In the Footsteps of Airbnb and TripAdvisor A New Generation of TravelTech Starts Its Journey

Over the past decade, and stretching back even further in some cases, ambitious and well-funded ‘traveltech’ start-ups have blown the legacy travel industry apart and become dominant forces. First there were the online-only ticket sales aggregators such as Skyscanner and Expedia. Then came broader P2P review and booking platforms such as TripAdvisor and that aggregate offers across hotels and private rentals as well as now also selling flights, recommending restaurants, rating tourist sights and activities and almost anything else you can think of that holidaymakers get up to. And of course, Airbnb, the digital platform that allows private owners to rent out their own properties short term on an ad hoc or more regular basis and has hugely ‘disrupted’ the traditional hotel industry.

The travel industry is almost unrecognisable to what it was less than two decades ago. The ‘disruptors’ are becoming, or in many cases have already become, the establishment. Airbnb, still a private company though it is rumoured it will list through an IPO next year, is valued at $38 billion. TripAdvisor is publically listed on the Nasdaq and worth almost $9 billion. Expedia, also listed, has a market capitalisation just shy of $19 billion.

And now the next wave of traveltech start-ups is attracting the attention of Venture Capital. There are new ‘traveltech unicorns’ whose valuations have surpassed $1 billion based on their most recent capital raises. Over 2018, new unicorns in the sector include TripActions, the travel management platform that addresses the business travel sector, and Klook, whose business model is built around selling tours and other travel activities.

Other traveltech start-ups that have recently snagged major investment include luggage designer and retailer Away, now valued at $400 million, tour-focused TourRadar and TravelPerk, a direct competitor to TripActions in the business travel niche. Behind them are a further phalanx of earlier stage companies successfully securing seven and eight figure capital injections to further their already promising development.

It should perhaps not be a surprise the venture capital still has a soft spot for the travel and tourism sector. It’s one of the most valuable industries in the world, generating global annual turnover that surpasses $7 trillion. The online segment of the industry is, again unsurprisingly, that which is growing fastest and will hit $817 billion by 2020. VC’s are enthusiastically backing traveltech start-ups that represent the latest technology in the world of digital platforms in the hope of securing a slice of that huge and growing pie.

First generation traveltech companies such as Expedia are also circling the most promising of the latest cohort of new market entrants. The company has already made several major acquisitions including Airbnb rival HomeAway, bought for almost $4 billion in 2015 with Pillow and ApartmentJet, both also in the short term rentals space, added this year. Digital travel photography community platform Trover has also been added to its stable.

The focus on new traveltech innovation seems to be working for Expedia. Last month the company’s share price gained almost 10% after it posted third quarter earnings that beat analyst expectations. The message is clear. The travel and tourism industry’s new tech-centric leaders will have to maintain their focus on innovation and fresh ideas and approaches if they themselves don’t want to be swept away in the same way they took over from the sector’s incumbent powers as they burst onto the scene one to two decades ago.

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