Changes in the travel industry and the opportunity for travel tech
There is little controversy that the travel tech industry is likely to be changed forever after the COVID-19 pandemic. Already, the crisis is predicted to have had 7x the impact of the last largest disruption to the travel industry 9/11. So far, the current crisis has caused the losses of 5.9 million jobs and $910 billion in travel-related economic output — and there is no end in sight. The short term impacts to the industry are going to be significant, but this presents an opportunity for niches to emerge.
Short Term Consolidation and Contraction
Airlines, hotels, and cruise ships have been feeling the squeeze for over a month now as of this writing. The airline industry has grounded flights, hotels have furloughed most of their workers, and cruise ships are inoperable. In the short term, consolidation will be the name of the game. Airlines already went through a strong wave of consolidation with a flurry of M&As in the 2000’s, but this time, routes will be consolidated and waste will be trimmed.
Hotels are likely to come back with more efficient portfolios and less bloat. Interestingly, more travelers may choose to stay in hotels as opposed to AirBnBs because of the higher cleaning standards. Cruise ships will be held to a higher standard. After being left out of the government stimulus bill because the big 3 cruise lines are not incorporated in the United States, they are being offered stimulus money only if they clean up their environmental footprint. This should bode well for the industry in the long term as inevitably more scrutiny will be placed on these negative externalities.
The Opportunity for Travel Tech
The most prominent travel tech companies are going to thrive, and as demand will rebound, opportunities will arise in travel tech. Airbnb has been positioning itself to investors as the premier benefactor of a rebound. The argument goes that because they offer private residential homes, this suits consumer needs of desiring caution with social interaction. Whether consumers will be comfortable with a potentially lower cleaning standard is the question. The company has also engaged in acquisition activities, gobbling up smaller struggling companies at a lower price to augment its capabilities.
All of these changes prove to be an opportunity for emerging tech companies. Though they have to remain lean right now, this standstill actually provides them an opportunity to augment their capabilities, rather than constantly working on BAU offerings. Skyscanner, the website that provides metasearch on flights, has been rethinking its strategy to get people to fly again. This will undoubtedly create new features that will only serve to benefit the skeptical consumer. So far, the company has created live information sharing tools on its website on COVID-19 data.
New startups are emerging in this space as well. With the increased anticipated demand, players are trying to use this downtime to catch this weave. Hotelmize, an Israeli founded startup, just raised its series B amid the crisis, aiming to use its funds to expand internationally, to prepare for the opportunity of rebound. Crises breed opportunity, and it is exciting to see what will emerge from this one!
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