A recent webinar from Phocuswright highlighted the state of tech startups in travel.
REPORT FROM THE U.S.—New companies enter the tech market each day, and it seems like many of those companies have an interest in the travel space.
During a recent webinar titled “The State of Innovation,” Phocuswright officials shared data they track as part of their annual report on startups in travel, highlighting things such as an exponential increase in funding at a time when the number of new companies is actually slowing.
Here are some takeaways from that webinar and the underlying report.
1. The numbers are constantly growing
Phocuswright’s examination of startups, which includes companies founded as far back as 2005, included 1,497 companies. Collectively, those companies have received roughly $62 billion in funding since 2005.
The funding number saw a large jump since Phocuswright’s 2016 study, when 1,252 companies had collectively received $32.6 billion in funding. Of that $62 billion, $48.7 billion has come in since the start of 2015.
2. Funding finds its way to a few companies
While those overall numbers are impressive, it’s important to note that large portions of it find their way to a select few companies. Of that $62 billion funding number, roughly 80% of that total, or $38.9 billion, made its way to just eight companies that raised at least $1 billion a piece.
Those highly funded companies include Chinese ride-sharing company Didi Chuxing, Uber, Airbnb and Lyft.
Michael Coletta, manager of research and innovation for Phocuswright, noted funding seems to favor ground transportation companies.
“It’s really incredible how much Didi Chuxing and Uber have raised,” he said.
Airbnb is the only company in the top eight that focuses on accommodations. That company accounts for roughly $4.4 billion, or 7% of the total, while fellow alternative accommodation platform HomeAway received $510 million, or roughly 1%.
Of the 1,497 companies, 220 have raised more than $10 million, and 46 have raised more than $100 million. In total, 862 of the companies have received funding.
3. Asia/Pacific a large source of startup funding
Increasingly, the Asia/Pacific region is becoming a primary source of funding for tech startups in travel. While North America was the top source for the 2000s and early 2010s, Asia/Pacific had been the top-funding region since 2013.
“We’re seeing this shift happening where more huge rounds are going into APAC, and that’s mostly in China,” Coletta said. “It’s mostly in ground transportation, but also in tours, OTAs and metasearch startups.”
From 2010 to 2012, North America made up 44% of the travel tech funding compared to 22% from Asia/Pacific. But Asia/Pacific jumped ahead in 2013-2014 with 43% of funding compared to 32% from North America.
Perhaps even more starkly, Asia/Pacific accounted for more than half (52%) of all global travel tech funding in 2015. The region has accounted for 39% of funding since the start of 2016, compared to 30% from North America.
4. The number of new startups is slowing
While funding has grown significantly, the number of new companies joining the fray each year has actually diminished.
According to Phocuswright’s data, the pace of new startups peaked from 2010 to 2012 when 606 companies were founded. In 2013 and 2014, 405 new companies were added, and just 125 were created in 2015. The pace continues to slow with just 47 companies created from the start of 2016 to the end of the second quarter 2017.
“We see a dramatic contrast of startups being founded slowing and funding just exploding,” Coletta said.
5. Lodging and accommodation startups have relatively good chance of surviving
Of the 1,497 companies, 392 have closed, and Phocuswright officials used that data to determine a relative likelihood of a company closing based on the vertical in which they operate.
While the most likely to survive were once again in the relatively robust ground transportation segment or in tours, which both had a 14% chance of closing, lodging companies (18%) and private accommodations (19%) weren’t far behind.
Inspiration-based (43%) and itinerary-based (41%) companies were the most likely to fold.