Report Overview

Venture capital investment in the travel industry hit a decade low in 2023, with just $2.9 billion of funding, as compared to $5 billion in 2022 and $9 billion in 2019. This decline mirrors the struggles of the broader venture capital market amid a challenging macroeconomic climate, characterized by interest rate hikes, increased market volatility, and declining valuations. There’s a noticeable shift towards later-stage, mature companies, with 2023 seeing a drop in venture capital funding across all deal stages except late-stage Series F, indicating investors’ preference for safer bets.

Despite the downturn, there are signs of recovery. Preliminary 2024 data suggests a year-on-year increase in travel venture capital funding, with fewer but larger deals anticipated. We are also seeing the investment landscape becoming increasingly more fragmented and shifting Eastward, with more funding coming from Asia and the Middle East. By themes, we are seeing growth pockets in tours & experiences, AI & automation, and hospitality employment – hinting at areas of sustained investor interest amidst the overall decline.

What You'll Learn From This Report

  • The size of the travel startup financing market from 2009 - 2023, with projections for 2024
  • 2023 funding by deal stage, region, company and sector
  • Key 2023 funding trends in travel startups: tours & experiences, corporate travel and expense management, property management technology, short-term rentals, OTAs and AI automation & predictive analytics, amongst other thematic buckets

3 Headline Charts

1. Venture capital (VC) investment into the travel industry has dropped to its lowest level in a decade. Travel saw only $2.9bn of VC investment in 2023, compared to $5bn in 2022 and nearly $9bn in 2019. This is largely representative of the overall venture capital market which continues to struggle amidst a tough macroeconomic environment fueled by interest rate hikes, increased market volatility and declining valuations. 

2. There is an increased fragmentation and shift Eastward within the list of top-10 countries investing the most in travel venture capital: in 2021, the top 10 held 91% share of the travel venture capital market; in 2023 they held 85% share. More travel companies in the Middle East and in Asia are raising venture capital.

3. Though 2023 saw an overall decline in travel VC funding, there were pockets of growth within key areas of investor interest: tours & experiences, AI & automation and hospitality employment.

Global Trends in Travel Venture Capital

Travel venture capital funding continues to decline

As of 2023, venture capital (VC) investment into the travel industry has dropped to its lowest level in nearly a decade. According to our database (based on data from Crunchbase – see methodology section at the end of report), travel saw only $2.9bn of VC investment in 2023, compared to $5bn in 2022 and nearly $9bn in 2019. Though VC investment in travel fell sharply in 2020, there was a sharp rebound in 2021 – recovering to more than 90% of 2019 levels – but has since continued to fall, with levels in 2023 the lowest in 10 years. 

The number of deals has also dropped considerably in the last five years, from 1,021 deals in 2019 to only 587 in 2023. The number of deals in 2023 dropped more than 20% vs 2022 – making it the second steepest year-on-year decline since 2020 lockdowns. 

The average deal size (i.e. total VC funding value in $ divided by the number of deals) has also declined consecutively over the last two years, falling from $10m average per deal in 2021 to under $5m per deal in 2023. Having said that, the average deal size has generally trended up in the last decade, though deal size in 2023 was only slightly higher than that in 2017. However there are signs of a bounce-back in 2024, as we discuss later in this report, with preliminary data from January till April 2024 suggesting an increase from $4.9m per deal in 2023 to $8.4m per deal in 2024. 

The decline in travel venture capital funding is representative of a struggling overall venture capital market

The travel VC market has clearly struggled amidst a tough macroeconomic environment fueled by interest rate hikes, increased market volatility and declining valuations. Travel’s share of the total VC market has consistently fallen every year since 2019, from 3% share in 2019 to 1% in 2023. 

The decline in the last two years is a clear representation of the struggles of the broader VC market. 

Whilst 2020 and 2021 saw the travel VC market underperform the total VC market (for example in 2020 the travel market was down -50% vs 2019, compared to the overall market up +13%), 2022 and 2023 have seen the travel VC market perform more in-line with the overall market – both down ~40% year-on-year in 2023. We can therefore see that the decline in VC funding today is not just specific to the travel industry, with the overall market struggling equally as much.

If we consider the VC markets vs a 2019 basis, we can see that the travel-specific VC market is still 70% below 2019 levels as of 2023, vs the overall VC market down just 5% – showing that the funding environment into the travel industry has a long way to go before full recovery to pre-Covid levels.

There is an on-going shift towards safer, later stage deals 

In line with a struggling VC market, we are increasingly seeing a shift in investment capital towards late stage deals for mature companies. Though 2020 and 2021 saw a surge in early stage (pre-seed or seed capital) VC raised by start-ups as compared to 2019 levels ( shown in the chart below), 2023 is seeing a reversal towards late stage funding.

For example, 2023 saw a drop in VC funding raised across every deal stage bar late-stage Series F – showing that when investors did invest more, it was in safe, mature companies rather start-ups requiring seed capital. 

The charts above considered the total VC $ value by deal stage. If we look at the number of deals by stage (i.e. stripping out the fact that early stage deals are generally smaller in value than late stage deals), we can see from the following two charts that though the travel VC market is generally made up of early-stage companies, we are again seeing signs that there is a shift towards mid and late stage companies: in 2023 10% of deals were mid and late stage deals; as of Q1 2024, 23% deals are mid and late stage. 

Additionally, as of Q1 2024 we can see that there is an increase in the average deal size for mid and late stage deals, up from $32.6m per mid-and-late stage deal in 2023 to $35.1m as of Q1 2024. On the other hand, the average deal size for early stage deals is just $1.5m as of Q1 2024 which is the lowest level since 2017. 

Could 2024 see a re-bound in the travel venture capital market?

As we can see in the chart below, there is a strong inverse correlation between interest rates and the amount of VC funding invested into the travel industry – with every 0.1% increase in the U.S. interest rate seeing a drop of ~$50m in VC investment into U.S. travel companies. With the U.S. Federal Reserve getting closer to hitting its target of 2% inflation (as of May 2024 the U.S. inflation rate is 3.3%, down from an average of 7% in 2021, 6.5% in 2022 and 3.4% in 2023), we should expect more regular cuts in the interest rate throughout the next few years, which in turn should fuel an increased appetite for VC investments into the travel industry. 

Based on an extrapolation of preliminary data from the first quarter of 2024 and our own projections, we expect that 2024 will see a year-on-year increase in VC funding into the travel industry. In line with the on-going shift towards investment into larger, late-stage mature companies, we expect that investors will continue being highly selective towards which companies to invest in, with there generally being fewer deals, but for those deals to be of a larger average size as compared to 2023 levels. 

Furthermore, as the interest rate environment further improves into 2025 and 2026 (as of the Fed’s latest meeting in June 2024, there is projected to be only one rate cut in 2024, with expectation for more to come in later years), we should expect VC deal flow to improve – though there is much to go before we reach pre-Covid levels of VC funding into the travel industry. 

Regional Breakdowns

As we have seen above, 2023 saw a 40% year-on-year decline in VC investment into the travel industry. By region, this decline was led mostly by North America (which saw a 70% drop in 2023 vs 2022) and Europe (27% drop in 2023 vs 2022), whilst other regions saw growth – such as Asia (+10% growth in 2023 vs 2022), Middle East (+128% growth) and South America (+570% growth). 

Through the last four years, Europe has seen the most stable growth (or rather decline) profile and as of 2023 had the most VC funding out of any other region – largely led by investment into tours and activities company GetYourGuide. This compares to Asia and North America which have seen large year-on-year fluctuations in VC funding raised, impacted by large deal inflows and outflows. For example, both regions saw a material year-on-year increase in VC investment in 2021, led by funding rounds into OTAs such as Yanolja, Klook and ixigo in Asia and Hopper in North America as well as corporate travel management companies such as Navan. 

In the chart below we can see that South America and Middle East & Africa have seen the most growth in recent years, with 2023 seeing investment into companies such as Beond, a premium leisure airline based in the UAE, and corporate travel management companies like Onfly in South America. 

However, as we can see in the chart below, the global travel VC market continues to be dominated by deal flow in North America, Europe, and increasingly Asia Pacific –  with South America and the Middle East’s contribution to the overall VC market remaining comparatively small.

In 2023, as compared to 2022, we can see a shift away from North America towards Asia Pacific (which has doubled its share of the global travel VC market) and Europe. In Asia, VC funding was led by deals from Klook (tours and activities OTA), Huangbaoche (Chinese travel booking platform) and SAMHI Hotels (branded hotel ownership company in India). In Europe, funding was led by GetYourGuide (tours and activities OTA) and NUMA (German vacation rental provider). In 2023, North America lost its share of total capital raised, likely due to a tough financing environment, the SVB banking crisis and continuing macroeconomic uncertainty. We list all the significant deals by region in the tables below for further reference. 

Having said that, the U.S. continues to be the single largest country for travel VC investment, accounting for $722m of VC raised in 2023 – 25% of the global total. We are however increasingly seeing a shift Eastward, with Singapore and India taking the #3 and #5 spot in the list of top 10 countries for travel VC investment in 2023. India has moved from the 7th biggest market in 2021 to the 5th biggest by 2023. 

As shown in the chart below, we are seeing increased fragmentation within the list of top-10 countries investing the most in travel venture capital: in 2021, the top 10 held 91% share of the travel venture capital market; in 2023 they held 85% share. 

2023 significant deals by region

Below we lay out the top deals in every region in 2023. 

Investible Themes

We tracked all major travel startups over the last four years that raised $10m or more over their lifetimes. Based on this database of businesses we assigned a theme and tracked their funding to gauge interest in that travel thesis. We identified 11 key themes: property management technology, short-term rentals, corporate travel and expense management, OTAs, tours & authentic experiences, vehicle rentals & sharing, transportation, air travel, hotels, AI automation & predictive analytics and hospitality employment. 

In the chart below we can see that whilst 2020 was led by investment into short term rental companies (such as Sonder ($170m) and Evolve ($25m) – fueled by the surge in demand for whole homes and vacation rentals during the Covid period), the last two years has seen this trend taper out and has instead been replaced by significant investment into the tours and activities sector (with large funding rounds from the likes of GetYourGuide in Europe and Klook in Asia). 

As we can see in the two charts below, though 2023 saw an overall decline in travel VC funding – with nearly all themes seeing a decline in VC funding in 2023 as compared to 2022 – there were pockets of growth within key areas of investor interest: tours & activities (+42% in 2023 vs 2022), hotels (+10%), AI (+30%) and hospitality employment (+442% – though this is a relatively small themed bucket). 

There has been significant investment into Tours & Experiences OTAs Klook and GetYourGuide – which were the two largest VC funded companies in 2023, as shown in the chart below. Investors see the tours and experiences sector as one of the most opportunistic and untapped prospects within the travel industry today: it is highly fragmented with a long tail of small suppliers and is rapidly shifting online. Read our deep dive on the Experiences sector here: The Last Outpost of Travel: A Deep Dive into Tours, Activities and Experiences 2023

Hospitality employment has also seen significant growth in VC investment in 2023, predominantly led by funding rounds into Instawork which offers on-demand staffing apps and recruitment services. Funding into Instawork grew from $8m in 2022 to $60m in 2023 with this latest series-D round focussed specifically on implementing AI and machine learning into its operations. 

According to a Forbes article, Instawork weren’t originally looking to raise any more funding in 2023 – particularly in a sluggish VC market – but CEO Sumir Meghani said that due to “our product engineering team started getting really excited about AI”, a funding round would help expedite the implementation of AI into their foundational algorithm, allowing a more efficient pairing of workers with jobs. As we can see in the charts below, though employment numbers in the leisure & hospitality sector are rising – finally back to pre-Covid levels –  rising labor costs remains a key issue for hoteliers. A more efficient pairing of workers with jobs will aid in costs associated with employer churn, re-staffing and re-training. 

As we can see from the example of Instawork, growth in VC funding into companies focussed in AI, automation & predictive analytics in 2023 is a key area of investor interest today (read our deep dive into AI in travel: Generative AI’s Impact on Travel). Our database showed a 30% year-on-year increase in VC funding into travel companies focussed on AI in 2023. 

At Skift’s 2024 Data & AI Summit, Chris Hemmeter, Managing Director of Thayer Ventures highlighted that there remains a large opportunity for technological advancement in the travel industry – a gap which could be potentially filled by AI, saying “We find ourselves now with this incredible technical debt and in a real problem, because at the same time that our [hospitality] industry, has been playing catch up and just layering technology on top of itself, the traveler has changed. I mean, humans have changed the way that we engage with every aspect of our lives.” 

According to Kurien Jacob, Partner and Managing Director at Highgate Technology Ventures, the travel industry is so far behind on tech implementation that even something as simple as a room assignment is still being done manually, saying “Go to any hotel and check in. I would guarantee that in 90% of cases, somebody has either sat through the night or during the day to figure out which room you’re going to get. And I don’t know on what basis, maybe they like your last name, or your first name, or some other weird stuff. But obviously some people pay a higher rate, they might be given a different room. But that entire room assignment can be automated. Why does it even exist? So if you look at it, the fragmentation, the the amount of human capital that we have in this industry, the size of it, all of it, it’s is is an opportunity itself” 

According to investors, this presents an optimal time for investments into the travel tech space, with Hemmeter of Thayer Ventures saying “We really feel that there is a decoupling between the tech platform that drives the world of accommodations, principally hospitality, and the traveler. That decoupling has reached a critical point which is now driving the classic flipping of the iceberg which makes it one of the best times to be an entrepreneur and an investor in the category”. 

However, interestingly investors aren’t just investing “for the sake of AI”, with Jacob of Highgate Technology Ventures saying “We don’t look for an AI company in travel, you don’t have that approach”, but rather “you look for companies that can use the best of AI”. According to Hemmeter of Thayer Ventures, “Every quality company is going to have some sort of AI tool integrated into their value proposition”. Therefore, though there is increased investment into the travel AI space, we don’t expect AI to be as large a thematic bucket as other themes in the future, with investors seeking companies that can efficiently implement AI into their tech stacks and strategies rather than investing in AI companies on their own. 

We are increasingly seeing more investment going into companies which focus on making processes more efficient – particularly through tech innovation. In the chart below we present the top companies which have raised the most VC funding across their lifetime. Two of the top three themes are corporate travel & expense management (led by investment into companies such as Navan and Travelperk) and property management technology (led by investment into Guesty and Mews).

For example, recent survey work by Amadeus shows an increased appetite from senior decision makers for increasing technology investment spend into their businesses in 2024. The survey highlights that “85% of respondents from the hospitality sector anticipate that personalization could help them to deliver more than 5% growth in incremental revenue” and “a third of corporate travel managers said their organizations intend to digitize the complete end-to-end expense management process over the coming 12 months”. 

Methodology 

Our data is based on the analysis of  the Crunchbase database of startup businesses and fundraising rounds. We started by screening for businesses categorized as belonging to the travel and tourism sector. To isolate firms primarily focusing on travel, we added a custom-built filter to exclude specific subcategories. For instance, we excluded ride-hailing software applications like Uber and real estate companies like Vici Properties Inc., which have a secondary travel and tourism categorization. 

Next, we screened to only look at travel startups that had received at least one private investment round. We only chose equity-funded companies and excluded any post-IPO funding and Private Equity. After screening and final manual cleaning of the data, our analysis consists of 5,971 unique companies and 11,053 private funding rounds dating back to 1990.

We note that compared to our previous report in 2022, charts may differ due to Crunchbase updating its database which can impact the funding amounts and deal stages. 

Conclusion

  1. Venture capital (VC) investment into the travel industry has dropped to its lowest level in a decade. Travel saw only $2.9bn of VC investment in 2023, compared to $5bn in 2022 and nearly $9bn in 2019. This is largely representative of the overall venture capital market which continues to struggle amidst a tough macroeconomic environment fueled by interest rate hikes, increased market volatility and declining valuations. 
  1. There is an on-going shift towards investment into later-stage, mature companies. Though 2020 and 2021 saw a surge in early stage (pre-seed or seed capital) VC raised by start-ups as compared to 2019 levels, 2023 is seeing a reversal towards late stage funding. For example, 2023 saw a drop in VC funding raised across every deal stage bar late-stage Series F – showing that when investors did invest, it was in safe, mature companies.
  1. There is a strong inverse correlation between interest rates and the amount of VC funding invested into the travel industry – with every 0.1% increase in the U.S. interest rate seeing a drop of ~$50m in VC investment into U.S. travel companies. As the interest rate environment further improves into 2025 and 2026, we should expect travel VC deal flow to improve. 
  1. Based on an extrapolation of preliminary data from the first quarter of 2024, we expect that 2024 will see a year-on-year increase in VC funding into the travel industry. We expect that there will be fewer deals, but for those deals to be of a larger average size as compared to 2023 levels. 
  1. There is an increased fragmentation and shift Eastward within the list of top-10 countries investing the most in travel venture capital: in 2021, the top 10 held 91% share of the travel venture capital market; in 2023 they held 85% share. More travel companies in the Middle East and in Asia are raising venture capital.
  1. Though 2023 saw an overall decline in travel VC funding, there were pockets of growth within key areas of investor interest: tours & experiences, AI & automation and hospitality employment. 

We would like to thank Skift Research intern Aaditya Ugale for his assistance with data collection and analysis for this report.