The increase in capitalization of startups in Mexico, the old infrastructure in the travel industry and the new consumption habits generated by the COVID-19 pandemic create opportunities for entrepreneurs and investors to participate in the travel tech sector (the sector in which that companies use technology to add value to the travel industry).
The country’s travel industry is in a unique position to implement technology and fuel the growth of its travel tech ecosystem given that, since the pandemic began, Mexico has assumed its role as the world’s leading country in travel recovery, and Mexico City is a growing tech hub where startups have raised $3.7 billion in venture capital investments in 2021, a more than triple increase from 2020 and almost six times from 2019, Endeavor reported in the presentation of its study “Travel tech in Mexico 2022”.
The economic repercussions of the pandemic in Mexico were less severe than in the rest of the world. In addition, the country has become the main market for Latin American technology companies. Thus, by combining the competitive advantage in tourism and technology, Mexico can be a world power in Travel tech, says Josue Gio, founder & CEO of GuruHotel.
Established players have a lot of information, but often don’t know how to use it to improve the consumer experience. There is currently exciting potential in B2B2C (business to business to consumer), particularly in helping those businesses streamline their operations and use the data they have access to, says Josue Gio.
Among the opportunities presented by the sector, it stands out that the first sphere of travel in Mexico (international tourism) is a high-income industry with a strong presence of consumption habits driven by the pandemic; while the second sphere (internal tourism) is highly fragmented and not highly digitized, pointing to opportunities for B2B (Business-to-business) or B2B2C (business to business to consumer) companies to bring independent hotel operations online , travel agencies or tour operators, according to Enrico Robles, CFO & Intelligence Director of Endeavor Mexico.
In contrast, the main obstacle for travel tech is mergers and acquisitions, very common in the industry, which inhibit competition and are an important factor in explaining the small number of companies in the sector. However, liquidity in the travel industry also means that entrepreneurs will have more opportunities to make an ‘exit’ and sell their innovative company, explains Robles.
Juan Carlos Zuazua, CEO of VivaAerobus, pointed out in the presentation of the study that the negative post-pandemic part for the travel industry is the loss of a large part of business trips, those who previously traveled for a single appointment are no longer going to do so. never do again. On the other hand, on the positive side is all the digital nomads and all the workers who are traveling for longer periods, “it is a trend that we did not have before and that is very positive for the industry that is benefiting the entire value chain “.
Among the success stories in the travel tech sector in Mexico are 26 companies that have raised 176 million dollars in venture capital and debt funds, among which the following stand out: Casai, Kocomo and Urvan, with 59, 56 and 15 million dollars. dollars, respectively.
37% of venture capital and debt deals in Mexico went to companies in the Ground Transportation vertical, while those in the Hospitality vertical received 75% of the sector’s total venture capital and debt financing, for a amount of 132 million dollars, according to the study carried out by Endeavor.
The large portion of venture capital investment allocated to the Hospitality vertical is indicative of its innovation efforts. Kocomo is a pioneer in the fractional ownership model of vacation homes, while Casai has designed its urban rentals around sustainability and cutting-edge technology.
The use of artificial intelligence and aggregated data to personalize the travel experience has become a pervasive trend in travel tech, facilitating the booking process by allowing travelers to book flights and check their status through a customer service chatbot. client, create personalized travel itineraries and control room amenities before arrival, such as temperature, music and housekeeping services.
The recent shift to remote work has increased the opportunity to travel independently of vacations and beyond the limitations of two-day weekends. This can be seen on trips outside of peak season and on extended weekend trips.
The study carried out by Endeavor shows that searches for bus trip departures in Mexico in 2021 have decreased on Saturdays and Fridays and have increased 6.7% on Thursdays and 5.6% on Wednesdays.
Additionally, travelers have substituted long-term vacation rentals for timeshares; this trend has stimulated the creation of new companies that mix Travel tech with PropTech through fractional ownership of high-end properties.
If entrepreneurs continue to develop a solid product market fit, build efficient business models, and understand post-pandemic consumption habits, the Travel tech community is likely to multiply and scale, Enrico Robles trusts.
