Substantial Variations in Travel Sector Valuation
USD 1.5 Tn – 9.9 Tn valuation range
The travel and tourism sector exhibits a wide range of valuations, spanning from USD 1.5 – 9.9 trillion. This variability arises primarily from inconsistencies in valuation methodologies and varying definitions of the market and its segments.
The sector is made up of multiple industries—from transport to accommodation—each with distinct characteristics and dynamics. Therefore, a nuanced approach is needed to understand its intricate anatomy and navigate it effectively.
Travel And Tourism Sector Sub-Segments
Decoding travel sub-segments
The sub-segments within the travel and tourism sector are defined variably across different sources. These sub-segments encompass both online and offline components, with the possibility of broader categorizations depending on the scope of analysis.
For major subsegments identified, the average annual tech spend could be used to assess the level of tech presence in respective domains.
This would include spending on;
- Customer services technology (online bookings, mobile apps etc.)
- Operational technology
- Cybersecurity
- IT infrastructure (cloud storage, data centers etc.)
Sources: Statista, SITA
*Note: Tech spend as a % of revenue broadly incudes expenses related to software, hardware, other tech infrastructure, tech personnel, maintenance and so on. This was calculated based on selected leading players in respective domains except for Airlines; hence, the value range is approximate annual average. OTAs were mainly considered under package holidays.
Travel Tech Market
Revolutionizing travel with technology
Travel tech market is the ecosystem of digital tools, platforms, and innovations designed to enhance and streamline the travel and tourism industry. It operates in both B2B—corporate travel management platforms, API integrations for flight, hotel, or activity bookings— and B2C—OTAs, travel planning apps—models, often with overlapping strategies and offerings.
Source: imarc Group
*Note: Travel tech market primarily covers digital tools and platforms that facilitate and enhance the travel experience
Industry growth drivers
Evolving demographics
- Rise of tech savvy Gen Z travelers
Disruptive technology
- Enabling hyper-personalized travel experiences
- Democratization of travel through accessible and affordable experiences and short term rental accommodations via platforms like Viator, GetYourGuide, and Airbnb
Key technologies shaping the travel tech market includes;
- Mobile Travel Applications
- AI and Machine Learning
- Data Analytics
- Blockchain Technology
- Internet of Things (IoT)
- Augmented and Virtual Reality (AR/VR)
- Sustainability Tech
Travel Tech Applications and Their Relative Importance
The travel tech landscape is vast, and it’s crucial to identify the right target market for each application based on its relevance. Different technologies are better suited to specific segments within the industry. For example, dynamic pricing works well for airlines and hotels, while AI-driven personalized travel recommendations are more beneficial for tour operators and OTAs. Understanding these differences helps businesses adopt the most effective technologies, improving both customer experience and business performance.
Travel Tech Monetization Metrics
Linking customer behavior to long term value creation
In travel sector, tech-driven solutions are evolving rapidly, with monetization models ranging from SaaS platforms to custom-built systems. A key driver of financial success in this sector is digital marketing, making digital marketing metrics indispensable in assessing performance. These digital marketing metrics provide valuable insights into customer behavior, the effectiveness of digital strategies, and overall revenue generation in travel tech sector. By continuously optimizing these metrics, businesses can refine their initiatives, enhance customer experiences, and drive long-term value creation.
*Higher CTR does not always correlate with higher conversion
How Travel Tech Utilizes Various Metrics to Evaluate Revenue and Profitability
When evaluating travel tech monetization efforts, four key metrics—click-through rate (CTR), cost per click (CPC), conversion rate (CVR), and cost per action (CPA)—serve as the primary focus. The four charts below, which illustrate these metrics are based on data from 14,197 U.S. companies across 16 sectors that advertised on Google’s Search and Display networks between August 2017 and January 2018. Averages were calculated across these 16 sectors.
Search network metrics are based on ads that appear in search engine results pages like 'Google Search' whereas display network metrics are based on ads shown on partner websites, apps, or YouTube videos like banner ads.
Clickthrough rate (CTR)
Clickthrough rate focuses on the awareness stage and indicates target audience’s interest in digital content.
Average CTR could be improved by;
- Effective targeting
- Optimizing Ad placement and channels - e.g. Instagram for millennials, LinkedIn for corporate travel
- Optimizing for mobile devices - e.g. responsive designs, fast loading visuals)
- Incorporating social proof - e.g. real traveler experiences, influencer endorsements, statistics
The higher Search Network CTR in the Travel & Hospitality sector—compared to both the 16-sector average and the Display Network CTR—can be attributed to factors such as high-intent searches, time-sensitive bookings, and seasonal demand. In contrast, repeated exposure to display ads may lead to ad fatigue, contributing to a lower CTR on the Display Network.
