Travel-focused incubator and accelerator programs that help
startups grow, refine their products and network with potential investors,
corporations and peers have been popping up for the past several years, now
totaling an estimated 15 around the world.

While the next Airbnb or Uber — rare unicorns, privately
held startups valued at $1 billion or more — hasn’t sprung up yet, it’s a
possibility down the road. But many in the industry argue that evolution in
lieu of revolution isn’t a negative.

“There may not be as much true innovation coming out of
the incubators and the accelerators as there are good business ideas, but that’s
not a bad thing,” said analyst Henry Harteveldt, founder of Atmosphere
Research Group. “Not every business is going to be an Airbnb or is going
to be the concept for a new artificial intelligence-type of company that will
change the way we live. But there could be somebody who has a really good idea
for a business that is new, that is not yet out in the travel market and that
certainly provides value, whether it’s a B2C business or a B2B business. Not
every business is destined to change the world, and that’s OK.”

In Phocuswright’s recent Travel Innovation and Technology
Trends 2018 report (a precursor to a more in-depth report later this year),
Michael Coletta, manager of research and innovation, tackled the topic “Are
travel incubators and accelerators producing real innovation?”

In an interview, Coletta said there are a number of factors
at play.

“I feel like we’re at a point where there’s a bit of a
lull,” he said, “and we’re really waiting to see how it plays out in
terms of where the next opportunities are for early-stage startups.”

Consumer-focused travel startups face stiff competition from
the largest OTAs and established online brands, such as TripAdvisor, Coletta
said. At the same time, there are plenty of opportunities for B2B startups to
solve problems for the industry, but Coletta called that “trickier.”

“We don’t see a lot of groundbreaking, truly
groundbreaking innovation happening, really, on either side,” he said. “It’s
a lot of incremental improvements to travel planning, search, booking, customer
service and more behind-the-scenes revenue management-type of problems that
startups are solving.”

Travelport in January announced it would “take a pause”
in its incubator and accelerator program this year “to concentrate on
executing on these opportunities, as well as to focus on innovation
opportunities that have been presented by our relationships with our key
technology partners.”

Coletta said that suspension could be “writing on the
wall,” indicating that Travelport was not seeing the expected return on investment
or value.

“I think part of why it’s tricky is because for a
startup investment to return a good return on investment, it takes seven to 10
years or so,” he said.

Many travel-specific incubator and accelerator programs have
come on line within the past few years, meaning they are still several years
from the tail end of that seven- to 10-year investment cycle.

But is true revolution possible down the road?

“Absolutely,” Coletta said, though he admitted it’s
a tough game to find the winning startups.

The current environment has plenty of opportunities for
entrepreneurs to make connections and gain experience, and the future is
largely dependent on technologies like artificial intelligence (AI) and
blockchain.

“Are they going to open up those kinds of huge
opportunities?” Coletta asked. “That’s the million-dollar question.”

Money started flowing back into venture capital around 2012,
after the end of the Great Recession, Harteveldt said. Some travel accelerators
and incubators might have “missed the curve.” He has also noticed a
number of people with product ideas that wouldn’t necessarily translate into
sustainable businesses.

“I’m not sure if we will see the same level of success
from the incubators and accelerators over the next few years as we have in the
past because it’s just that much harder,” he said. “All of the big ideas
have been taken, the easy ideas have been taken.”

Travel Startups Incubator began in 2014. Matt Zito, managing
partner, said there is “tremendous innovation going on” in the
incubator and accelerator space, regardless of the lack of the next Airbnb or
Uber, what he called 1-in-1,000 companies.

Unicorns are rare. As investment cycles in the travel
technology space mature, Zito predicted, there will be true revolution, but
that’s a matter of time. Thus far, Travel Startups Incubator has financed 21
investments, Zito said; 13 are active, and eight are dead. He believes that of
the 13 active investments, seven will move on to be full-fledged companies.

Travel Startups Incubator has also had one exit: FlitWays,
which went public. Other companies his incubator has invested in are also doing
well, he said, asserting that one is doing more than $12 million per year in
gross bookings.

Plug and Play Tech Center added a travel vertical, the
Travel & Hospitality Center of Innovation, about two-and-a-half years ago.
Amir Amidi, the vertical’s managing partner, said it includes two accelerator
programs a year, more focused on B2B, and has made numerous “meaningful
engagements” between startups and corporations like Carlson Wagonlit
Travel in the travel management company space.

Those engagements range from continued talks on partnerships
to actually deploying technology from the startups.

Travel & Hospitality Center of Innovation managing
director Lio Chen said, “I feel like hospitality and travel in general are
notoriously bad at open innovation, [and] so is trying to play a role of
introducing the concept of open innovation to the industry.”

Virtuoso also runs its own incubator program, each year
accepting a handful of technology companies that are used and reviewed by
volunteer advisers; some of the companies are later selected to be preferred
suppliers. The program started in 2015 after the consortium noted a lack of B2B
solutions for agents in the marketplace, according to David Kolner, senior vice
president of global member partnerships.

Kolner said evolutionary gains in technology, versus
revolutionary change, work for Virtuoso, especially when it means increased
efficiency for advisers, such as what itinerary management platforms began
bringing to the trade several years ago.

“In the world of efficiency, we have a view at Virtuoso
that a lot of what counts as innovation is sometimes smaller things,” he
said. “Yeah, it doesn’t create the multibillion-dollar market cap of a
company like Airbnb or Uber or super disruptive unicorn-type technology, but
the reality is there is lots of innovation that is happening, and it’s
incrementally moving the entire industry forward.”

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