Small Players Backed by PE Thrive in Travel Tech’s M&A Surge

Skift Take

2025 is expected to be a banner year for travel tech M&A. Add-on acquisitions, particularly of companies with $5M-$50M ARR, are poised to set new records as platforms scale up and prepare for IPOs or acquisition by mega-cap firms.

Travel tech industry is in for a big year of M&A, with private equity driving the sector’s transformation, according to the new year end report from the hospitality and travel tech team at tech investment bank AGC Partners, led by Jonathan Weibrecht.

As companies scale up, strategize for IPOs, and diversify their offerings, the stage is set for a “feeding frenzy” in 2025, it says, with key drivers include improved LBO financing conditions and significant dry powder reserves among PEs​. The large OTAs, historically buyers in online travel and travel tech, have sat out recent years because of anti-trust concerns.

Some more insights from the report by AGC, after the two charts below.

1. M&A Activity Is Surging:
   • Travel and hospitality tech M&A values surged by 108% based on headcount, driven by strong business momentum and investor confidence.
   • Private equity-backed strategics are leading the charge, particularly companies with $50M-$500M ARR​.
   • Scaled players are actively seeking M&A to prepare for IPOs or acquisition by larger horizontal tech acquirers​.
2. PE Dominance in Deal Flow:
   • 62% of deals in 2024 YTD involved PE-backed companies, with strategics taking a backseat​.
   • PEs are expected to continue driving M&A activity in the next two years, with an emphasis on companies with scalable fundamentals but not yet IPO-ready​.
3. Capital Availability:
   • PEs have significant dry powder—approximately $330B—fueling an environment conducive to M&A​.
   • The high-yield financing market has also improved, with junk bond yields decreasing by 275 bps since October 2023, facilitating larger transactions​.
4. Segment Highlights:
   • Hospitality commands the largest share (39%) of M&A activity in the travel tech space, followed by restaurants and travel management companies (TMCs)​.
   • PMS (Property Management Systems) and marketing stacks are key areas of focus, with marketing tech narrowing the gap​.
5. Upcoming Trends:
   • A “feeding frenzy” is anticipated in 2025 for strong companies with $5M-$50M ARR as platforms seek to consolidate ahead of IPOs or larger acquisitions​.
   • The OTA segment, historically less active in M&A, is expected to see a resurgence in deal activity by 2025, reaching pre-COVID levels​.
6. Market Dynamics:
   • With large platforms constrained by antitrust scrutiny, M&A activity has shifted toward smaller, niche players. This includes smaller OTAs and short-term rental platforms​.
   • Add-on acquisitions are predicted to set a record in 2025 as platforms seek to enhance their offerings​.
7. Cross-Border Transactions:
   • North American acquirers are leading global M&A activity, with 26% of their deals involving non-North American targets​.
   • European and Middle Eastern regions are also seeing increased activity due to professionalization and tech adoption in short-term rental and outdoor leisure verticals​.
8. Future Consolidation:
   • The aviation tech sector is in the early stages of M&A, with major roll-up platforms being formed around solutions like pricing, ancillary revenue, and operational efficiencies​.
   • Hotel technology is consolidating into three distinct stacks: marketing, operations, and IoT, driven by PE-backed players and hoteliers’ focus on top-line growth​.
9. Key Deals and Players:
   • Companies like Duetto, SHR, and Above Property received aggressive valuations, highlighting investor appetite for marketing stack technology​.
   • Notable transactions include acquisitions in property management software, guest engagement solutions, and revenue optimization platforms​.
10. Challenges for Strategic Buyers:
    • Large strategics, including the “big three” OTAs, have remained cautious in acquisitions due to antitrust constraints. This has created opportunities for smaller players to gain traction in M&A​.
    • Regulatory scrutiny has forced larger players to diversify their strategies, such as investing in complementary technologies or niche markets​.

11. Geographic Focus:
    • M&A activity aligns with growth hotspots, with Asia, the Middle East, and Latin America being key targets for expansion​.

12. Financial Multiples:
    • The travel tech sector has settled into a trading range of 4-6x EV/revenue, on par with broader SaaS valuations, showcasing its post-COVID resilience​.