Travel Venture Capital Hit a Decade Low – Where the Growth Is

21.06.2024 - 10:03 / skift.com / Pranavi Agarwal / Skift Research / Chris Hemmeter

Skift Research’s latest report explores the state of venture capital investment in the travel industry. Below we present 5 key insights and takeaways.

Travel had only $2.9 billion of venture capital (VC) investment in 2023, compared to $5 billion in 2022 and nearly $9 billion in 2019. It was the lowest level in 10 years. 

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

The declines in travel investment track the overall declines in VC, which continues to struggle in a tough macroeconomic environment marked by higher rates and declining valuations. 

In 2020 and 2021, travel VC underperformed the total VC market. However, in 2022 and 2023, both saw similar declines, with each down about 40%.

Though 2020 and 2021 saw a surge in early stage (pre-seed or seed capital) VC raised by start-ups, there was a move toward late-stage funding in 2023. 

For example, there was a drop last year in VC funding across every deal stage – except late-stage Series F. That shows that when investors did invest, it was in safe, mature companies.

There has been significant investment into the tours and experiences sector. This has been led by large funding rounds in OTAs Klook and GetYourGuide. Investors see opportunity and untapped prospects for the tours and experiences sector: 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, predominantly led by funding rounds in Instawork, which offers on-demand staffing apps and recruitment services. Funding into Instawork grew from $8 million in 2022 to $60 million in 2023 with its latest series-D round focussed specifically on implementing AI and machine learning into its operations. 

AI, automation & predictive analytics in 2023 is another key area of investor interest. At Skift’s 2024 Data & AI Summit, Chris Hemmeter, Managing Director of Thayer Ventures, said there remains a large opportunity for technological advancement in the travel industry – a gap which could be potentially filled by AI.

“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,” Hemmeter said.

However, investors aren’t just investing “for the sake of AI,” said Kurien Jacob of Highgate Technology Ventures:

“We don’t look for