According to a report by TNMT (a market intelligence resource produced Lufthansa Innovation Hub), Asia is three to five years in front of the rest of world when it comes to travel technology adoption.
The report “Unpacking Asia’s Corporate Investment Trends in Travel” aims to give insight into the priorities of corporate investment in Asia in terms of technology that powers the travel industry.
The takeaways from the report are very interesting, especially given that travel technology investment has been lukewarm for many years. Phocuswright will release its State of Travel Startups 2024 Report, which will show a drop in global funding in the last few year – from $17.6billion in 2021 down to $12.6billion in 2022. The report also shows a drop to $5.2billion in 2023. This year’s funding is $4.3 billion as of September 30. This is on par with 2023 figures.
Phocuswright’s data show that investments have been at their lowest levels in almost a decade. The TNMT Report focused on a few key insights on corporate investment in Asia. It also highlighted how the region has remained steady when it comes to corporate financing in travel and mobile despite global instability.
The report also found out that ground transportation, online travel and corporate investments are the top priorities for Asian corporations. They have also continued to prioritize digital consumer experience enhancements.
Jeff Kim, CEO at Yanolja Cloud and Group Chief Strategy Officer at Yanolja, said that Asia is one of most dynamic regions in the world for travel technology investment.
“The pandemic has accelerated digital transformation in many industries, but we are seeing sustained growth and innovations in Asia, especially in AI, automation, and robotics.”
PhocusWire reached Kim and other investors from the region who shared their views on the trends identified and what they are looking for when it comes to travel technology investments in Asia.
Experts’ take on corporate investment trends across Asia
Tim Hughes, vice president for business development at Agoda said that Asia’s mobile first approach and leadership in travel innovation are noteworthy.
He said that the region must be exciting, if Lufthansa Innovation Hub, an innovation unit of Europe’s largest airline, is spending so much time online on Asia’s investment trend. He said that it’s an “energizing” time to be a tech company in the region. He was enthusiastic, but he did not show it.
Hughes said, “The challenge of any article that tries to cover Asia all at once is the nuance in each market.” “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 has been highlighted by TNMT in terms of corporate travelers in Asia over the past five years, said that the trends outlined are in line with what his business is experiencing.
He highlighted a growing emphasis on automation and digitalization, especially in spaces that utilize cloud-based applications, predictive analytics, and advanced connectivity.
Kim said:
“We have seen a shift to data-enablement platforms, which help companies take data-driven decision and automate critical business processes.”
He sees a new trend emerging. Asia is the most dynamic region for travel technology investment.
“I believe that the next big trend in AI will be to invest more in industry-specific AI [artificial intelligence] Solutions, as companies begin to realize long-term profitability from vertical AI. This is especially true in a sector with so much data as travel.”
Kim said that vertical AI differs from generative artificial intelligence because it is industry specific. It allows travel companies develop specialized data-driven solutions in order to improve operational efficiency.
What’s exciting for investment experts right now
Hughes is interested in AI. He said he expected AI to be the “big solution” for what excites most investors. He called it the foundation of what is happening and what will come.
“AI is not ‘the thing’ it is the ‘thing you use to build the thing,'” he said.
My hope is that supplier connectivity and payment flow can be the areas of travel where we can fix pain points and take advantage. “These are two areas where industry attention is still needed to address consumer expectations of seamlessness, interoperability and the like.”
Nick Cocks is a partner at Velocity ventures Pte Ltd., which has invested early stage travel startups such as Joyned ByHours Zytlyn, and others. He said that they look beyond metrics in order to identify viable companies.
Cocks said, “We throw our dice on good founders. What makes a good startup are the capabilities and competences of its founders. Great founding teams [have] A far greater chance of achieving success than just metrics.”
Cocks explained that Velocity Ventures is interested in the technologies that companies are working to solve these issues.
Characterizing the investment climate of Asia
Kim said there’s a contrast between established players and new entrants to the Asian market – and this impacts on the investment markets.
He said that Asia’s diverse travel markets, which include well-established, technology-advanced urban areas and emerging economies, creates opportunity for solutions, especially AI-driven, scalable solutions. Despite the wide range of opportunities, Asia’s travel industry isn’t completely balmy.
Kim stated that Asia’s travel demand is still lacking. “Asia offers a lot of new and exotic travel goods, but it lacks its own travel supply,” Kim said. Therefore there is a weak point in that the continued growth of the Asian market is possible because of the combination with the demand from western countries like Europe and North America.
Cocks stated that the region is experiencing a slower pace in Asia due to the overinvestment made during COVID, and the commitment of money. It’s not helping that interest rates have risen since the pandemic.
Look ahead
Investors keep an eye on current investment trends but also look to the future. Cocks predicts that developments in social media, e-commerce and loyalty programs will all have an impact on the online agency space, distribution costs and loyalty programs. He said that he also believes discretionary categories, such as travel, are more susceptible to regulation. This can also create investment opportunity. He said, “Consuming a lot of rice is a staple that is almost impossible to regulate. On the flip side, regulators are likely to target travellers due to the nature the industry.”
Hughes believes that the future is dependent on the economy, and how it evolves. “We are entering a period where we will see more rational investment levels, driven by macroeconomic factors (high interest rates), and the effects of the exuberance that was present in the COVID pre- and early-period,” he said. Can’t say how long this cycle will continue.”
