Artificial intelligence (AI) is making it faster to develop travel technology, but startups still face familiar obstacles to securing investment and building businesses that scale.
The first hurdle for founders: convincing investors they understand the industry they aim to disrupt.
“Our problem is that everybody who likes to travel thinks they can solve the problems that exist in the travel industry,” said Amir Amidi, managing director at startup accelerator and venture capital firm Plug and Play. “VCs have over-heard the same story about the same opportunities that everybody thinks they can solve without really understanding the underlying challenges.”
Amidi made the comments during an investment panel at the online Travel Trends Summit on October 29.
Traditional venture capital firms are often reluctant to back early-stage travel startups unless their founders have a proven track record.
“More often than not, if you’re not a serial entrepreneur and they haven’t had a successful exit with you, most likely they’re not going to return your calls,” he said.
Those investors are more inclined to provide capital once startups demonstrate product-market fit and strong growth in users, revenue or partnerships.
Amidi was joined on the panel by Roger Sharp, chairman of technology investment bank North Ridge Partners, who pointed to a shortage of venture capital dedicated to travel and hospitality technology.
“I think even a small, a modest seed round fund for new travel tech is something that's sorely needed,” Sharp said.
Where investors see opportunities
Despite the rise of AI, Amidi said Plug and Play’s investment priorities have not fundamentally changed. The firm continues to look for technologies that address industry inefficiencies and improve the travel experience, rather than focusing exclusively on AI-native startups.
“There’s so much room for optimization, with or without AI,” Amidi said.
Sharp, whose investment activity is concentrated in Asia Pacific, said B2B opportunities dominated the deals he encountered this year, while B2C was relatively scarce.
He described a “chaotic and very stimulating environment” as AI agents enter travel and established players pursue acquisitions, saying “no one knows what comes next.”
That uncertainty makes it difficult to invest in B2C businesses without substantial scale and financial backing, he said. B2B offers more tangible problems to solve with potentially less risk.
Amidi agreed that B2B is the safer bet, but he sees greater potential in B2C, where the traveler experience remains inefficient.
He expects much of that innovation to come from AI platforms offering travel alongside other services, rather than from travel-specific companies.
The challenge of scaling
Customer demand and a product that solves a real problem remain essential to scaling a travel business, regardless of the technology behind it.
“The business fundamentals of how you scale up a company have remained the same,” said Betsy Mule, an investor at F Prime Capital, during a separate panel on scaling in the AI era.
Mule said companies still need to establish product-market fit, win customers and expand their offerings.
But in the age of AI, she said, “Every single part of that process now happens so much faster than it used to, and the incumbents have access to the same technology that you do.”
Startups retain an advantage in speed because they aren’t burdened by legacy technology, Mule said.
But they have less time to establish a competitive position before rivals catch up.
Matt Zito, managing partner at mergers and acquisitions brokerage TravelExits, predicted that most AI scaling over the next year or two would come from incumbent and legacy companies.
“They're going to harness the AI, and they already have the customer base, and they're just going to apply it,” he said during the same panel.
Mule said the emergence of AI-native startups initially threatened more established companies, but many have responded by expanding their offerings.
“When AI-native startups kind of started popping up, it was a really scary time,” she said. “But I think a lot of them have been able to adapt very well and layer on products in a really interesting way.”
Shane O'Flaherty, global director of travel and hospitality at Microsoft, said during the same panel that AI could fundamentally change how companies structure their workforces.
He envisioned a “human-led, agent-operated model,” with employees overseeing AI agents that perform tasks and potentially manage other agents.
Companies may need to rethink traditional organizational charts and staffing decisions as a result.
“Is that a person or could that be handled by an agent?” O'Flaherty said.
On scaling in the age of AI, Zito concluded the session with what he called “old school advice.”
“Go where your customers are going,” he said. “Follow your customers’ needs.”