Travel Tech Investors Are Ready For Takeoff

Next Story

TC Droidcast Episode 23: Samsung’s Music Milk Shake, HTC’s One 2 Punch

(Editor’s Note: Christine Magee is an analyst for CrunchBase.)

Despite the popularity of travel booking sites like KayakTripAdvisor, and Expedia, venture capital firms are still investing in companies selling consumers a better way to travel. 

In the past few years, investors have poured millions into travel and accommodation companies around the globe like Airbnb and Room 77, Wimdu (Berlin), Tuniu and 17u.cn (Beijing and Suzhou, China), Ostrovok (Moscow), HouseTrip (London), and most recently Hotel Urbano (Rio de Janeiro). The travel tech industry has become increasingly geared toward convenience and accessibility. Travelers want the ability to book lodging, transportation, and experiences- simply and immediately- all from their mobile devices.

“Mobile is changing the landscape a lot. More broadly consumers are wanting and expecting to be able to use their mobile phones as a remote control for their life… and travel is part of that,” said Ben Holmes at Index Ventures.

Investments in this new dimension of travel startups have increased as companies like HotelTonight and GetYourGuide expand the options for on-demand traveling.

Instead of using the “desktop” model to search for and book flights, hotels, and activities months in advance of a trip, consumers can now book a next-day flight with reward points, reserve a room on HotelTonight upon landing at the airport, and request a car to the hotel via the regional Uber clone. And when traveling in a foreign place without any plans, Trippifi will show nearby friends, GetYourGuide will find tours or activities to book, and WorldMate will let tourists organize it all in one place.

Consumers have come to expect immediate results, even in an industry where planning ahead has typically been fundamental to finding the best deals. “The major driver is how easy it is the device factor has changed travel in itself,” said Atlas Venture’s Jeff Fagnan.

Beyond the travel search and booking platforms, companies providing services for travelers are also emerging more rapidly than ever. Healthcare app TraveDoc just announced plans to expand to the Middle East and South Asia to connect travelers to nearby (and English-speaking) physicians. Private plane ride-sharing service FlyteNow, worldwide fishing charter booking platform Fishfishme, and on-demand yacht chartering service Sailogy all raised new rounds in the beginning of 2014.

This surge in travel investment is a global phenomenon.  Investors have funded travel-related startups in over 40 different countries since 2009, according to CrunchBase data. While the U.S., U.K., and China lead the way in total number of travel investments, emerging markets are seeing their fair share as well- from Hotel Urbano’s recent $50 million Series D round to seed rounds in Kenya-based SafariDesk and Colombian startup Escapar.

According to Accel’s Brian O’Malley, travel is typically one of the first categories online to monetize in emerging markets. Less physical barriers to overcome and a national consumer base means a lot of opportunity to monetize traffic. Accel’s investments include Russian hotel booking site Ostrovok and Brazilian review and recommendation platform Kekanto, both of which have raised multiple funding rounds since launched in 2010.

As startup ecosystems mature in emerging markets like Africa, travel startups are receiving a lot of attention. Different cultures travel differently, and investors have recognized a potential for success in companies that are tailoring successful models of travel to fit a specific market. The Chinese company Tuniu and Brazilian business Hotel Urbano both derive a significant portion of their business from packaged tours, a segment of the market that’s not as big in the U.S.

So what’s next? Most active travel investor Accel Partners is focusing on less mature forms of travel, like vacation rentals, but also looking into SaaS for travel providers.

Jeff Fagnan at Atlas agrees. “Another thing that’s an interesting area is helping travel providers, from airlines to hotels — how to help them really find consumers, market to consumers,” Fagnan said. There is a clear need for improving customer relationships and increasing management efficiency. “It shouldn’t get to the point of people posting bad reviews on a website,” he said.

Photo via Flickr user DearEdward