With all the disruption we’re seeing in travel these days, it wasn’t surprising to read that Phocuswright research shows we are in an unprecedented period of opportunity for travel startups.
According to their report, “The State of Travel Startups 2017,” a flood of travel-focused investors, incubators and other entrepreneurial support programs have given $62 billion to 1,497 travel startups since 2005.
While a lot of that has been poured into mobile and the sharing economy, the report says early-stage companies across a wide spectrum of categories, from search and data analytics to social networking and rich media, are getting more support than ever.
Importantly, however, the report notes that while “the price of entry for startups has never been lower, the price of success (has) never (been) higher.”
So what’s working and what’s not? According to Phocuswright, 392, or 26 percent, of the startups tracked have closed. And those farthest away from the actual transaction had the highest rates of failure.
The report categorized the companies by vertical, with the traditional lodging, air, tours, cruises and ground transportation — as well as private accommodations — all logging failure rates below 20 percent. At the same time, companies at the top of the booking funnel categories like “inspiration” and “itinerary” had a failure rate above 40 percent.
In other words, the further away from the transaction they are, the less likely they may be to generate revenue and survive, the report says.
That’s certainly valuable information for entrepreneurs and investors looking at travel startups going forward. Because after all, startups are always a risky venture. And in travel they are competing with established giants who are also focused on new growth areas,
With so many new ideas and technologies, and the fast pace of change, hopefully Phocuswright and others will keep digging deeper to give us more insight and metrics behind the companies that excelled vs. those that failed. For instance, did the size of investment play a role? What other factors, both internal and external, are at play? And what conclusions can be drawn to help startups maximize their chances for success?
These are indeed exciting times for the travel technology space. But the fast pace of change also creates huge challenges. Thanks to the bright minds and ongoing analysis and trends from organizations like Phocuswright, it’s just a little bit easier for us all to remain relevant and competitive.
– Toni Portmann
