Oyo layoffs, Airbnb’s delayed IPO and the long-term quandary of investing in travel startups


Image Credits: Frank Bienewald/LightRocket (opens in a new window) / Getty Images

It’s the best and worst of times for travel startups.

Massive growth over the past few decades has made tourism one of the big global industries, covering everything from recreation to business conferences to shopping sprees.

But doubts about the future of the industry are growing — and not just because of the novel coronavirus and COVID-19. The rise of remote work and the increasing stresses from tourism on urban and environmental systems portends tougher times ahead.

Given the spate of bad news the past few weeks swirling around global tourism startups, I wanted to go over where we are and what the future holds — and why that’s going to be so challenging for startups in this space.

One massive tailwind: The number of people who want to travel is multiplying

Global tourism has been one of the great inexorable growth industries over the past few decades. The rise of East Asia, China and now India, cheaper airfares, mobile devices with GPS and translator apps, deepening international business ties and trade and a sense of shared humanity have all accelerated the numbers of people traveling abroad every year. According to UN data, the number of international tourists hit 1.4 billion in 2018, with about half of that in Europe, up from just a few tens of millions a couple of decades ago.

And that growth is not about to stop. Political leaders of all stripes have made courting tourists among their national priorities. In Japan, which is (presumably) hosting the Summer Olympics in Tokyo later this year, Prime Minster Shinzo Abe is targeting 40 million tourists by this year, doubling the number of arrivals in Japan from just a few years ago. China’s middle class alone may send out tens if not hundreds of millions of more travelers per year as their economic prospects brighten in the years ahead.

Programs to attract tourists shouldn’t be surprising, of course. Tourists are vacationing, freely spending money on hotels, food and goods and driving local economies forward. All that spending creates bountiful jobs, and while the service industry often doesn’t pay extremely well, expansive employment is a big win for political leaders. Even today, leisure and hospitality remains one of the largest industries in tech’s epicenter of San Francisco in terms of employment (if not wages).

Those tailwinds have driven huge gains for startups in the industry, and specifically in hospitality. Airbnb has been valued at upwards of $35 billion, massive India-based hotel brand Oyo has reached $10 billion, vacation rental platform Vacasa raised $319 million from Silver Lake just a few months ago, group-traveling apartment platform Domio raised $100 million in December and, going a little further back, HomeAway was acquired by Expedia in 2015 for $3.9 billion.

A few weeks ago on Extra Crunch, we interviewed a bunch of the top VC investors in travel and tourism to ask where they saw investment opportunities. One major theme that arose from those discussions is that while there has been huge investment in the consumer travel market, business travelers remain surprisingly untapped, and are still owned by legacy players like American Express.

Where top VCs are investing in travel, tourism and hospitality tech

Expansion, growth, scale — these have been the buzzwords of the travel space for years now.

And now, a sudden shock of headwinds

Times change really fast, however. Now, there is a global retrenchment in the tourism industry, particularly for the once high-flying startups that once bore the flag for the industry’s success.

Airbnb is presumably delaying its IPO, potentially to 2021. Oyo announced today that it is laying off 17% of its global workforce, firing 5,000 workers with a huge number of them in its largest growth market of China. Booking Holdings, which owns, has seen its share price decline by nearly a fifth as global travel sours and competition from Google forces up marketing expenses.

SoftBank-backed Indian startup Oyo to cut 5,000 jobs globally

Yes, yes, coronavirus is one immediate aspect of this, but it’s temporary, and at least so far, it’s on par with a typical economic recession where travel typically takes a dip.

Remote work is going to be a huge dampener on travel

What the spread of coronavirus is actually doing, though, is forcing many business leaders and some tourists to consider whether all that jetsetting is actually useful (or even fun) in the first place.

Remote work has in just a handful of years gone from weirdo-on-the-beach-in-Thailand-with-laptop-coding to a mainstay at major Silicon Valley tech companies. Investors are clearly impressed: Shares of video-conferencing software Zoom have zoomed themselves, doubling in just a few months, while Slack has been one of the most successful companies through its trailblazing direct listing.

Slack’s share price and the future of direct listings

There are a couple of factors pushing companies to remote work. First, and this is actually in line with WeWork’s rise, is the increasing demand for geographic-agnostic employment and flexible work arrangements. Remote work facilitates a lot of employee demands, whether students taking classes, working mothers or people with specific work patterns who need the flexibility that remote work provides.

Second, the tools for empowering remote work have gotten significantly better, even if they aren’t perfect. TechCrunch itself is perhaps a great example — this site is written by a decentralized web of editors and writers working through Slack, email, our CMS, our editorial calendar and other productivity tools to keep our business growing. We aren’t alone — from my conversations with founders over the past year, almost all have at least some component of remote work in their businesses, often from day one of the company’s founding.

Third, and perhaps most importantly, there is a shift in psychology around remote work. These days if you are a knowledge worker, you almost certainly know someone who does remote work or works remotely for your organization. As tricks-of-the-trade and best practices diffuse throughout business, the cognitive barriers to doing a meeting by videoconference instead of in-person start to drop.

