Investment Climate in Hospitality Startups
The past few years have caused the hospitality industry to turn on its head with both big hotel chains and startups trying to survive the turbulence.
Now as the pandemic wave eases off and countries reopen their borders, the global travel and hospitality market is beginning to recover in full swing. People who were stuck in their homes during the lockdown are more than eager to spread their wings and travel once again. This so-called “revenge travel” garners investors’ interest and increases the likelihood of large and small funds pumping into the industry.
Julia Simpson, the president, and chief executive officer of the World Travel & Tourism Council commented earlier in the year that “Our latest forecast shows the recovery significantly picking up this year as infection rates subside and travelers continue benefiting from the protection offered by the vaccine and boosters. As travel restrictions ease and consumer confidence returns, we expect a welcome release of pent-up travel and demand.”
The global travel and hospitality industry is worth around $1.6 trillion and accounts for 10% of the world’s GDP with the number of hotel rooms rising year after year. The startups that survived the downturn have showcased their competency and resiliency through one of the most severe global crises. The investors are putting their dollars and trust in these buoyant entrepreneurs.
Hospitality startups today are revolutionizing the industry by embracing technology and innovation as society transforms. We support visionary entrepreneurs who attempt to make an impact and reshape the hospitality landscape of tomorrow.
Hospitality Startups Trend in the Post-pandemic Era
It is undeniable that the pandemic brought immense changes to the way we live and gave rise to the latest traveling trend. With companies offering remote working as an option, we are experiencing new opportunities for alternative accommodation such as properties for staycation and workation.
For instance, a Europe-based startup, HiveGeist offers a rental platform for remote professionals to search for premium accommodation where they can live and connect with others by becoming part of the digital nomad community.
Aside from the startups offering alternative accommodation across the budget and high-end segments, hospitality technology startups are also attracting attention from investors and VCs.
Mint House is a tech-focused startup aiming to disrupt the traditional hospitality model. The company provides a unique and home-like accommodation experience with all essential amenities using smart technology, such as pre-stocked groceries, on-demand fitness, 24 hours digital concierge service minus the hassle of having to carry around the key card. Mint House has raised around $50 Million with over 20 properties in major cities.
The major changes in consumer behavior do not only open doors to new opportunities for startups and investors but also drive the necessity for digitalization and innovative business models. The digital transformation in the hospitality industry is no longer a trend but an underlying factor in creating personalized customer experience and efficiency in operating the business.
Our portfolio company, Innaway is focusing on the use of everyday messaging communication to improve the guest experience from the moment before booking until after their stay. Using AI technology, the Vietnam-based startup enables hotels to interact with prospective customers and guests via popular social media applications including LINE and Messenger. With this single platform, hoteliers can manage bookings, digital check-ins, and in-house services in addition to executing retargeting campaigns to transform customers into long-standing ones. The customizable AI chatbot plays an important part in the system allowing a seamless chat experience that brings the guests and the hoteliers closer through direct communication. These functions ultimately maximize the hotels’ revenue by upgrading the overall service quality and reconnecting with the customers.
With these new trends emerging and global tourism bouncing back, the future for hospitality startups is looking brighter than ever.
Hospitality Startups Investment in Asia
When looking at the tourism and hospitality sector in Asia, Chinese tourists play an important role in determining the ebb and flow of the industry as they account for over 10% of global outbound travel. Before the start of the pandemic, almost 11 million Chinese visitors traveled to Thailand which gained the largest share among Southeast Asian countries.
The COVID-19 outbreak caused a restriction on all outbound travel from China. This significantly impacts the hospitality scene in the region. Yet, like in other parts of the world, hospitality startups in Asia are innovating new and effective solutions to reform the industry and withstand uncertainties.
The hospitality market in the region is mostly dominated by major chains and conglomerates. This may change as startups are attempting to reinvent the accommodation experience for travelers. Well-recognized startups such as OYO Rooms and Pandabed were initially created to cater to Asian travelers and have been drawing the attention of global investors.
In Southeast Asia, 12.1% of the GDP is contributed by the travel and hospitality sector and the region is home to over 5000 travel and hospitality startups. The growing middle-class population in the area means more spending power. This coupled with the accelerated digital adoption opens a range of opportunities in Southeast Asia’s hospitality business.
Hotel Chains Joined the Hospitality Startups Investment Race
In recent years, large hotel chains have taken interest in hospitality startups and entered investment rounds. Some became shareholders while some chose to acquire the businesses. Though these startups may provide similar services or may be considered their alleged rivals, the conglomerates see the opportunities in expanding their market segment through the startups’ distinct and innovative solutions.
AccorHotels is an eminent chain that has been active in the startup scene. The company acquired shares of Squarebreak, a French startup offering high-end property rental via a digital platform with property management services for the owners. The chain continues to invest in other startups in the sector.
Wyndham Worldwide is another major chain that felt the heat from startups offering accommodation in the digital marketplace. The group acquired LoveHomeSwap which allows people to book their stay in other people’s homes.
Deals flowing into the travel and hospitality sector remain fairly strong with high-profile investments in different areas such as accommodation platforms and short-term rentals.