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A New Wave of Travel Tech Takes Off for
Growth Equity
October 2017
Briehan Burke, Dave Gordon & Ryan McNally
2
• Large number of growth-stage businesses in B2B & B2B2C travel tech
• The focus of this report is on the transportation...
3
Established Players Disrupted by New Wave
(1) Airbnb Fast Facts.
(2) Certify, Q2 2017.
(3) Morgan Stanley.
(4) Bureau of...
4
Leverage Ecosystems
• Build businesses that leverage incumbent’s existing
ecosystems
• Evaluate existing business models...
5
Today’s
travelers have
high
expectations
Spend shifting
from offline to
online and mobile
Rise of on-
demand and
sharing...
6
Activities
Opportunities and Interest Areas for Growth
Equity
• Even with the aid of OTAs, transportation
options leave ...
7
Note: this landscape is intended to be a representative sampling and is not an exhaustive list.
Please direct inquiries ...
8
Investment Trends
Source: Data courtesy of CB Insights.
Investment Trends Strong History of B2B/B2B2C Exits
Steady uptic...
Please send any inquiries to briehan@catalyst.com
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Travel Tech Takes Off for Growth Equity

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A new wave of travel tech arrives for growth equity

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Travel Tech Takes Off for Growth Equity

  1. 1. A New Wave of Travel Tech Takes Off for Growth Equity October 2017 Briehan Burke, Dave Gordon & Ryan McNally
  2. 2. 2 • Large number of growth-stage businesses in B2B & B2B2C travel tech • The focus of this report is on the transportation, lodging, and activities sectors • In the future, we plan to focus on adjacent areas (i.e., corporate travel, loyalty, etc.) • Massive sector: $2.3 trillion of global T&T spend, or 3.1% of global GDP • By 2027, forecast to grow to $3.5 trillion, or 3.5% of global GDP (1) • Mature B2C tech adoption: global online travel sales account for ~$600 billion annually (~30% of total global T&T spend) (2)(3) Travel Tech Arrives for Growth Equity (1) World Travel and Tourism Council. (2) Statista. (3) World Travel and Tourism Council. Significant investment opportunity for growth equity: • New Wave of startups going after new audiences, inventory, and SMB players by leveraging existing travel ecosystems, unlocking underutilized supply, and repeating / improving on successes of incumbents • Opportunity to offer vertically-tailored software platforms (i.e. Tours & Activities, Lodging) or best-of-breed point solutions (i.e. marketing automation, analytics & BI) at a fraction of the cost of legacy providers • Investments in B2B and B2B2C travel software historically focused on solutions for larger players (e.g., hotel chains vs. smaller, independent hoteliers) • Space dominated by a handful of software platform vendors, including Amadeus, Sabre, and Travelport, with a combined ~$10.4 billion of annual revenue • Opportunity for business models enabled by First Wave players and software focused on long tail of SMB travel The Travel Technology industry (“Travel Tech”) is comprised of tech-enabled businesses that offer services and products focused on the travel and tourism sector (“T&T”)
  3. 3. 3 Established Players Disrupted by New Wave (1) Airbnb Fast Facts. (2) Certify, Q2 2017. (3) Morgan Stanley. (4) Bureau of Labor Statistics Occupational Outlook Handbook. Waves of Travel Tech Innovation Brick & Mortar Tech-Enablers First Wave New Wave Lodging: • Airbnb has more listings worldwide than top five hotel brands combined (4mm vs. 3.3mm listings, respectively) (1) • Hotels and resorts face several challenges as they attempt to keep up and expand tech platforms: connection issues, integration problems with legacy systems, staff training, etc. Transportation : • Uber and Lyft accounted for 63% of receipts and expenses vs. 8% for taxis (first instance where the latter commanded a single digit percentage) (2) • Taxi’s share of trips in NYC shrank from 84% to 65% from 2015-2016 (3) • Consumers continue to prioritize instant, personalized travel that provides a consistent experience nationwide Travel Agents: • Emergence of OTAs led to the decline of the traditional travel agent • Travel agent employment projected to decline 12% from 2014 to 2024 (4) Significant opportunity for the New Wave to enter the market and succeed Technology continues to reshape the travel ecosystem: ~2002-2009~1985-2001 ~2010-present
