Skift Research’s latest report indicates that in 2023, travel venture capital investment hit a decade low of $2.9 billion, with a significant drop in the number of deals compared to previous years. However, early 2024 is showing signs of a rebound, with increased investments from Asia and the Middle East, as well as a focus on experiences and AI. The decline in travel investment reflects the challenges faced by the overall VC market in a tough economic environment marked by higher interest rates and declining valuations.
One key trend observed is the shift towards investment in later-stage, mature companies in 2023, as opposed to early-stage funding that was more common in 2020 and 2021. This shift is evident in the drop in VC funding across all deal stages except for late-stage Series F, indicating investor preference for established, safe companies. Additionally, there has been significant investment in the tours and experiences sector, driven by funding rounds in companies like Klook and GetYourGuide. There is also interest in AI, automation, and predictive analytics within the travel industry.
The report highlights a growing fragmentation and eastward shift in the list of top countries investing in travel venture capital. While the US remains the largest country for travel VC investment, countries like Singapore and India are gaining prominence. India, in particular, has moved up the ranks from 7th place in 2021 to 5th place in 2023. The report predicts an increase in VC funding in the travel industry in 2024, with a focus on larger, late-stage companies and fewer but larger deals. This trend is expected to continue as the interest rate environment improves in the coming years.
Investors are increasingly looking for companies that can efficiently implement AI into their operations and strategies, rather than just investing in standalone AI companies. The report emphasizes the importance of companies utilizing the best of AI to enhance their value proposition. It also notes the potential for technological advancement in the travel industry through AI adoption. As interest rates improve, there is expected to be a further increase in VC deal flow in the US travel industry, with a strong inverse correlation between interest rates and VC funding.
In conclusion, the travel venture capital market saw a significant decline in 2023 but is showing signs of recovery in early 2024. The shift towards investment in later-stage companies, focus on experiences and AI, and the eastward shift in investment patterns are key trends shaping the industry. The report predicts an increase in VC funding in 2024, with a focus on larger deals and the implementation of AI in travel operations. This analysis provides valuable insights for decision-makers in the travel industry looking to navigate the changing landscape of VC investment.
