High demand for travel, but what about venture capital financing for the sector?

Jan Seal and Cobay Kastan started their out-of-office travel planning company in March 2020 – right when the pandemic hit and international borders were closed.

While travel companies, along with companies in the live events and fitness industries, have borne the brunt of the COVID-19 pandemic shutdowns, out-of-office pushes have been made, helping users get travel recommendations from friends. It launched its app in August 2021 and recently raised a seed funding round of $3.5 million in April.

“If you fast forward to today, you see people traveling more than ever before despite looming economic conditions,” Sell said.

torrent is right. For the first time since the COVID-19 pandemic began more than two years ago, travel spending exceeded 2019 levels in April 2022, according to a report earlier this month by the American Travel Association.

But this does not necessarily mean that risky investment in travel companies is in line with investors’ fears about an economic recession. Funding for VC-backed companies in the travel and tourism industry group has reached about $3.2 billion globally so far this year, according to Crunchbase data.

That’s a bit later than it was at the same time last year when investment in the travel sector rebounded to pre-pandemic levels. In 2021, VC-backed travel and tourism companies raised $10.7 billion. This was close to where funding was in 2019, which has seen the peak funding for the sector over the past five years.

“With so much pent-up demand for travel during the pandemic, the travel sector has been really recovering quickly and growing, yet people are trying to do things a little differently as a result of the pandemic” from investing in 2021, said Steve Taub of Jetblue Technology Ventures.

Jetblue Technology Ventures invests in innovative companies in the travel and hospitality industry.

“It was kind of a reset,” Taub said.

looking back

Last year laid the foundation for the revival of the travel industry. The widespread spread of COVID-19 vaccines has helped restore a sense of normalcy to the world, and travel restrictions have been eased.

At the same time, venture capital funding for the sector has rebounded, and companies in the space are making big strides of their own. For example, Airbnb and Vacasa both went public last year, along with airlines Frontier Airlines and Sun Country Airlines.

But volatility in public markets has put investors on hold. Venture capital financing as a whole has declined, and travel is no exception.

So far in 2022, about a third of the companies in the travel and tourism sector that have raised funding have been from seed stage companies. This includes Localeur, Out of Office, and Showplace. Many are in the travel planning space, while others work in hospitality or aviation technology.

What’s Next

It is too early to say whether financing for the travel sector as a whole will rebound. It depends to some extent on the macroeconomic environment. Many venture capitalists are waiting to see what happens in the broader market.

According to Frederic Lalonde, CEO of Hopper, especially as the recession approaches, travel is expected to decline overall after this year’s “super cycle.” Regarding funding, “I don’t think, travel or not, there is a founder who can raise a level higher at the moment,” he said

But according to Samantha Patel, founder of Los Angeles-based travel planning startup Well Traveled, stagnation doesn’t mean people will stop traveling entirely.

“I think as long as people remember the point in time in their lives where they couldn’t travel, which wasn’t long ago, they’re going to want to travel,” Patel said.

She said this could mean more domestic trips rather than a multi-country tour of Europe

Sale of the Office expressed a similar view, noting the increasing flexibility that many people have with work-from-home policies.

“People have had more flexibility than ever before, so no matter what, people are going to come out,” Sell said.

Crunchbase queries used in this article:

Illustration: Dom Guzman