Travel Startups Report: Asia to Dominate Market

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French startup incubator 33Entrepreneurs have just released a report on the current state of travel startup funding, and it makes fascinating – and eye-opening – reading for anyone involved in the travel startup scene. Here are the 5 key findings from their research…

Market Dominated by Planning/Inspiration Apps

Travel inspiration startups, such as media, planning, marketing and itinerary apps – those which help travellers plan their trips – still dominate the market, accounting for 30% of the total. Next up are accommodation at 16%, and tour/activity booking at 15%.

Entrepreneurs looking for market opportunities should look at the bottom of the rankings, where key areas such as B2B travel startups (8%) and transportation (9%) are underserved.

Market Out of Sync with Investment

Travel inspiration startups may be the most plentiful, but, probably for that very reason, they’re not popular with investors. Of the $9b invested in travel startups in the last 18 months, a mere 3% went to the inspiration sector. The most popular? Transportation by far, which accounted for 43% of all investment (with the taxi app sector – think Uber and Grabtaxi – accounting for 33% of the total alone). Next up was peer markets (P2P apps bringing travellers together) with 27%.

Travel Startups Reliant on Seed/Early Stage Funding

Seed and series A funding accounted for almost a third of all travel startup funding events in 2014, with only a small percentage (around 15%) of series D funding or beyond. This suggests that not only is there a lot of competition for seed/series A funding in the travel sector, but also that only a small number of startups make it to a D round. This isn’t necessarily bad news – unless you’re building an inspiration app – as there was still $1.5bn invested in early funding rounds in 2014, so the money is definitely there!

Investors Like Established Startups

Whilst late funding stage events only account for around 15% of the total, they’re definitely the most valuable – of the $5b invested in 2014, $3.5bn went on stage D funding and beyond. Investors may like to dabble in young apps, but they clearly save the big money for safe bets on well-established startups.

Asia is the Future of Travel Startups

Currently, most travel startups are based either in North America (42%) and Europe (35%), with Asia lagging behind at 14%. But research suggests that, if current growth trends continue, this will change very soon, with Asia (driven largely by China) taking the lion’s share at 35%. Good news for those of us in Asia’s travel technology sector!

So what can aspiring travel startups take away from this research? As far as we’re concerned, travel inspiration is totally oversubscribed – we read about new inspiration apps every day – and whilst transportation is where the big money is right now, it’s going to be hard to compete with well-established major players such as Uber, Lyft and GrabTaxi, flawed though they are. We would advise new startups to look at B2B solutions, particularly in the tour operations/travel agent sector, and tours/activities – anyone who can crack the concept of instant tour/activity booking will truly strike gold!

Click the link to read Tnooz‘ take on the report

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About Author

Tim is one of representasia’s co-founders and the company’s CMO. He has been in the tourism industry since 1992 and has worked in Paris, London, Saigon & Bangkok. He has a strong background in operations, technology, sales & marketing. Representasia is his second business venture, following his founding of a successful Vietnam DMC in 2009.

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