While travel demand in Asia Pacific (APAC) remains strong, early-stage startups may find it harder to secure funding.

According to an upcoming Phocuswright research report, “A Market Rewired: Ten Structural Shifts Redefining Asia Pacific Travel,” investors increasingly are prioritizing “financial rigor and selectivity.”

Macro uncertainties, geopolitical tensions and changing traveler behavior are shaping the market, according to Nick Cocks, partner at Velocity Ventures.

“The startup environment, specifically, is undergoing a strategic shift toward building durable, high-value businesses,” Cocks said.

The change comes as the ecosystem has matured and become more disciplined than in the previous decade, said Coney Dongre, research manager at Phocuswright.

“The region continues to see a steady pipeline of new ventures, but both new and established startups are now expected to build sustainable businesses with a clear path to profitability,” Dongre said.

Given the dominance of incumbents like Trip.com Group and Agoda, Dongre said the startups seeing success right now are those solving specific problems.

“Startups applying artificial intelligence (AI) and automation to improve travel operations, pricing and customer service are increasingly attractive to investors because they deliver tangible efficiency gains,” Dongre said.

Competing in a fragmented market

Characteristics specific to the APAC region are impacting the startup landscape, too, according to Joe Lu, founder of Singapore-based HeyMax.

The supply of travel startups is limited compared to the U.S. or China due in part to fragmentation, he said.

“In Southeast Asia alone you have dozens of languages, currencies, regulations and travel behaviors,” Lu said. “That makes it harder for startups to project large-scale growth stories compared with a single-market economy.”

But that doesn’t mean opportunity doesn’t exist. Lu said rising demand, combined with increased AI use by consumers, creates more opportunities for startups—as long as they can offer value.

“Consumers today are more empowered than ever to discover, compare and switch products,” he said.

Funding

While investments aren’t being spread around freely, they are happening—and making headlines.

Lu’s HeyMax, a PhocusWire Hot 25 Travel Startup for 2026, raised $11 million in January. Singapore-based Truely raised $2 million last year. Japan-based Reiwa Travel raised more than $30 million in 2024. And raises haven’t been limited to early-stage startups. Late-stage company Klook secured $100 million to expand in Asia last year.

“The region has moved beyond hype into an infrastructure cycle—where monetization, regulatory depth and cross-border execution separate real companies from noise,” said Bell Beh, co-founder and CEO of Buzz, also a PhocusWire Hot 25 Travel Startup for 2026. “Funding is returning, but it rewards durability, not storytelling.”

Venture capital allotted to Asia-based startups across sectors was $67.5 billion in 2025. That number marks a 6% drop from 2024—the lowest annual investment tally in half a decade, according to the Phocuswright report.

The mandate is clear: Investors are prioritizing profitable business models, margin improvement and viable economics.

Travel startup funding in APAC has contracted following a 2017 peak of $21.6 billion in funding for travel startups and a rebound of $15.1 billion in 2021, according to Phocuswright.

Now, investors are favoring lower-risk investments and more mature, later-stage companies with proven models over early-stage ventures.

“As a result, large, growth-first funding rounds have become less common, while smaller strategic investments, corporate venture participation and partnerships with established travel companies are gaining prominence, as these alliances provide startups with distribution access and clearer revenue pathways,” Dongre said.

Beh said the last few years have been a “‘spring cleaning’” period in APAC funding.

“Capital now flows to fundamentals: unit economics, defensibility and regulatory execution. 2026 will be defining for post-COVID survivors,” Beh said.

What’s happening now has raised the bar for investors, Dongre said. For startups, it is more important to demonstrate traction and forge strategic partnerships.

According to Cocks, “Investors are spending more time on diligence, asking tougher questions around unit economics and scalability and reserving capital for follow-ons rather than spreading smaller checks across many new bets.”

As a result, raising capital takes longer, valuations are more grounded and storytelling isn’t enough to land an investment, Cocks said. Founders need to have something concrete—evidence that their businesses can withstand potential volatility.

Innovation

AI, infrastructure and fintech are key areas of innovation for APAC travel startups.

Many of those efforts are pragmatic, data-driven and operator-centric, according to Cocks.

“Rather than creating entirely new categories, founders are building solutions that close the gaps exposed by shifting traveler behavior, rising cost pressures, regulatory tightening and the region’s overall need for more intelligent, adaptive infrastructure.”

Nearly every conversation in the travel tech space involves AI in some form, according to Lu. Beyond features and efficiencies, AI is changing relationships between consumers, businesses and distribution.

AI is being implemented to improve usability, discovery, product development and back-office processes, according to Fritz Demopoulos, founder of Queen’s Road Capital and co-founder of Qunar.com.

Meanwhile, much of the innovation among startups is happening in the B2B space, as companies build tools to improve operational efficiency, Dongre said.

Startups are focused on pricing intelligence, distribution optimization, operational software and automation to boost efficiency and profitability for hotels, airlines and travel agencies, Dongre said.

“Fintech has emerged as another particularly active area, with startups developing solutions around flexible payments, cross-border transactions and risk-based booking products,” Dongre said.

Looking ahead

Stakeholders see a bright future for APAC’s travel startup sector.

Dongre expects the APAC startup environment to become “even smaller but stronger” over the next few years.

Lu and Dongre agreed that AI is likely to redefine which startups gain traction.

“One major shift will be the dramatically lower cost of building companies because of AI,” Lu said. “Small teams can now build and scale products globally with far fewer resources. That means we’ll likely see more local APAC startups expanding internationally much earlier.”

As AI changes cost structures and lowers operating expenses, Lu said incumbents could face pressure to compete more aggressively on efficiency and price.

“Some startups will attract disproportionate investment as investors try to back potential ‘winner-take-all’ AI platforms,” Lu said. “Meanwhile, most startups will need to operate in a more capital-constrained environment.”

Dongre is also bullish on business models unique to the region, particularly those built around super apps. While new super apps are unlikely to emerge, opportunities exist to create tools, services and features within existing ecosystems, she said.

She is also optimistic about fintech as a continued area of innovation.

“From the outside, payments may appear to be just one step in the travel booking process, but in reality, the category is far deeper and more transformative,” she said. “Given the region’s diverse markets, traveler segments and payment behaviors, fintech solutions have significant potential to reshape how travel is booked and paid for across [APAC], which should drive further innovation in the years ahead.”

Demopoulos outlined expectations for more startup activity in experiences, bleisure and multigenerational travel, as well as niche segments such as medical and educational tourism.

He also anticipates new business models to emerge in China, which could serve as reference points for APAC startups.

“Overall, the startup scene will remain vibrant across multiple geographies within the [APAC] region,” Demopoulos said.

This article was originally published on Phocuswire