Although a sagging economy continues to upset the vacation industry, venture investors are still booking reservations with travel-related start-ups.
The first half of this year alone has seen at least 10 investments in travel companies that range from providing online reviews, recommendations and bookings to vacation rental management software.
Venture capitalists are attracted to the billions of dollars spent each year by consumers online for travel plus the money that marketers shell out to attract their business, suggesting they see the segment as a good recession play.
It’s also a growing industry. Forrester Research expects $115.6 billion will be spent for travel online in the U.S. alone this year, and that number is expected to jump to $157.8 billion by 2013.
“You have all these social networking plays that say, ‘I’m going to get a whole lot of users and expect it will monetize,’” said Jim Armstrong, a venture investor at Clearstone Venture Partners and board member of travel company LeisureLink Inc. “I accept that, but it’s lottery math to invest in that stuff. Our firm, we try to stay around the money on the Web. We’re excited about categories with a lot of money around them and there’s a lot of money in travel.”
And it’s an area that is ripe for innovation, investors and entrepreneurs say. The early 1990s introduced the first wave of online travel agencies, which ended with a large consolidation in the early 2000s. The industry is currently experiencing a next wave of travel innovation, which includes opportunities that didn’t exist before, including social networking and mobile.