All that portends huge challenges for the travel industry going forward. Business travelers spend more than a trillion dollars annually, and if even a fraction of those meetings and trips are replaced by virtual substitutes, the effect on travel could be tremendous, particularly given how business travel drives up the market price of many parts of the travel segment.

The fear of over-traveling

It’s not just remote work though. The longer-term headwind against the industry has to do with the changing tenor of travel itself. Once viewed in a deeply positive light filled with the language of exploration and adventure, tourism and business travel is increasingly being perceived as a burden for the planet, as well as the locals who have to interact with these travelers.

Even before the coronavirus, Europe has been putting restrictions on tourism while actively trying to discourage ever more people from arriving on the continent. There are increasingly strident reports about how tourism is harming famed cities like Paris, Amsterdam and Rome, plus local coalitions of residents are working to restrict tourism even further through policy initiatives.

Then there are the environmentalists, who are increasingly pointing out the atmospheric damage of air travel and urging travelers to stay local. This isn’t a one-time political movement that will suddenly melt back into the waves. The increasing concern over climate change is putting more and more facets of the global tourism industry under a microscope. While there are travel startups specifically trying to address climate change in their models, much of the industry today doesn’t pass muster.

The future of travel startup investing

The huge and arguably durable tailwind of global population growth and prosperity at the top of the customer funnel is increasingly coupled with a variety of headwinds that, while small now, each have the potential to cripple the sector going forward.

What was interesting from our survey of travel VCs wasn’t their theses, but rather how many voluble consumer and even B2B VCs declined to answer any questions, essentially saying that they didn’t really have much thought on the space today. Travel always had robust engagement from VCs, but these days, there are fewer and fewer investment theses that seem to be attracting attention.

Startup investments take more than 10 years to mature, on average, which means that these headwinds could very much affect any investment made today in a startup.

So where to look? First and foremost, start listening to the data and look for the small distinctions in the data. Whole segments of the world are coming online and traveling for the first time, and the global tourism industry mostly doesn’t cater to them. Oyo itself, while going through a tough patch here and regularly accused of exaggerating its numbers, is approaching the problem correctly, identifying a type of customer underserved in today’s market and offering them better alternatives.

Along the same lines, expand the definition of “travel” to include virtual replacements; a16z recently invested in Run The World, a digital platform for building online-hosted events. These gatherings aren’t conferences held in convention centers, but instead act as a sort of live events substitute. Plus, a lot more attendees who might not have been able to take days off from work to attend a conference might suddenly pop in as well. That’s market expansion, not just market replacement.

Finally, spend even more time looking at the climate change-aware sector of the tourism economy. Climate change is changing everything, and tourism is no exception. But there are going to be all kinds of new opportunities to make tourism better for tourists themselves, and the planet as well.

Yes, there is a lot of bad news from the sector these days, and the bad days are probably not behind us just yet. But there are still so many interesting facets of this industry, and even more opportunities to capture in the years ahead.

More TechCrunch

Meta’s Oversight Board has now extended its scope to include the company’s newest platform, Instagram Threads, and has begun hearing cases from Threads.

Meta’s Oversight Board takes its first Threads case

The company says it’s refocusing and prioritizing fewer initiatives that will have the biggest impact on customers and add value to the business.

SeekOut, a recruiting startup last valued at $1.2 billion, lays off 30% of its workforce

The U.K.’s self-proclaimed “world-leading” regulations for self-driving cars are now official, after the Automated Vehicles (AV) Act received royal assent — the final rubber stamp any legislation must go through…

UK’s autonomous vehicle legislation becomes law, paving the way for first driverless cars by 2026

ChatGPT, OpenAI’s text-generating AI chatbot, has taken the world by storm. What started as a tool to hyper-charge productivity through writing essays and code with short text prompts has evolved…

ChatGPT: Everything you need to know about the AI-powered chatbot

SoLo Funds CEO Travis Holoway: “Regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

Fintech lender SoLo Funds is being sued again by the government over its lending practices

Hard tech startups generate a lot of buzz, but there’s a growing cohort of companies building digital tools squarely focused on making hard tech development faster, more efficient and —…

Rollup wants to be the hardware engineer’s workhorse

TechCrunch Disrupt 2024 is not just about groundbreaking innovations, insightful panels, and visionary speakers — it’s also about listening to YOU, the audience, and what you feel is top of…

Disrupt Audience Choice vote closes Friday

Google says the new SDK would help Google expand on its core mission of connecting the right audience to the right content at the right time.

Google is launching a new Android feature to drive users back into their installed apps

Jolla has taken the official wraps off the first version of its personal server-based AI assistant in the making. The reborn startup is building a privacy-focused AI device — aka…

Jolla debuts privacy-focused AI hardware

OpenAI is removing one of the voices used by ChatGPT after users found that it sounded similar to Scarlett Johansson, the company announced on Monday. The voice, called Sky, is…

OpenAI to remove ChatGPT’s Scarlett Johansson-like voice

The ChatGPT mobile app’s net revenue first jumped 22% on the day of the GPT-4o launch and continued to grow in the following days.

ChatGPT’s mobile app revenue saw its biggest spike yet following GPT-4o launch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

1 day ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine