Tough 2022 for travel startups as investors turn cautious

It has been a tough year for most travel startups, with funding that had been plentiful in recent years now harder to come by.

Early stage rounds in particular have been highlighted as impacted by the more conservative approach from investors who, perhaps stung by the pandemic, turned to startups with a proven market fit.

Phocuswright’s annual State of Startups report reveals that as of May 2022, investments in travel startups were slightly more than 40% of the total funding raised in 2021.

However, despite investors saying they predicted recovery sooner rather than later, as the threat of recession loomed in the second half of the year and warnings emerged from the investment community, 2021’s $12.5 billion funding total looked less likely.

That said, a number of segments in and around travel including rentals, mobility and payments continue to attract the investor interest.

There have been a number of notable rounds going into the rentals segment, although most have been in the B2B world - property management or property investment - as opposed to B2C startups.

Early in 2022, short-term rental management platform Evolve announced its $100 million raise to add more properties and further develop the guest experience.

In August, rival platform Guesty announced it had raised $170 million to expand into other verticals and scale operations.

Other notable rounds over the course of 2022 in the alternative accommodation space include $125 million for membership-based apartment rental platform Landing and $90 million for hospitality platform Placemakr (previously WhyHotel).

Upwardly mobile

While 2021 was notable for the mobility segment and particularly micro-mobility, investments seemed to slow for scooters and bikes in 2022.

There have been stories of the demise of some startups such as U.S.-based Bolt Mobility , significant employee layoffs at others and predictions that the segment will consolidate into two or three companies .

The majority of investment into the mobility segment went into autonomous driving, with significant funding for Cruise $1.35 billion , Wayve attracting $200 million , Ruqi Mobility landing $153 million and $120 million for Minieye .

Sizeable rounds such as the above might now begin to pique the wider travel industry’s interest in this sector as use cases for tourism begins to be highlighted.

Micro-mobility companies did score some investment early on in 2022 with Dott attracting $70 million and Beam raising $93 million .

There were other interesting rounds in the transportation segment including $260 million over two rounds for car rental on-demand platform Kyte and $35 million for ground transport platform Bookaway , which has also made a string of acquisitions.

The hype around fintech in travel as well as developments around travel payments more widely has also attracted investor dollars for startups as well as some more established players.

Connexpay landed $110 million in late October to fund global expansion while payment startup Mesh saw an investment of $60 million .

And, while the impact of Apple’s launch of buy now pay later service remains to be seen, travel BNPL startup FlyNowPayLater attracted $75 million in a debt financing package at the beginning of 2022.

Perhaps surprisingly, given what a tough time the corporate travel segment had during the pandemic as well as the fact that it has not fully recovered, some startups in the field still managed to attract investment.

Although rumors of a confidential IPO for TripActions have been circulating, the corporate travel platform has recently announced further investment including $300 million in Series G in October and $400 million in credit facilities just last week.

TripActions also made a fourth acquisition in Spain-based Atlanta Events & Corporate Travel Consultants.

Meanwhile, Spotnana, the travel-as-a-service platform which aims to offer travel booking and management microservices, has raised $75 million in Series B funding .

Other corporate travel startups have attracted smaller rounds including $29 million for Itilite and $23 million for Hotailors , which also rebranded to WorkTrips.

While startups in other travel segments of travel have managed to raise funding, large sums have been few and far between.

Notable rounds include €100 million for online travel company Kiwi and about the same amount for Spain-based tours and activities marketplace Civitatis .

One areas to watch as we head into 2023 will include more interest and investment in electric vertical take-off and landing startups including Joby Aviation ( $60 million ) and Lilium ( $119 million ).

Looking ahead

Autonomous vehicles will continue to attract significant rounds as the problems are many and complex.

Further merger and acquisitions are also likely as inflation rises and recession bites.

Alternative accommodation startup Bob W acquired several regional players giving it a wider presence across Europe while property management company Altido acquired Sherpa.

Payment companies have also been a target for acquisition with corporate accommodation platform HRS acquiring PayPense in August .

In the same month, Sabre announced the acquisition of Conferma Pay .

Look out for further investment in sustainability startups - especially initiatives that go beyond offsetting.

The final word goes to special purpose acquisition companies - the route to IPO for a number of travel startups this year including Swvl, Selina, Amex GBT and most recently, Getaround.

A quick glance at share prices reveals that most companies that went public via SPAC in the past year are down in recent weeks.

Car-sharing platform Getaround has had a particularly bumpy ride in recent days with its stock diving after its public debut last week.

Many of the investment trends mentioned above were also discussed with startup consultant Cara Whitehill of Unlock Advisers at the PhocusWire Studio during The Phocuswright Conference .

She also touches on how big companies can engage with startups and ways for newcomers to weather a downturn.

See below for the full interview with PhocusWire senior reporter Linda Fox: