IT has been a turbulent time for tech investments and particularly tough for travel. But then amid the dark clouds, there’s always the silver lining and investors are hard wired to seek out the bright spots. What do they see beyond the horizon, into the new world of travel and tech investments? Where are the hot spots? Where are the no-go zones? What’s their thesis on NFT and metaverse?

These questions were floated during the ‘Money Shaping The New World’ panel at WiT Singapore last year. The panelists, all experts of their respective fields within the travel industry, were honest about the state of the industry and where money was starting to flow in a post-pandemic setting. 

According to a study by the World Travel & Tourism Council, capital investment in the travel and tourism sector fell from $1.1 trillion to $750 billion over the course of the Covid-19 pandemic between 2019 and 2021. Now that the sector is in full recovery mode, the challenge for many key players and destinations is how to win back capital and investor interest. 

The aforementioned report titled Critical Factors to Attract Hotel Investment also lists nine key areas that have allowed certain destinations to succeed in gaining positive attention, including governance and the rule of law, liquidity, government aid, taxation, physical infrastructure: air and ground connectivity, destination planning and sustainability, workforce, service culture and travel facilitation. 

Portugal is a prime example of how to attract investor confidence by showcasing workforce initiatives. Portugal launched schemes like the Tourism Training Talent (TTT) programme to reskill the hospitality sector’s workforce and has been acknowledged by the UNWTO as an example of innovation for its dedication to the training of future generations of industry professionals. In turn, travel and tourism investment in Portugal is forecast to soar by an average 9.4% a year over the next ten years.

Valuation is only one part of the equation

Tried-and-tested companies have years of results to showcase when asking for cash injections or financial boosts – but what about investors who come in during the early stages? 

“We tend to invest at an earlier stage so the public market multiples don’t have much of an effect at an earlier stage simply because… there’s nothing to multiply by”, answered Steve Taub (Managing Director, JetBlue Technology Ventures) when asked about the many different ways to tackle an investment opportunity. 

“We all know that the projections that the companies are giving us are works of creative fiction so we try to put our own lens on that. We are investing off the balance sheet, but we’re also investing for a return. So we use [the term] strategic fit as a way to prioritise. We’ve got five themes that we’re investing in that are lined-up with the corporate parent’s priorities – sustainability, next generation operations, accommodations, the seamless customer journey and distribution, loyalty, and revenue management.”

Steve Taub added that companies are restructuring the way investments are designed to reflect changes in the industry. 

“They’re offering other terms to investors that give the investors maybe less downside in exchange for keeping the valuation up. So, better liquidation preferences, liquidation preference multiples, warrants on top of the equity investment – I think people are going to get very creative on structuring.”  

Opportunities in Asia and silver linings of the “China freeze”

It’s no secret that China’s closure over the last year has been a drain on the travel and hospitality scene, with entire segments of travellers removed from the equation in terms of traffic and revenue globally. However, other countries may have benefitted from China’s absence. 

When Manpreet Ratia (Managing Partner, Jungle Ventures) was asked if India has been a beneficiary of the “China freeze” in terms of capital allocation, or if the country is just a fantastic underlying opportunity in the post-pandemic era, he answered that it was a bit of both. 

“Over the last 10 to 15 years, a lot of money has been made by US capital, European capital investing into China. If I look across the world, I think the only region where there is still an element of growth that is still coming through, is India and Southeast Asia.”

Manpreet added that due to the looming recessions and battles with inflation in both the US and Europe, growth doesn’t seem to be on the cards in the near future. 

“We are venture capitalists, we have a ten-year horizon, and these things are cyclical in nature. So, from that perspective the attraction for India and Southeast Asia remains immense. A lot of tech that’s built in India is particularly for domestic consumption. From a business buildout perspective, [India is] a very large domestic market in the vicinity out here. Indonesia is also fairly huge. And that’s a broader theme that seems to be coming through.” 

Taking advantage of fragmented markets

“We have a checklist for us to assess if they have the ability to become rhinos”, said Oliver Rippel (Founding Partner, Asia Partners), who decided the term rhinos were better suited for future billion-dollar companies than “unicorn”. 

“It starts with a business model, it’s always easier if there’s a China or US peer that is publicly listed in that same business model, that’s actually quite important. We look at it from the perspective of multi-market proof points in Southeast Asia, given that this is quite a diverse region – it’s hard to operate across six markets, very different from China, India, or the US. 

So, if you have demonstrated that you can make it across two to three markets, then you probably have a good shot to make it to all six. If you’re stuck in your home market, maybe it’s a bit difficult and we don’t want to take that execution risk.”

There’s more. Oliver added that, “It’s all about the financial profile. You need to have a minimum level of gross profits in order to be listable in the US – from our perspective the minimum threshold you have to hit is $25 million of gross profits.”

We’ve uploaded WiT Singapore in its entirety on YouTube. Check out more panels here.