Travel technology is growing exponentially in Southeast Asia, particularly in Indonesia. Technology, with a focus on travel, received a massive $1 billion USD injection of capital in 2019, with 70% dedicated to startups in Indonesia. With a record $30 billion USD spent on online travel bookings in Southeast Asia in 2018, along with increased travel to the region, where tourism receipts reached $160 billion USD, it is undoubtedly a burgeoning epicentre for investors, startups and travellers. Considering the tourism industry already employs two in ten people globally, and is worth $1.6 trillion USD worldwide, it is an industry worth paying close attention to, especially now.
Why Indonesia is so attractive for investors
Indonesia is the largest country in Southeast Asia, with a population of 264 million, and had more than six million visitors in 2018, so it makes sense that investors would embrace this market for travel technology. Additionally, it has a GDP growth of 5% per year and is the third-fastest growing country in the G20, making it a venture capitalist’s playground. The country has a proactive government, and President Joko Widodo has his sights set on being an economic powerhouse by 2045. Widodo is proposing a new capital city in Borneo which promises to be a smart city, driven by artificial intelligence, a world-class transport system and elite educational institutions.
International companies are preparing to invest in the development of the city; Japanese company, Softbank Group, has offered to invest $30 to $40 billion USD, Hong Kong and South Korean companies are putting up $40 to $49 billion USD, and companies in the USA and UAE have also indicated they will invest. Indonesia’s new capital is set to be ready for inhabitants by 2024. In addition to building new infrastructure to support technology, Indonesia has a strong focus on the startup community, with an abundance of co-working spaces and multiple programs in place to build and support the startup community, such as Plug and Play Indonesia and Digitaraya.
The collaboration: Singapore and Indonesia
With Singapore and Indonesia being the two countries in the region with the most venture capital injected into their homelands for travel technology, it was sensical for them to work together to create a technology startup environment. In 2018, Singapore’s Economic Development Board (EDB) and the Citramas Group from Indonesia collaborated to open Bantam’s Nongsa Digital Park, which houses more than 30 digital companies. The EDB also runs a talent program called ASEAN-ready, where they support graduates from Singapore to work in startups and other businesses in Indonesia. Meanwhile, Jakarta based startup incubator, Block 71, is a joint project between Salim Group in Indonesia and the National University of Singapore and provides a pool of talent who contribute their skills across both countries. This cross-country collaboration is a smart way to expand opportunities for investors, businesses and talent alike.
As a relatively new startup environment, there is a risk of an unstable economy, particularly if Indonesia becomes too dependent on these businesses to uphold the country’s financial system. Startups like Tripvisto began successfully but failed quickly. Tripvisto, an online company offering travel packages received millions of dollars in seed funding and investments and closed its doors shortly after, with 40 employees losing their jobs and many investors losing their funds. One of the primary challenges was the speed of growth, coupled with a lack of talent who were skilled enough to adapt to the rapid expansion. In the region, 64% of businesses are restructuring to keep up with the accelerated technological trajectory.
They say that a gap in skilled talent impacted their productivity in 2018. Co-founder of Traveloka, Derianto Kusuma, asserts that having a team of top engineers is essential to the success of any travel tech company. To help bridge the gap, the World Economic Forum has committed to upskill 20 million ASEAN residents with relevant digital expertise, to increase the resource pool and improve startup scalability.
Another challenge is consumer demand. As the different generations emerge and subside, it is essential to know what the current consumer wants. Adaptability is a must when playing in the startup space, in regards to both customers and business models; if the current model is not working, flexibility to pivot is fundamental.
All eyes on travel tech in Southeast Asia
Travel technology is growing so vigorously in Southeast Asia that a new convention, Travel Tech Asia 2020, is being launched this year. It is rolling out in Singapore in October as a result of intense interest and investment in the industry. The lineup includes speakers and exhibitors sharing knowledge on new technologies and strategies available now and in the future. This event brings businesses and buyers together to create, collaborate and accelerate the travel tech industry in Indonesia and the region. In the changing climate of travel tech, it is essential to stay informed about consumer needs. The current trend is to provide entire end-to-end experiences. For organisations who only have one product or service, if they want to stay at the top of the game, they need to provide a more well-rounded proposition to customers. If a business can successfully adapt to this, they are more likely to attract both talent and funding.
With substantial capital investment, a focus on skill development and advancements in technology in Indonesia, it promises a lucrative return on investment for smart, adaptable travel tech startups.