Assessing travel tech investment trends in Asia

Asia can be found operating three to five years ahead of the rest of the world in terms of travel technology adoption, according to a recent report from TNMT, a market intelligence resource produced by Lufthansa Innovation Hub.

The report, “Unpacking Asia’s corporate investment trends in travel,” aims to provide insight as to the priorities of corporate investors in Asia when it comes to technology powering the travel industry.

The takeaways are interesting, especially considering the travel technology investment climate globally has been lukewarm in recent years. Phocuswright’s upcoming State of Travel Startups 2024 report will reflect a global funding drop over the last few years – from $17.6 billion in 2021 to to $12.6 billion in 2022 and down to $5.2 billion in 2023. This year, funding sits at $4.3 billion through September 30 – on track with 2023 figures. Phocuswright data show the last two years mark the lowest level of investments in nearly a decade.

The TNMT report honed in on a number of insights focused on corporate investment in Asia, including how the region has remained stable when it comes to corporate funding in travel and mobility despite instability around the globe.

The report also found that ground transportation and online travel are at the front of the pack in the competition for corporate investments in Asia, and that Asian corporations have continued to prioritize enhancements to digital consumer experience.

“Asia is one of the most dynamic regions for travel tech investment,” said Jeff Kim, CEO of Yanolja Cloud and group chief strategy officer at Yanolja. “The pandemic accelerated digital transformation across industries, but in Asia, we’re seeing sustained growth and innovation, especially in AI and automation.”

PhocusWire reached out to Kim and other investors in the region, who weighed in on the trends identified by TNMT and shared their insights as to what they’re seeing and looking for in the travel technology investment space in Asia.

Experts take on corporate investment trends in Asia

Tim Hughes, vice president of business development for Agoda, said Asia’s mobile-first approach and leadership in innovation for travel are noteworthy.

He said the region must be exciting if Lufthansa Innovation Hub – an innovation unit of one of Europe’s biggest airlines – is spending so much online real estate on Asia’s investment trends. He said it is an “energizing time” to be a technology company in the region.

But he couched his enthusiasm.

“The challenge with any article trying to cover all of Asia in one go, is that there is so much nuance on a market by market basis,” Hughes said. “For example, ranking companies based on the ‘number of deals done’ is not necessarily a measure of anything as deals vary dramatically by scale and impact.”

Kim, whose Yanolja was highlighted by TNMT as one of the top four contributors in terms of corporate travel investors in Asia in the past half decade, said the trends outlined resonate with what his company is seeing.

He pointed to a growing focus on automation and digitization, particularly in spaces utilizing cloud-based software, predictive analytics and advanced connectivity.

“We’ve seen a shift toward data enablement platforms that help companies make data-driven decisions and automate critical processes,” Kim said.

But he sees another trend on the horizon.

“I believe the next big trend will be deeper investment in industry-specific AI [artificial intelligence] solutions, as companies start to realize the long-term profitability that comes with vertical AI, particularly in a sector as data-rich as travel.”

Vertical AI differs from generative AI because it’s industry specific, Kim said, noting it allows travel companies to develop specialized, data-driven solutions to bolster operational efficiency.

What’s exciting to investment experts right now

Hughes is also interested in AI. He quipped he expected AI would be the “big answer” to what’s exciting for most investors.

He described it as foundational for what’s happening and what is to come.

“AI is not ‘the thing’ it is the ‘thing you use to build the thing,’” he said.

“My hope for areas in travel that can take the most advantage and fix pain points are supplier connectivity and payment flows. Both being areas in which consumer expectations of seamlessness and interoperability still need industry wide attention to address.”

Nick Cocks, partner at Velocity Ventures Pte Ltd, which has invested in early stage travel startups including Joyned, ByHours, Zytlyn and others, said they look beyond metrics to identify viable companies.

“We ultimately toss our dice on really good founders,” Cocks said. “What makes a really good startup is the capability and competences of the founders. Great founding teams [have] a far greater chance of success than just metrics.”

Cocks added that his team often looks at what problem areas exist in travel – and problems down the pipeline – and the technology that companies are working on to face those issues is what Velocity Ventures finds interesting.

Characterizing the investment climate in Asia

There’s a unique contrast of new entrants and established players in Asia – and that impacts the investment market, Kim said.

He said Asia’s diversity of travel markets, which range from well-established, technologically advanced urban areas to emerging economies, creates opportunities for solutions – particularly AI-driven and scalable solutions.

But even with such opportunity scope, Asia’s travel industry climate isn’t totally balmy.

“Asia has a large supply of new and exotic travel products, but its own travel demand is still lacking,” Kim said. “Therefore, there is a weakness in that continued growth of the Asian travel market is possible due to the combination with demand from western countries such as Europe and North America.”

And Cocks said that the area is experiencing a slowdown in Asia as a result of overinvestment during COVID and the commitment of funds. It doesn’t help that interest rates rose after the pandemic.

Looking ahead

While investors have a finger on the pulse of current investment trends, they’re also looking ahead.

Cocks predicts the online travel agency space, loyalty programs and distribution costs will all be impacted by developments in social media and e-commerce.

He said he also believes that discretionary categories such as travel are more susceptible to regulation – which can also create investment opportunities.

“Consuming rice is seen as a staple activity that is near-impossible to regulate,” he said. “On the other hand, regulators are more likely to target travelers due to the nature of the industry.”

And Hughes believes the future is pendent on the economy and how it evolves.

“We appear to be [in] a period of more rational investing levels, driven by macroeconomic impacts (i.e.. high interest rates) and the consequences of the exuberance of the pre-COVID and early COVID period,” he said. “Can’t tell how long this cycle will last.”