Undeniably, COVID-19 send the world travel industry back to 10 years ago when travel startups are standing on the verge of collapse. Additionally, the frozen demand for travel and tourism has caused investors to scrupulously pour capital. Due to financial exhaustion, the majority of travel businesses have reconstructed to survive.
The period from 2013 to 2019 referred as the golden edge of the travel and hospitality sector when investors saw the dramatically potential boom of the industry.
While the risk investment in 2013 accounted for US$1.4 billion, that number rapidly claimed to a peak of US$30.3 billion, which is equivalent to the average growth rate of 48 per cent annually.
Additionally, the portion of travel and tourism in the investor’s portfolio had increased from two to 18 per cent in five years. Unfortunately, the trend had ended due to the outbreak of coronavirus.
An adverse adjustment in investment preferences
In the first half of 2020, the value of investment deals in travel startups significantly drop over 42 per cent that the number of deals also fall by 25 per cent. It was due to the expeditious decline of global demands. The new transaction has rarely occurred, while the current cancellation rate is on the rise.
Accordingly, several startups are running out of money, leading them to implement a prudent financial plan instead of burning money to expand the market share as six months ago.
Undoubtedly, the airline sector and its investors are suffering the greatest loss recently. In June 2020, investors of Delta Airline had lost over 26 per cent of what they invested in this brand due to the sharp drop in the global stock market. Besides, there was a surge of business withdrawing from the market, while the number of new entrances constantly decrease in the Asian market.
On the other hand, the adverse change in investors’ preferences also induces pressure in a fundraising round of several Asia startups. An online booking startup, Traveloka claimed that it was struggling with a new round of fundraising, which was over 17 per cent lower than the nearest one.
Definitely, Traveloka has never been the only victim. Even Airbnb encountered financial trouble recently. In which, around 90 per cent drop in its online travel booking platform cause this vacation rental business falling into US$2 billion debt, while some big investors refuse to add new money for it.
Many travel companies have decided to temporarily change the core business models, investing in other industries instead of pure travel business. Along with the advantage of broad customers’ groups and strong online distribution, those enterprises have a high incentive to enter the FMCG market. Besides, some startups expect the grow via the online food industry, which refers to be the least influential industry.
KKday in 2019 was the emerging online tour booking platform with rapid growth in three consecutive years. Unfortunately, its revenues were estimated to drop off a lift by over 90 per cent due to the pandemic, as the cancelled orders continuously erode its financial condition.
As a result, KKday has started using this platform for selling souvenirs and food. The revenue of non-travel products saved KKday from bankruptcy, contributing approximately 50 per cent of total revenue.
Klook in Hong Kong has paused its tour booking services recently to provide on-demand food delivery. In which, Klook has added the new feature, allowing customers to make a reservation at restaurants, select meal kits, and delivery option in its platform. Instead of booking tours, Klook’s customers currently order meals and raw materials to be delivered to their home.
According to an industry expert, the withdrawal of many investors is a non-permanent trend that will see the industry recovering at the end of 2020. Bloomberg predicts the Asia online travel market will increase by 129 per cent until 2025, reaching US$78 billion.
That’s why changing business models is still a temporary response to the current market condition. Startups should be ready for coming back to the travel industry at any time.
In the midst of the investment drop, travel startups need to implement new strategies to spend their limited money more efficiently. While the demand freezes, it is time for investing in improving the business ecosystem. The common strategy tends to be personnel reductions.
In particular, Airbnb reportedly cut over 25 per cent of its workers this May as an impact of the decrease in revenue in 2020, predictably accounted for around 50 per cent of 2019’s result. The majority of part-time positions have been laid off, while the whole business forced to reduce expenditure for avoidable activity.
Instead of focusing on international visitors, the majority of startups in Southeast Asia recently drive its resource into the domestic market.
Also Read: Report: Indonesian startups took 70 per cent of travel tech funding in 2019
In Vietnam, the country with zero deaths from COVID-19, domestic travel has restarted as normal. Luxstay, the Vietnamese answer to Airbnb, has restored its booking services since the middle of May. In which, it is focusing a promotion plan to Vietnamese rather than foreign tourists.
In Hong Kong, a travel business selling culture tour has successfully launched a brand-new virtual tour of some featured building to over 700 students. This campaign finally got sponsors from the authority and bring huge profits to the company, helping it came over the crisis.
Since the future of extending the movement restrictions is probable happened, the term of virtual travel expectedly become popular, and inspire several startups capturing this model to survive.
