Travel investors are hoping for the next innovation wave to hit soon as they decide where to channel their funds.

Phocuswright research on travel startups presented at Phocuswright Europe 2024 last month showed funding at the lowest levels for a decade and that there are half the number of active investors in travel in the United States. The research revealed that the decline is driven by the market being tough for exits, unrealistic valuations and interest rates. 

Many investors are focused on early stage investments perhaps in anticipation of betting on the next big thing as opposed to more established companies and concepts. Christoph Schuh, a partner at Lakestar, which was an investor in companies including Airbnb, HomeToGo and Limehome, said he would love to see the next wave of innovation in travel technology adding that Lakestar would not be interested in investing in the “classic vertical OTA.”

Schuh, who was speaking on the Investor Panel at Phocuswright Europe 2024, said: “Now we have all the ingredients with LLMs (large language models), with AI in general, to see the next innovation wave.”

He was joined on the panel by Bobby Demri of Roch Ventures, who said that while he remains “extremely bullish” on travel and its potential for growth, there is “zero interest” in a new online travel agency.

“I would like to tell all entrepreneurs in this room that the next big wave of innovation should be on sustainability. Sustainable travel is the future of travel,” he added.

Schuh offered a slightly different view, however, and said that sustainability and even generative AI, are more of a “horizontal layer” that goes across all verticals.

Meanwhile, Lucile Cornet, partner at Eight Roads, who also joined the panel, said she would like to see developments standardizing the data around sustainability.

“For me, what gets me excited is data because there’s a lot of noisy, inaccurate, not standardized data to help consumers compare. So, I’m actually excited about anyone who’s helping, you know, bring standardization. There’s a lot of like questions [such as] are the offsets even legit? How do we compare those claims of sustainability?”

The discussion moved on to making bets in the face of huge disruption and global uncertainty, AI’s impact on search and personalization and defensible ideas in travel.

Watch the full session moderated by Mike Coletta, Phocuswright’s senior manager of research and innovation, below.

See also Coletta’s research presentation on the state of startup funding in travel.