Cost per click (CPC)
CPC evaluates the efficiency and profitability of digital marketing campaigns. Average CPC can vary depending on the competitiveness of the keywords, ad position, targeting strategy, device type etc.
Average CPC could be improved by;
- Using long-tail keywords
- Utilizing negative keywords
- Optimizing Ad relevance
The comparatively lower Search Network CPC in the Travel & Hospitality sector could be driven by factors such as high search volumes, well-optimized campaigns, and strong ad relevance.
Conversion rate (CVR)
A product-market fit indicator directly measuring the effectiveness of turning visitors into paying customers
Average conversion rate can be improved by;
- Enhancing user experience - simplify navigation, fast loading, minimize steps in the process
- Personalization
- Improving customer support - multiple support channels
- Utilizing compelling Call-to-Action (CTA) - e.g. time sensitive offers, action oriented phrases
The lower Search Network conversion rate of travel & hospitality sector could result from factors such as a longer decision-making process, high price sensitivity, and non-transactional searches.
Cost per action (CPA)
The cost incurred to achieve a specific, revenue generating action, such as a booking, registration, or subscription and provides insights to CAC
In order to minimize CPA while improving conversions;
- Optimize targeting using data analytics
- Optimize conversion funnel
- Utilize automation tools - e.g. AI chatbots
As the travel and hospitality sector experiences relatively lower conversion rates—often due to a high volume of clicks with delayed conversions—it tends to result in a lower cost per action compared to the overall 16-sector average.
Source: WordStream
Beyond the four metrics outlined above, there are several other key metrics to consider when assessing travel tech monetization.
Free trial conversion
Measures the effectiveness of the free trial offers in converting users into paying customers.
Why using the free trial model?
- User experience validation
- Feedback loop for continuous improvement
- Higher engagement rates
- Competitive differentiation
Source: FirstPageSage
*Based on data from Q1 2019 – Q3 2024
Customer acquisition cost (CAC)
CAC provides insights into the overall cost of acquiring new customers including marketing, sales, and related costs.
Average CAC is dependent on the scale, target market, marketing channels, sales cycle length and complexity of the product
How to optimize CAC?
- Use data driven decision making - analyze customer data, predictive analytics
- Focus on customer retention and loyalty
- Identify high-performing channels and campaigns
- Improve conversion rates with retargeting
- Leverage strategic partnerships
Source: FirstPageSage
B2C travel tech solutions typically have lower CAC than B2B due to a broader audience, simpler sales processes, and quicker decision-making.
On the other hand, B2B travel tech solutions often operate under the SaaS model. Hence, offering free trials or adopting a freemium model would generally result in higher B2B SaaS conversions, effectively reducing CAC compared to many other B2B sectors.
Customer retention
Customer retention is as critical as new client acquisition for travel tech companies in order to maximize their revenue and LTV.
Here’s why:
- Increased repeat business and cross selling, upselling opportunities
- Customer loyalty and advocacy
- Cost effective
- Sustained revenue and long-term profitability
However, retaining customers in the travel and tourism sector is somewhat challenging due to the irregular nature of purchases, high competition, and high price sensitivity.
Source: Vena Solutions
Churn rate
Tracking customer churn rate is essential for gaining valuable insights into customer retention, satisfaction, and the overall health of the business.
- High churn results in more spending on new customer acquisition
- Lowers LTV, impacting profitability and the long-term sustainability
- Indicates the need for product improvement
B2B churn rate is generally a greater concern due to the higher costs associated with customer acquisition
Source: Lighter Capital
Optimizing the path from clicks to lifetime value
- Enhance CTR with targeted, compelling ad content
- Manage CPC through strategic bidding
- Boost conversion rates by delivering a seamless, personalized user experience with clear CTAs
- Lower CPA by improving ad targeting
- Optimize CAC with data-driven acquisition strategies
- Increase LTV by focusing on retention and upselling
Source: Business of Apps
The online travel booking industry was hit hard by the pandemic, with some apps seeing over 70% drops in traffic and bookings. While recovery is underway, strategic investments in digital initiatives are crucial for travel tech companies to drive revenue and build long-term customer loyalty for sustained growth.