  4. 4. 4 Leverage Ecosystems • Build businesses that leverage incumbent’s existing ecosystems • Evaluate existing business models or go-to-market strategies and enhance or make whole the offerings of competitors • Companies: Guesty, VirtualKey, HyreCar Unlock Underutilized Supply • Put pressure on larger competitors that have been slow to innovate • Companies that look to reinvent business models and have a novel approach to taking marketspace currently occupied by First Wave • Companies: HotelTonight, LoungeBuddy, KillerRezzy Repeat / Improve • Companies repeating successes of incumbents in well trodden areas, democratizing enterprise software for SMB players • Launching similar products, services, or business models in segments that have been much slower to innovate • Companies: Peek, Adventure Bucket List, BookingPal Emergence of the New Wave 1 2 3 • Significant scale (fundraising, valuation, revenue, etc.) • Established in the marketplace (user adoption, market share) • Frequently moving up the value chain to further capture market share • Airbnb launched its Trips platform in 2016 and entered the restaurant reservation marketplace via Resy • Booking.com launched Booking Experiences in 2016 so travelers can instantly book and pay for attractions in app • Market is becoming increasingly crowded for First Wave Companies First Wave Players Are Now The Incumbents Opportunity for New Wave Companies That Look To:
  5. 5. 5 Today’s travelers have high expectations Spend shifting from offline to online and mobile Rise of on- demand and sharing economies Larger travel companies starting their own incubators to speed up tech advances Travel habits are evolving (1) Hospitality is data-rich but information- poor Travel Tech Themes (1) National Travel & Tourism Office. They want tailored and customizable experiences based on their specific preferences, automated and streamlined processes, and immediate and accurate information and services Consumers expect instant booking capabilities E.g., jetBlue Ventures & Amadeus Ventures • U.S. international air traffic hit a new record in 2016 (221mm passengers vs. 2015’s 209mm) • Record number of Americans traveling abroad • ~73mm Americans traveled abroad in 2016, up 8% from 2015 • Oceania and Asia saw biggest changes YoY, with increases of 11.5% and 9.5%, respectively Companies will need to close the gap through process automation and enhanced customer experiences in order to win and maintain market share
  6. 6. 6 Activities Opportunities and Interest Areas for Growth Equity • Even with the aid of OTAs, transportation options leave much to be desired • As ride sharing and on-demand travel grow in popularity, user experiences become choppy as consumers jump between platforms • Majority of activity still happens offline (~85% in 2016) (1) • Businesses are only now starting to adopt technology to improve their marketing, payments, bookings, inventory, etc. • Aspects of lodging remain in the stone ages for both consumers and employees • Consumer experience lacks digital enhancement and personalization • Back-end relies on outdated technology and underutilizes mobile and wifi-enabled tech (1) Phocuswright. Transportation Lodging ‒ Ride-sharing ‒ Transportation-specific booking ‒ OTAs and metasearch ‒ Bookings by phone ‒ Disparate, individual listings ‒ Spreadsheet or paper comparisons when evaluating opportunities ‒ Offline bookings ‒ Offline bookings ‒ OTAs ‒ Generic peer to peer sites • Third-party rentals for the sharing economy • Trip planning and itinerary management workspaces • On-demand, IoT-fueled transportation • Transportation aggregators • Connected hotels and on-demand services (i.e., room service, check-in, keyless entry) • Technology that supports the sharing economy • Hospitality training and continuity services software • Property management platforms • Activity aggregators • On-demand and instant bookings • B2B services • Discovery and marketplace functionality
  7. 7. 7 Note: this landscape is intended to be a representative sampling and is not an exhaustive list. Please direct inquiries to briehan@catalyst.com. Travel Tech Landscape
  8. 8. 8 Investment Trends Source: Data courtesy of CB Insights. Investment Trends Strong History of B2B/B2B2C Exits Steady uptick in VC financing activity • $11.9bn dollars invested in 1,230 deals since 2013 • 2016 saw a record 361 deals, up 12% from 323 in 2015 Funding is highly concentrated • Top 10 most funded companies (incl. Airbnb and LY.com) raised $7.7bn since 2012, or 61% of total fundraising in that period • Majority of deals between 2012-2016 were seed/angel • Seed/angel accounted for 50% of deals and Series A accounted for 18% in 2016 Target Acquiror Type EV Date VC- Backed? Strategic $550mm 2017 Yes Strategic $1.7bn 2016 Yes Financial Sponsor $1.3bn 2016 No Strategic $168mm 2016 Yes Strategic $3.3bn 2015 Yes Strategic $830mm 2015 No Financial Sponsor $930mm 2014 Yes • Similar transactions with undisclosed valuations include: Trip4real/Airbnb, HouseTrip/TripAdvisor
  9. 9. Please send any inquiries to briehan@catalyst.com

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