Final words, notwithstanding implementing austerity strategy or changing the direction, travel startups have done a good job to defeat the severe impact of the pandemic. With the investment expected to return next year, the travel tech industry will come in a new chapter with prospects of glory.
Klook, a world-leading travel activities and services booking platform, announced today the launch of a new home-based experiences initiative, Klook Home. The new initiative is the first phase of Klook’s global multi-stage recovery approach and has been rolled out across 14 markets. The debut signals the company’s commitment to kick-start recovery and tackle the new normal of travel, combating the impact of COVID-19 in the travel industry. There are almost 200 home-based experiences on Klook Home such as Do-It-Yourself (DIY) craft and cooking kits, online workshops, as well as free virtual tours.
Klook’s multi-stage recovery efforts will be rolled out based on the unique needs and conditions of the markets, as countries across the globe are at varying stages of recovery. Starting with local experiences (home-based experiences; weekend things-to-do within the city; and domestic travel experiences), Klook aims to capture local demand first, followed by offerings based on intra-regional travel corridors, as global market conditions gradually improve and travel restrictions ease.
Seizing domestic demand first to pave the road ahead
Based on Klook’s search data in April across APAC and Europe, about 60% of the total number of searches are related to domestic experiences, a signal that local interest for domestic experiences is on the rise.
Markets with stay-home regulations such as Singapore and the Philippines will be able to tap into home-based activities from Klook Home, while markets that have eased stay-home orders such as Taiwan and Hong Kong can leverage Klook’s list of local activities within the city or other cities. Klook’s domestic offerings encompass weekend city things-to-do such as local attractions, movie tickets, and underexplored off-the-beaten-path activities.
Most notably in markets where recovery is on the mend, about 80% of searches in markets such as Taiwan and Australia were purely domestic in April. Hong Kong observed a similar trend, with 70% of its total searches solely on domestic experiences. Klook hopes to leverage this momentum and increasing interest when it reignites its efforts to promote regional and global travel.
As travelers across the globe increasingly seek more hyper-local and unique experiences, the curation of local experiences for domestic travelers will help pave the way in providing a wider range of offerings for both intra-regional and overseas travelers in the future.
“COVID-19 has inevitably altered the future of travel and we must continue to be nimble to capture new opportunities,” said Eric Gnock Fah, Chief Operating Officer and Co-Founder of Klook. “Global travel may be some time away from now but we are confident to seize every opportunity, starting with local experiences. What we do now will define how we navigate the future of travel.”
Expanding into local experiences based on successful pilots
Aligned with Klook’s mission to empower travelers to discover, book, and experience the best things to do anywhere, anytime, the expansion into local experiences is a natural extension of Klook’s existing overseas travel offerings, as locals also seek unique experiences in their own backyard.
Earlier in April 2020, Klook piloted a curated list of local, unique experiences ranging from outdoor tours and activities in South Korea and mainland China with encouraging success. Based on Klook’s April booking data, the number of bookings in South Korea and mainland China increased by almost 2-fold and 4-fold month-on-month respectively.
In addition, Klook offers services and activities to help travelers better ease into the new normal of travel emerging from COVID-19. Even before COVID-19, adventure and outdoor activities bookings surged globally by 3x and this is expected to continue in 2020 as travelers seek the outdoors to avoid large crowds. Klook also launched its private car rental page earlier in May 2020. The launch of the dedicated page enables users who prefer to explore the open road in small groups to better access, browse, and book their own private cars.
Empowering local merchants to navigate and grow during this challenging period
It has always been Klook’s long-term commitment to empower its merchants and to ensure that they continue to grow and succeed. Since the start of the pandemic, Klook has been at the forefront to support merchants.
In Taiwan, Klook partnered with the local governments of Tainan and Pingtung in March and May respectively to help traditionally offline merchants, enabling these offline operators to digitize their travel activities, monetize their offerings, and bring them on to a global stage.
In addition, the company rolled out Klook Partners Hub, a resource center to help merchants keep abreast of the latest updates from the travel industry and Klook’s platform.
It is also launching Klook Academy, an initiative to help merchants optimize their travel products and services better in the new normal of travel. Klook Academy will offer workshops and webinars touching on a wide range of topics that can help their business, ranging from marketing to operational excellence.
COVID-19 has exposed the technological challenges offline tour operators face and as a result, offline merchants are increasingly open to innovation. Merchants can leverage Klook’s user-base and expertise to capture new opportunities, starting with local experiences and eventually, regional and global travel.