With the industry at a near standstill due to the global pandemic, we often forget that over the last decade the travel industry experienced significant investment from Angels, Venture Capitalists and Private Equity, creating new travel/transportation unicorns (e.g. Uber, Lyft, Airbnb, TripActions, Travel Perk and Oyo to name a few). While post Covid-19 investors need to exercise caution, there is still significant money out there to invest in travel technology, but what companies will survive and what are the new opportunities for investment?
Timing is everything. Back in 2004, I was hired by Sandler Capital to evaluate an investment in Farelogix. My conclusion after some extensive research is that there was a real opportunity for air travel distribution disruption. I can of course chalk this up to my own brilliance, but it was much more a case of good timing. My research had uncovered a strong desire by the airline to take back distribution and a desire to explore new technology solutions. While conducting the research, I contacted Derek Lewitton, who back in 2005 ran distribution at United Airlines. Derek is the individual who gave us the term GDS New Entrant or GNE. By interviewing Derek, I was able to alert him to the existence of Farelogix and as a result they were invited to famous United Airline’s alternative distribution meeting held in early 2005. Though most of the other tech companies in attendance were acquired (ITA Software, G2 Switchworks, TRX), Farelogix emerged as the primary catalyst of change. This eventually led to Farelogix donating their code to IATA which became the IATA New Distribution Capability (NDC). Though the 2005-2006 period of Web-only airline fares ended with new GDS agreements for full content, the timing of Farelogix success was due to market opportunity uncovered during the research which reflected the airline’s desire to control distribution.
So, the question today is what are the technologies and more important what are the timing issues to keep in mind when considering investment in travel tech during the pandemic? Common wisdom would suggest that any technology which helps cleanliness and supports the health of the traveler would be an obvious opportunity, but more subtle opportunities exist in each of the major travel sub segments.
Specifically, here is a brief list of the obvious and the more nuance investment opportunities to consider:
|Sub Segment||Obvious Opportunity||Subtle Opportunity||Timing / Comments|
|Airline||Health monitoring before boarding, tech tools for social distancing on board and cleaning solutions.||New NDC aggregators and Airline IT service providers.||The idea of removing content from the GDS during normal times is a losing proposition for the carrier due to the corporate market’s dependency on the GDS. Corporate travel has been put on hold for now, so the time for pilots of alternative distribution and settlement platforms are here today. We’ve already have seen signs of this with recent moves by Lufthansa (Sabre) and British Airways.|
|Airport||Health monitoring tech, social distancing tools, cleaning solutions.||Better integration between airport and airline systems for passenger flow management and ground handling resource management.||There has historically been significant friction between the goals of the airport and the airline. Distrust is based in what has been viewed as sometimes conflicting goals. We can no longer afford to have any gaps between airline and airport systems and thus technology that ties these systems together represent a strong future investment. For example, with fluctuating passenger loads, ground handling staff need to be deployed based on actual passenger volumes. Systems are needed to facilitate this information exchange between the airline and airport.|
|Corporate Travel||New TMCs that have a fresh tech stack and can embrace new forms of distribution. Further automating the SMB segment to provide all companies greater visibility and control over their employee travel.||Data analytics will be key for corporate travel recovery. Corporations need systems that tie travel history with employee performance which will dictate who will be authorized to travel based on measurable results.||Corporate travel data has always been flawed (incomplete or inaccurate information) due the dependency on legacy platforms for data capture. Every corporate buyer today should be analyzing their 2019 travel data to understand the impact of travel on the company by creating an effectiveness index for each employee. Companies that can support deep analytics represent a growth area to watch. These analytic platforms need to be tightly integrated with enterprise systems such as Salesforce, ERP and HR.|
|Hotel||Extensive cleaning and touchless operations.||Provide facilities to locals to enjoy at a fee. Explore ways to execute true hybrid meetings.||As local travel returns first, hotels may want to consider firms that offer facilities to non-guests for day use. Groups, meetings, and conventions are a critical revenue source for hotels but will be one of the last segments to return. Technology that provides a blend of virtual and in person meetings with the ability to network with attendees are a likely way this segment will begin to return. The virtual networking capability between attendees will be a critical feature to watch for these hybrid solutions.|
|Ground Transport||Drivers wear masks. Ride sharing and rental cars are cleaned after every use.||Metasearch that compares ride sharing prices and the health and safety rating with taxi and other options.||Car sharing will likely rebound, but new criteria will be used to evaluate the cleanliness of specific cars and health of drivers. Comparison shopping will become the norm.|
|Short Term Rentals||Cleaning standards across properties owners. Shifting to a long-term rental model||Short term rental inventory has always been very inconsistent. Data analysis is needed not only to monitor the cleanliness of short term rentals, but to identify rentals that are off the beaten path and tied to specific activities and experiences.||Short term rental sites such as Airbnb have created a strong brand to become top of mind for the Millennial and Gen Z traveler. These leisure travelers travelers are looking for experiences. Technology that merges short term rental inventory with Covid-19 “travel bubble spots” married with campaigns that target individual looking for adventure. Technology that matches this supply with understanding of the traveler’s experience goals will help revive this segment.|
|Technology Providers||Med Tech that measures vital signs and keeps track of medical history including an antibody test when available.||Med tech that goes beyond tracking of vitals and immunity records but also encompasses an overall travel risk index.||What has become clear during the pandemic is that certain groups of individuals have greater risks contracting Covid-19 and thus have a greater safety concerns when traveling. One way a company can mitigate this issue is by having a detailed medical history of each employee. Given the privacy implications of this data, storage of medical information must be highly encrypted platform with access ultimately controlled by the traveler.|
|Tours and Activities||New cleaning standards and social distancing. Emphasis on smaller groups and individualized tours rather than larger groups.||Technology that provides an immersive tour experience via VR will both replace and prime the pump for future tours. Some tours may become virtual on a permanent basis.||There is evidence that during the shutdown, many individuals are exploring tours and activities they want to experience once the lockdown ends. The T&A sector can use virtual tours, but they must be filmed in way that is immersive (VR) and playful (AR initiated games).|
This by no means is an exhaustive list of potential post Covid-19 travel tech investments but intended to stimulate some thought about less obvious investment opportunities. When considering an investment in the travel industry one should keep in mind: