The travel industry enjoyed a resurgence as COVID-19 restrictions fell away, with both surging demand and soaring investment. But while demand has continued to tack into the headwinds of inflation and banking fears, investment in the sector began to sink over the first quarter of 2023.
If the rate of investment over the first three months of the year continues, travel investment would fall back to 2015 levels for the year, Phocuswright research shows.
To anticipate the course for the rest of the year, the 2023 Phocuswright Europe conference brought together three top investors to share their views Tuesday on the second day of the annual event, this year in Barcelona.
Bobby Demri, managing partner of Roch Ventures, Christoph Schuh, a partner at Lakestar, and Johanna Von Herman-Kim, the director of operations at Ennea Capital Partners, spoke about why investment has been down so far this year, what generative artificial intelligence and other technologies might mean the sector and how the investment climate in Europe compares with other parts of the world.
But the first question pitched by moderator Mike Coletta, Phocuswright’s manager of research and innovation, took aim at the investors’ level of optimism for travel. A crowded theater of travel professional found comfort in their responses.
“Most of the investors are not bullish enough, and they should open the gate,” Demri said, adding, “Demand is huge. There’s no reason not to push investment. I think it’s just a question of balance between reality and the reservations we’ve had to live with these past years.”
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Schuh said he sees parallels now with what happened to investments after the Great Recession in 2008.
“We see a clear pattern. … The funding volume was going down between 40 and 70%, exactly the same as we are in now. Then there was a turning curve,” he said, adding, “In our view, we are [now] close to the turning curve.”
Despite the inflation and banking fears, he said his company has invested in 10 companies this year, and while they weren’t travel companies, he said that was proof “we are back in the game.”
“I have to say travel has recovered even faster than other industries due to the fact that the recovery after COVID is quite strong,” he said. “… I wouldn’t say I’m super optimistic, but I’m positive we are coming into a more investment-heavy season in the second half of this year.”
That’s not to say anyone was forecasting a monsoon season, raining money on travel startups. Asked for parting advice to companies in search of funds, Von Herman-Kim spoke of staying lean and disciplined. Demri also offered words of caution.
“We are entering a new era where free money is over,” he said. “It’s time to learn how to deal with high interest and inflation. And for my generation, we’ve never faced it, we don’t know what inflation is. … I feel this is becoming the new normal.”
Yet through the difficulties, he saw promising things for companies strong enough to endure.
“The reason we created opportunity was that we were very bullish last August, and we’re even more bullish now,” he said. “We have bet on the fact that the industry would bounce back. Now it’s a reality.”
He quoted Rose Kennedy, the mother of U.S. President John F. Kennedy, who once said, “Prosperity tries the fortunate. Adversity, the great.”
Demri saw a lesson in that for the travel industry. “During adversity,” he said, “that’s the moment when you create the best opportunity.”
Watch the full discussion below.
The Investor View - Phocuswright Europe 2023