Funding to U.S.-based travel and hospitality tech startups has plummeted over 60% YoY, as venture capital financing in the industry moves abroad.
During the dot-com era, some of the earliest – and now largest – online travel companies were born in the U.S. – think Expedia, Travelocity, and Orbitz. With online travel now sufficiently covered in the US, venture investment toward travel and hospitality tech startups has steadily shifted abroad.
Over the last year, the travel and hospitality space reined in $474M across 116 deals spanning a wide variety of technologies from hotel and travel discovery search engines to travel rewards software to hotel revenue management platforms. Not included in this analysis were the host of consumer transportation tech startups (Uber, Lyft, Sidecar), which is quickly emerging into its own market. As shown in the chart below, funding to travel and hospitality startups has dipped 15% on a year-over-year basis, while YoY deal growth is at just over 7%.
But the aggregate numbers hide one interesting data point – the growth in financing activity to non-US based travel and hospitality tech companies. In the last year, nearly $350M went to internationally headquartered firms including Tujia (China), Hopper (Canada) and Wego (Singapore), accounting for a notable 73% of aggregate funding to the travel and hospitality space. YoY funding to non-U.S. companies has grown 66% and deal activity 40%.
U.S.-only travel and hospitality tech financing has fared significantly worse. While AirBnB raised a massive $112M funding round in Q3’11, investors haven’t opened their wallets much since. In the last year, funding has fallen over 60% and deal activity has dipped 17%. Just 11% of overall deal activity came at the Series C stage or later, and seed and angel rounds make up 67% of deal activity in the last year. Some U.S.-based travel sites have already called it quits. High Peaks and Quotidian Ventures-backed Tripl shut down late last year and Lightbank-backed travel recommendation site Gtrot pivoted into social gifiting service Boomerang. Though several new travel-specific funds (Altimeter Capital, Concur Perfect Trip) have emerged, it is still too early to tell if they can spur a rebound of venture deals and dollars back to U.S.-based travel and hospitality startups.