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WiT Bootcamp 2018: APAC travel startups predicted to grow twice as fast as North America and Europe


WiT Bootcamp 2018: APAC travel startups predicted to grow twice as fast as North America and Europe
15/10/2018,
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The WiT Singapore 2018 Bootcamp kicked off today at the Grand Copthorne Waterfront hotel. As usual, a veritable mix of fresh-faced and ambitious startups, as well as stringent and open-minded investors filled the ballroom, ears pricked to find out how the travel industry is evolving, what fresh opportunities can be seized, and what challenges must be overcome.

Offering a thorough analysis of what’s going on in the world of travel startups was Phocuswright research analyst, Coney Dongre, who provided a ‘before’ and ‘after’ overview of how travel tech startups have grown over the past decade.

From founding to funding

The biggest shift seen in the travel tech startup space hasn’t been between verticals nor horizontals, but actually in a shift from founding to funding.

According to Phocuswright, about 1793 digital travel startups were founded ten years ago, with 2013 being the peak for new companies. (This data excluded companies in beta and stealth, and were assessed on the basis that they were active and/or announced meaningful funding.)

Yet since then, the number of new companies began to decline, while fundraising levels increased year on year.

Travel Startups | Phocuswright | Coney Dongre

“Funding in digital travel has seen a healthy increase year on year… the stark contrast between the two shows that funding is concentrating in winners that have been emerging since the founding wave 10 years ago,” said Dongre.

Of US$19 billion raised in funding, 41% of it is concentrated in the top 10 of the 1793 companies that were founded over the decade long boom. The key outlier however, is Airbnb, which raised US$4.4 billion (23%) of that total. Other than Airbnb, Asia-born companies like Tujia (4%), Traveloka (3%), lvmama.com (2%) amongst others, made up the rest of the high-value pie.

That being said, while North America remains in the lead with a 38% share of startups, Dongre was quick to point out that APAC funding far outweighs it, 42% of total funding in APAC (over a 28% share of startups) versus just 30% in North America.

China still leads the pack

In 2017, APAC travel startup funding saw significantly faster growth than both North America and Europe. This funding shift has fuelled Phocuswright’s prediction that APAC startups will grow twice as fast than any other region. Dongre said that this could largely be attributed to the astronomical online market growth seen in Indonesia (22%) and perhaps unsurprisingly, China’s too (20%).

In fact, China has seen significantly higher funding between 2016-2018 that far surpasses that of the USA (despite the USA showing consistent growth year on year too). Over half of the top-funded startups in APAC are in fact Chinese.

The underlying point being that China remains a consistent leader in travel innovation within APAC, with the added benefit of scale (China’s mobile market is more than double that of most other nations).

Digging deeper into the numbers, the Phocuswright research also identified the most lucrative travel verticals that are proving to be trendy turf for up and coming travel startups.

Dongre pointed out that despite being some of the oldest sectors to come online, lodging and air startups still lead the pack, with 31% of startups being in lodging, 17% in air, and 14% in tours and activities.

Lodging and accommodation remain at the top with regards to funding, having raked in about US$2.5 billion each over the last decade. However, there are clear hints that investors are betting big on the “in-destination segment as the next breakthrough segment.”

From verticals to horizontals, booking is still making big bucks in the startup space. Making up 52% of startups founded over the last 10 years, B2C booking tools are logically a lucrative sector, given that when using a travel service, consumer intent is usually to book.

Travel Startups | Phocuswright | Coney Dongre

High numbers don’t mean high success

The travel tech space might look like its flooded with smart business ideas and investors with deep pockets, the stark reality is that mortality rates are still high, with about 1 in 4 startups failing.

Top failure segments are typically those higher in the funnel; fields notoriously difficult to monetise. In particular, inspiration, travel planning and destination content.

“The farther you move away from transactions, the harder it is to survive,” said Dongre. “Travel startups are also facing unprecedented obstacles,” she continued, identifying the dominance of travel incumbents, product expansion and maturing startups as being key challenges to smaller businesses’ growth.

However, all is not lost. The travel startup ecosystem has adapted to allow for greater opportunities. “Travel focused incubators have blossomed that didn’t exist 10 years ago… there are still plenty of opportunities for funding and mentorship.”





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