Phocuswright Conf. Roundup: Tech Investment Slows

Global funding of travel technology companies has slowed to its weakest level in nearly a decade, though mergers and acquisitions in the broader travel space have proliferated in recent years, analysts said during the recent Phocuswright Conference.

Phocuswright's The State of Travel Funding 2023 report, published this month and which monitors more than 4,600 travel companies, showed that funding through the third quarter this year has been $3.1 billion and is on pace to be less than $4 billion by the end of the year. That would be the lowest level in about eight years, Phocuswright research and innovation manager Mike Coletta said at the conference. Comparatively, total funding for 2022 was $11.7 billion, and the previous year was an "incredible record-setting year" with $16.2 billion in investment.

In terms of the number of funding rounds, this year also is shaping up to be the slowest in about a decade, Coletta said.

"These drastic declines are mainly due to economic factors, rapidly rising interest rates, stubborn inflation and geopolitical tensions but also sky-high valuations that resulted from that bubble of 2021 and 2022," according to Coletta. "As valuations are now dropping, follow-on funding is much harder to secure."

Mergers and acquisitions in the travel space, including corporate travel, have outpaced pre-pandemic levels in the past few years, according to research published by French travel investment bank Cambon Partners and Indian travel research company Videc.

From the beginning of 2022 through the third quarter of 2023, 423 companies in the travel space have changed hands, the research indicated. During the same length of time from the beginning of 2018 through the third quarter of 2019, there were 389 deals.

While companies focused on corporate travel make up a small proportion of those deals, "corporate travel has emerged as the flavor of the season with the number of deals doubling to 25 post-pandemic," according to Videc cofounder and CEO Virendra Jain.

The ratio of B-to-B compared with B-to-C funding rounds also "is continually trending up over time," and B-to-B currently accounts for 46 percent of total funding rounds, compared with one-third a decade ago, Coletta said.

"When Covid hit, people were willing to bury corporate travel like it was a dead industry, and that was a very big mistake," Cambon Partners travel lead and partner Morgann Lesné told BTN during the conference. "The need of traveling for [business] is still the same, and people are willing to spend a little more money for that, so I'm very confident in the rebound of that space."

In geographic terms, Europe has been the busiest for travel M&A activity, representing 212 of the 423 deals in recent years, up from 154 in the pre-pandemic period, according to. Europe this year also has the largest share of funding for travel technology companies globally, which has "never happened before," Coletta said.

The hospitality sector has had the largest number of deals—149 in the recent period, up from 125 in the pre-pandemic period—and technology company deals have grown from 65 to 107, according to Lesné. In total, from 2014 through the third quarter of 2023, there have been a total of 1,758 travel companies sold, according to the research.

Abbott Reports NDC Framework Compliance Progress

American Express Global Business Travel's "minimum framework" for New Distribution Capability content, its list of 162 items that airlines and others in the distribution chain need to fulfill before such content can be distributed in the Amex GBT marketplace, has been a "constructive step forward," CEO Paul Abbott said during the conference.

Those requirements stemmed from a lower level of standardization on the airline side compared with the hotel side—where currently about a quarter of Amex GBT's transactions come outside of the global distribution systems, Abbott said. To date, there have been about a dozen changes to airline APIs as a result of the requirements, he said.

Abbott also dismissed the "binary description" of new players that have an easier time implementing NDC versus established players that have a more difficult process as "rubbish," saying "not all proven"—his chosen nomenclature in lieu of "legacy"—"TMCs are created equal." About 77 percent of its transactions now are through digital channels, about 60 percent of which are on its own digital platforms, he said.

"We have 10 airlines up and running on NDC," Abbott said. "We're seeing increases every month in terms of the volumes, but we are seeing greater speed and scale on Egencia and Neo, where we own and can control the ecosystem."

Kayak Announces New Enterprise Clients

Kayak for Business' new Enterprise solution, which developed from its work with initial client PwC U.S. and blockchain technology provider BlockSkye, has signed up two more clients, Kayak CEO Steve Hafner said at the conference.

U.K.-based multinational alcoholic beverage company Diageo along with TripAdvisor each have signed up to have corporate travel booked on the platform, Hafner said during an onstage interview. The company now has begun a bigger push of broadening its enterprise clientele.

"Everyone's been dissatisfied with their corporate tools for a long time," Hafner said. "We're finally at a time where the solutions are pretty darn good that are coming out. We just need to go through the sales cycle of companies signing up and actually using it."