Travel demand is on the rise, but what about venture capital funding for the industry?

Jan Seale and Cobai Kastan launched their travel planning company Out of Office in March 2020, just as the pandemic hit and international borders were closed.

As travel agencies, as well as businesses in the live events and fitness industries, have felt the brunt of COVID-19 pandemic lockdowns, Out of Office, which helps users find travel recommendations from of friends, succeeded. He launched his app in August 2021 and recently raised $3.5 million in seed funding in April.

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“If you fast-forward to today, you see people are traveling more than ever despite the economic conditions looming,” Seale said.

Seale is right. For the first time since the COVID-19 pandemic began more than two years ago, travel spending surpassed 2019 levels in April 2022, according to a report released earlier this month by US Travel. Association.

But that doesn’t necessarily mean that venture capital investment in travel agencies is keeping pace, especially as investors fear an increase in the recession. Funding from venture capital-backed companies in the travel and tourism industry group stands at around $3.2 billion globally so far this year, according to data from Crunchbase.

That’s slightly below what it was at the same time last year, when investment in the travel sector rebounded to pre-pandemic levels. In 2021, venture capital-backed travel and tourism companies raised $10.7 billion. This was close to the level of funding in 2019, which saw a peak in funding for the sector over the past five years.

“With such pent-up demand for travel during the pandemic, the travel industry was really recovering quickly and growing, and yet people are trying to do things a little differently as a result of the pandemic,” said Steve Taub of Jetblue. Technology Ventures. investment in 2021.

Jetblue Technology Ventures invests in start-up companies that innovate in travel and hospitality.

“It was kind of a reset,” Taub said.

Looking back

Last year laid the foundation for the recovery of the travel industry. The widespread rollout of COVID-19 vaccines has helped restore a sense of normalcy around the world and travel restrictions have eased.

At the same time, venture capital funding for the sector has increased and space companies themselves have made great strides. Airbnb and Vacasa, for example, both went public last year, along with airlines Frontier Airlines and Sun Country Airlines.

But public market volatility caused investors to halt. Funding for RC as a whole is down, and travel is no exception.

So far in 2022, about a third of travel and tourism companies that have raised funds have been seed-stage companies. This includes Locator, Out of Office, and Showplace. Several are in the travel planning space, while others are in the hospitality or aviation technology space.

And after

It is too early to tell whether funding for the travel industry as a whole will resume. It depends a bit on the macroeconomic environment. Many VCs are waiting to see what happens in the broader market.

Especially with a looming recession, travel in general is expected to decline after this year’s “supercycle,” according to Hopper CEO Frederic Lalonde. In terms of funding, “I don’t think, whether I’m traveling or not, that there’s a founder who can raise funds right now,” he said.

But according to Samantha Patil, founder of Well Traveled, a Los Angeles-based travel planning startup, even a recession doesn’t mean people will stop traveling altogether.

“I think as long as people remember the time in their lives when they couldn’t travel, which wasn’t that long ago, they’ll want to travel,” Patil said.

That could mean more local travel rather than a multi-country tour of Europe, she said.

Seale of Out of Office, expressed a similar sentiment, pointing to the increased flexibility many people have with work-from-home policies.

“People have had more flexibility than they’ve ever had before, so regardless, people will walk out,” Seale said.

Crunchbase queries used in this article:

Illustration: Dom Guzman

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