Technology has influenced the path of development of all industries, making businesses more efficient and shaping up digital solutions that enhance the final user experience.
The Covid-19 pandemic forced the tourism industry to reboot. Companies operating in the sector raised funding for $11.3bn in 2021 surpassing 2019 levels ($11bn).
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This rise particularly rewarded those start-ups that developed viable solutions, especially related to accommodation and booking, as borders reopened and travel resumed.
Following a peak in 2021, the flow of venture capital funds to the tourism industry in 2022 and 2023 showed signs of stabilisation in the wake of rising interest rates, less appetite towards risk and the realisation that the pandemic effects were not the absolute game changer many had expected.
Nevertheless, most of the innovations are meant to last and keep evolving — especially those linked to artificial intelligence, blockchain and the different scales of virtual reality that enhance human experiences while protecting values like security, flexibility, authenticity (local experiences) and sustainability.
Another force driving new venture capital into the sector is environmental sustainability. Particularly since the adoption of the Paris agreement in 2016, VC investment has leaned towards technology driven solutions for climate change mitigation and adaptation in the tourism sector.
Most of the travel tech and climate-friendly start-ups raising money through venture capital are located in North America, Asia and Europe, something that is not surprising as their ecosystem for promoting innovation and financing new ideas are highly developed. While North America and Europe have naturally led the evolution of the sector, Asia has rapidly developed their innovation ecosystems, with emerging epicentres like Gurgaon, Shanghai and Seoul.
Investors like SoftBank, Vision Fund, General Atlantic, and Ant Group focus more on late-stage ventures, taking on less risks than investors in early stage start-ups. Other major corporations like Accor and Amadeus IT also contribute to the pool of funding available, as they innovate in their internal processes.
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As these trends shape and transform the way that companies operate, there must be a balance between the integration of new technologies and the human nature of an industry that fosters cultural exchange and social development in communities in a sustainable and pragmatic way. Recognising paradigms like local travel, remote work and “bleisure” (business/leisure) will also keep tourism strong when facing new potential challenges that the future might entail.
The UN Tourism Innovation Network promotes challenges and competitions related to these trends by reuniting nearly 400 leading start-ups who have provided more than $2bn in funding from different regions.
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This article is part of the Special Report:
Tourism Investment Report 2024