While 2024 suggested a positive shift in funding for travel
startups compared to the prior year, things cooled off in the first quarter of 2025.

“[This year] is off to a slower start than any other year so
far, with under $1 billion raised as we close in on the end of the quarter.
This compares to $1.6 billion last year and $1.2 billion in 2023 at the close
of Q1,” said Mike Coletta, senior manager of research and innovation at Phocuswright.

According to Coletta, typically, the bulk of
funding goes to a small number of companies via Series A through E and
private equity rounds—and this rings true for the start of 2025. However, “Series A funding is trailing further than
usual so far.”

A significant round of funding went to corporate travel this
quarter, specifically to business travel management platform TravelPerk, which secured
$200 million in Series E funding in January. At the time of the
announcement, the company also confirmed the acquisition of expense management
technology company Yokoy for an undisclosed
amount.

Corporate events specialist Naboo also
raised €20 million in a Series A round  during the first quarter of 2025.

Tours and experiences were of particular interest for
investors during Q1 with Exoticca, a platform for multi-day tours, raising
€25 million to improve its artificial intelligence-powered technology, and
experiences platform Klook securing
$100 million in February to extend its reach across Asia Pacific and
attract younger travelers. Meanwhile, this month, Spain-based campsite and experiences
provider HolaCamp
raised €10 million to bolster operations.

In terms of hotel technology, Mews
raised $75 million in March to expand in the United States as well as in Germany,
Austria and Switzerland. Revenue
management systems provider RoomPriceGenie—a PhocusWire
Hot 25 Travel Startup for 2022—also raised $75 million this quarter to fund
its global expansion.

Additionally, Kenya-based startup Purple
Elephant Ventures raised $4.5 million in seed funding to advance its
mission to bolster Africa’s tourism. Superlogic, a specialist in helping brands
with engagement and loyalty, raised
$13.7 million in Series A funding to “meet the market demand” and expand
its customer base. 

When looking at the remainder of 2025, Coletta said there
are “mixed signals.”

“Startups of the future could be run far leaner, requiring
fewer technology resources as well as employees in many different functions.
Thus, they could require less capital going forward,” Coletta wrote in a December
2024 Phocuswright report titled The
Impact of GenAI on Travel Startups.

On the other hand, however, Coletta said generative AI makes
it “easier to create software and start a company than ever.”

“This may create increased competition in the marketplace,
for which more money will be needed for marketing and branding to cut through
the noise, and this could offset diminished need for technology funds.
Furthermore, most technology revolutions like we are now going through with
generative AI typically spur an investment cycle,” he said.

“Additionally, many of investors who typically invest in
travel raised new funds last year, and we expect those to be deployed soon.”

M&A trends

Mergers and acquisitions (M&A) also defined the first quarter
of 2025, specifically within the payments and expense technology space.

Most technology revolutions like we are now going through with generative AI typically spur an investment cycle.

Mike Coletta, Phocuswright

Perhaps the most significant announcement came from American
Express, which plans to acquire Center, a payment and expense technology
provider.

While the financial terms weren’t disclosed, the merger “will
aim to create a seamless expense management platform” by combining Center’s
software and Amex’s corporate and small business cards. Announced in early
March, American Express said the acquisition is expected to close within the
second quarter of this year.

Payments specialist Flywire
Corporation also moved to acquire Sertifi, a payments and workflow
digitization platform for the hospitality sector, for a total of $330 million.

Currently, Morgann Lesné, travel lead and partner at Cambon
Partners, said M&A activity appears less active in business-to-business (B2B)
and business-to-consumer (B2C) “but super active in software.”

Notable software deals in Q1 included DerbySoft’s acquisition of AI-powered platform Arise in February and Mews’ acquisition of property and event management specialist Clarity Hospitality Software Solutions in January.

Other B2B acquisitions in the period included Juniper Group’s acquisition of retailing specialist InteRES in January and TravelPerk’s aforementioned acquisition of Yokoy as part of its Series E expansion.

For Matt Zito, an investor and broker for travel M&A, there
hasn’t been notable shifts in the types of companies being acquired from his “active
buy-side clients,” who are instead looking at a “broad spectrum of travel
companies,” including travel management companies, tour operators, online
travel agencies, destination management companies and various B2B travel and hospitality
models.

While Lesné observed less activity in both B2B and B2C, Zito
said there is “still interest” in these areas, as well as “action in both leisure
travel and business travel.”

On the consumer front, in
March, Mindtrip, an AI-powered trip planner and one of PhocusWire’s
Hot 25 Travel Startups for 2025, acquired
Thatch, a platform that offers guides from travel content creators and
local experts. And in Europe, travel conglomerate Dertour
Group acquired Hotelplan Group from Migros. A month prior, global vacation
rentals marketplace HomeToGo
acquired Interhome, which is a subsidiary of the Hotelplan Group.

February also saw the acquisition of
RightRez, a specialist in air travel technology, by travel technology provider
Mize. And earlier this month, Vacasa accepted a revised proposal from Casago to purchase the company for $5.30 a
share—an increase from $5.02 a share initially offered in December last year.

M&A activity predictions

In 2025, Zito said activity is “still outpacing 2024.”

“There is a lot of interest from both buyers and sellers.
Valuations have stayed fairly realistic, although I am starting to see a little
uptick from sellers wanting higher valuations.”

For his part, Lesné said that valuations are “more realistic”
in both B2C and B2B compared to software as a service
(SaaS) companies where expected ongoing growth and profitability can inflate valuations to 10 times their recurring revenue.

Unlike the current standings with startup funding, experts
are optimistic about M&A activity for the remainder of 2025.In fact, Zito predicted that transactions will double, driven by three main factors.”

First, aging owners in their sixties and seventies are ready
to sell, he said.

In addition, “Business climate is perfect—public stock
markets are at all-time highs, although it looks like a small correction is
underway. Travel companies’ revenue have hit 2019 numbers pre-COVID and are now
more profitable.”

Lastly, Zito said that buyers are seeking technology that
they can “acquire and maintain competitiveness.”

Echoing this, Lesné said Cambon Partners currently has 15
ongoing transactions, which is the company’s “biggest pipeline ever in value
and volume.” He also predicts an active M&A market, specifically in the
software space, where a number of transactions are already underway or being prepared.

Zito and Cambon Partners’ Min Liu spoke to PhocusWire senior reporter Morgan Hines at The Phocuswright Conference last November. Watch the full discussion below.