on AI highlights the role it plays as a fundamental driving force for future growth and innovation within travel and mobility.

Shifts and shifts in hospitality, online travel

Lufthansa Innovation Hub data shows that hospitality companies have expanded their boundaries beyond the traditional, investing in startups that offer tours, experiences and travel-related products. This trend, partly driven by the pandemic and aimed at diversifying revenue streams and enhancing customer experiences, is partially driven. Investment activities slowed down in 2023, due to inflation, rising energy prices and staff shortages.

Online Travel Agencies have pursued expansion strategies. Notable acquisitions include Trip.com’s acquisitions of Travix and Despegars acquisitions of Best Day Travel. Asian investors have been active, with AirTrip and Yanolja among the leading investment companies.

Emerging Trends in Electric Mobility

Ground transport investments are increasingly focused on charging infrastructure for electric vehicles (EVs) and battery swapping technology. Joint ventures such as Kakao Mobility, LG Unplus and TIER are supporting the UK-based Bonnet Platform.

Aviation sustainability investments are on the rise, with more than 30% of deals focusing on decarbonization. This trend is driven primarily by regulatory pressures, as well as commitments to reduce emission levels. For example, the International Air Transport Association (IATA) has set a goal of achieving net-zero emissions by 2050.

The report also notes the environmental impact of electric take-off and land (eVTOL aircraft) remains a topic of debate.

Header Image Credit: Lufthansa Innovation Center