Although startup funding remains few and far between in Dhaka, one sector continues to attract relatively increased attention from investors: travel. There have been some meaningful changes in the travel space in Bangladesh. The domestic tourism sector has been booming, thanks to a growing number of locals who are traveling inside the country. At the same time, a growing number of Bangladeshis are traveling internationally.
With a growing interest in travel, the dynamics of the industry have been changing fundamentally. Once an analog industry predominantly managed by traditional travel agencies, we have seen a rapid rise of online travel agencies (OTAs) in the past three years. The change has affected consumer choice and behavior. A growing number of urban travelers now are using online travel services to avail various travel-related services from booking flights to hotels to finding relevant information.
According to some industry insiders, there are 10-15 active online travel agencies (OTAs) in the market today. The market share of the OTAs has also grown to 5%-20%, depending on who you ask, from almost non-existent just a few years ago. The leading OTAs such as Flight Expert, ShareTrip, Go Zayaan, Amarroom, Vromon, share a significant market share among themselves.
There has been push back from traditional travel agents. Many complain that OTAs are disrupting the market with deep discounting and aggressive push. However, OTAs in Dhaka are not doing anything new that has already not been done in other markets.
Travel today is predominantly an online thing. In markets like India, MakeMyTrip and other online travel platforms wield excessive power on the traveling choice of customers.
While traditional travel agencies find it hard when OTAs make aggressive moves, the reality that travel services in Bangladesh will move predominantly online is inevitable.
Travel industry by the numbers
Travel is a US$7 trillion industry globally. According to some sources, some 350,000 Bangladeshis travel daily. Propelled by rising incomes and a growing appetite for exploration, outbound travel is on the rise in Bangladesh. An increasing number of Bangladeshis are now traveling abroad and spending generously. In 2014, some 1.5 million Bangladeshis visited abroad, according to data from the Bangladesh Bank, National Board of Revenue and Bangladesh Institute of Development Studies.
Outbound travel spending rose from $404.7 million in FY15 to $436.4 million in FY16, a 7.83 percent rise from the previous year. It indicates the rise of a new middle and upper class in the country who are more into travel and exploration. These numbers are set to rise significantly in the coming years.
According to a USAID study, the size of the travel industry was reported at $5.3 billion in 2017, with local travelers contributing approximately 98 percent of the revenue generation. The industry is expected to grow by 6.8 percent annually to $7 billion by 2023.
Attention from investors follow
These developments have not gone unnoticed by investors who actively follow the Bangladesh market. A small number of investors have started pouring money into the country’s rapidly growing travel-tech sector.
In 2019, the highest number of travel-related companies have raised investment, both small and big rounds, leaving more popular verticals such as transportation, ecommerce, and education behind.
ShareTrip has raised $3.5 million in seed and bridge round investment from Databird, a private equity and internet business group funded by Skycatcher Ventures. Go Zayaan raised its seed investment from OS Ventures and Osiris Group. Avijatrik raised an investment from Paragon Group. On the other hand, Robi, the second-largest telecom operator, bought Ghuri, a local travel services startup and relaunched it under its umbrella.
Similarly, the number of travel-related ventures has surged as well. We have seen an increased number of companies in different verticals of travel. There are companies that are focusing mostly on domestic travel and tour packages such as Amarroom, which is funded by a local group. There are companies that are focusing on Bangladeshi travelers traveling anywhere in the world. There is a slew of startups that are taking a content-focused route where they are putting up information related to domestic travel and travel in general in Bangladesh with an ambition to build a business around advertising and community. As the industry matures, there are likely to be companies of more variety.
Future: The only way is up
Travel has globally been a venture capital darling for many years. Deal flow in travel and hospitality remain strong and overall mood in the travel sector investment remains positive. The sector continues to produce unicorns, companies valued at or above US$1bn such as Klook, Sonder, Flixbus, Wheels Up, TripActions, and others. Relatively large funding rounds also appears to be a common phenomenon across various travel and hospitality sub-sectors such as activity marketplaces, bookings, short-term rental, and hotel platforms.
Bangladesh's travel and hospitality market is yet to get there but the sector shows potential. Not only are a growing Bangladeshis showing serious interest in travel, but Bangladesh as a travel destination is also moving up in the global rankings. If all the predictions about the economy and the disposal income of the middle class continue to go in the right direction, the domestic travel is going to remain strong. At the same time, proper policy interventions can help shore up the international tourists to Bangladesh which is already predicted to grow by 22% per year throughout the decade.