For the first time, an Asian startup, Klook, is attracting the highest funding ever in tours and activities. For the last time, can skeptics of this travel sector please bow out?
SoftBank Vision Fund is investing $225 million in Hong Kong-based Klook, the largest financing in the global tours and activities sector to-date.
This brings Klook’s Series D funding raise to $425 million, and the company’s total raise since inception in 2014 to $521.5 million. Softbank Vision Fund led the round with participation from existing investors Sequoia China, Matrix Partners, TCV, and Our Crowd.
Klook would not disclose the valuation basis of the latest round but for certain it fortifies its unicorn status while tours and activities itself gains added legitimacy. Doubting Thomases who are still in two minds about the real size of the sector, the lower prices of local tours and attraction tickets compared with flights or hotels, the discounting by players to win share, the highly fragmented marketplace, may be silenced.
The latest deal is also significant as “it is a sign of the times that a startup built in Asia is leading funding for a major global travel industry sector — sayonara Silicon Valley,” said Douglas Quinby, founder and CEO of Arival, who is bringing the tours & activities event to Asia from this year in Bangkok in June.
“The $200 million [Series D] raise last year was a milestone. This is a further affirmation of the opportunity in the sector,” said Quinby. “It definitely ups the ante, again, for everyone involved. Other players with regional or global ambitions, such as KKDay and GetYourGuide, will have to raise. TripAdvisor and Expedia will see more competition on their doorstep.”
GetYourGuide is said to be closing a $300 million funding, as Skift reported, with potentially new investors such as Singapore’s Temasek.
With the additional funding, Klook intends to scale its operations in Europe and expand further in existing Asian markets such as Japan, Klook’s COO and co-founder Eric Gnock Fah told Skift in an interview.
To some, Japan’s growing popularity among Asian and global travelers, the 2020 Olympics, the 40 million arrivals anticipated next year, and lending support to the home base must be a reason for SoftBank’s interest in Klook. Just last week, SoftBank and SoftBank Vision Fund inked a joint venture with Oyo to flood Japan with budget hotels.
This is just a piece of the puzzle. The bigger piece has Softbank’s hallmarks of investing generally in a player that it sees is the emerging category leader in each industry, with the potential to scale further globally.
Klook got there because it is “a leader in taking a mobile-first approach in the sector,” said Lydia Jett, partner at SoftBank Investment Advisers.
Added Jett: “The company has seen great success in scaling its business across different geographies and cultures, and we are excited to help them drive further innovation in the global travel industry.”
Last year, bookings on mobile devices tripled and accounted for more than 75 percent of total bookings, according to Klook.
“I continue to be a strong believer that in-destination booking [majority on mobile] is a different game than pre-arrival booking. In-destination has an ecosystem of its own,” said Klook’s Gnock Fah.
More than 50 percent of bookings now are in-destination and he expects this to rise further with Klook pushing for mobile-first in Asia and the three continents outside Asia it entered last year, Australia, Europe and North America.
“I see a role in companies driving such consumer habits and innovations. Traditional booking of flights and hotels is not mobile. We are telling consumers that it makes a lot more sense for them to be booking a tour, activity, attraction when they are in the destination. It’s a true hassle-free booking and they have a more flexible schedule. That’s where we do best.
“That’s why we see a pickup in mobile booking in the Western markets, even though the mobile usage is lower than in Asia,” he said.
It’s also why although everyone from online travel agencies to review sites and alternative accommodation platforms is jumping on the tours and activities bandwagon, Gnock Fah thinks it’s good for Klook.
“OTAs getting into the business helps consumers understand that they don’t need to be booking a mom-and-pop tour down the road that may not give them the best service or price, that they can rely on a platform.
“But once a consumer book online pre-arrival, that same consumer will start switching to mobile as soon as he or she realizes it’s so easy to book digitally . The question then is who can win the game on mobile. I think we’re a strong contender,” said Gnock Fah.
Likewise, Arival’s Quinby said, “To succeed, players in this sector need to be mobile first and bookable last minute with direct-to-gate ticketing; they must have access to the major attractions in key markets at competitive pricing, which is not easy, and they need to be prepared to get bloody with well-funded companies and lots of discounting.”
Klook said it made $1 billion in gross bookings last year, representing a triple digit growth over 2017. It is expecting another triple digit growth this year. It would not reveal more financial figures.
The platform now boasts more than 100,000 tours and activities in around 270 destinations worldwide. It works with no fewer than 10,000 industry partners. It claims over 25 million visitors monthly across its web, mobile web and app.
Gnock Fah said there is much to do in order to scale up. In a market like Japan, for example, merchants are still reliant on “legacy technology.” He gave the example that Japan’s trains still use paper tickets, hence the need to work with rail operators and merchants to digitize the tickets into QR codes so customers can simply scan and go.
“We have been investing in Japan and with SoftBank as backer, we look to do more on digitizing services in Japan,” he said.
“The tough part of our business is we cover so many services [tours, activities, attractions, train tickets, dining experiences, et cetera] that no one size fits all. You can create an airline booking engine and apply it to all airlines, same goes for hotels or ride hailing. The inconvenience of our business is it is fragmented not just in merchants but in category of services. So we pick our battles, for example, we digitize Japan rail while with Euro rail it could be about something as basic as the user experience with Wi-Fi connectivity,” he said.
Klook will focus on scaling up demand and service offers in Asia this year. Asia will remain its key market but Europe has strong growth potential.
“The upcoming Tokyo Olympics will result in travel from west to east, which is a market we’re going after. As the network effect grows stronger, we will also be valuable for European inter-regional travel. In fact, we’re already seeing a promising upward trend on Europeans consuming our services within Europe,” he said.
In North America, Klook already has a team on the ground who will continue working with suppliers and help them understand how the new millennials, especially Asians, are traveling and booking independently.
Gnock Fah described Softbank as “a strategic investor.”
“They do take a longterm view of how this industry will grow and what role the company would play in the Softbank ecosystem, which includes the likes of Grab, Uber, Oyo,” said Gnock Fah.
“These are not random investments. When we speak to Masa [SoftBank’s CEO Masayoshi Son], we can see the vision of what he’s trying to build and how we could fit into that.”
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Photo Credit: Klook's co-founders, from left, COO Eric Gnock Fah, CEO Ethan Lin and chief technology officer Bernie Xiong. Photo Credit: Klook.
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