Technology M&A: Travel & Hospitality Insights

What has been getting our attention in the Travel & Hospitality market

1. Market activity has increased markedly

• As we foreshadowed in our last report, M&A and fundraising activity in the European travel & hospitality tech market has increased markedly during 2024 and early 2025, driven principally by private equity capital supporting select platforms
• Davidson MCF has identified at least 15 transactions involving private equity investments of more than EUR 50m in European travel & hospitality tech businesses since the beginning of 2024; several of these processes have seen highly competitive multiples
• In addition, there have been several notable strategic-driven acquisitions during 2024, including Access Group’s acquisition of SHR, aiming to expand their hospitality business in the North American market, and Mews’ acquisition of HS3, aiming to bolster their presence in German-speaking Europe
• Hotel bed bank vendor HPX Group’s initial public offering in Spain in Jan-25, which saw Cinven and EQT sell part of their stakes, added a further proof point to strong market sentiment for travel technology. The IPO, Europe’s largest so far in 2025, raised EUR 725m

2. AI has not explicitly impacted M&A and fundraising activity yet, but we expect that to change rapidly

• Our industry conversations reiterate that everyone is considering how AI, in particular generative AI, will reshape the traveler experience and their business models. With that said, our impression is that most players have been in wait and see mode, in terms of AI shaping their M&A decisions. We expect that to change (rapidly) in 2025
• To give one example, travelers are already adopting ChatGPT as a key channel to search for travel experiences. Over time, travelers will receive fewer but higher quality recommendations on accommodation, transport and activity options which fit their needs. This of course introduces completely new dynamics to the existing OTA and metasearch business models and will increase the importance of reputation management tools
• We also expect AI to be transformative in how vendors use their data. See Lighthouse’s AI Smart Summaries, their first generative AI tool, which interprets revenue management data for hotel management and provides a natural language summary. There are a series of similar products which we believe will improve over time and become industry standard

3. Recent M&A activity points to vendors wanting to Adding value beyond the PMS & other core operational systems

• Within the software for lodgings, investor interest has historically been focused on PMS vendors, which often have a strong presence in a given geographical market or lodging niche (e.g. camping, city hotels or destination properties). This has also been mirrored in other hospitality and travel technology market niches
• We have seen increasing interest in other solutions around the PMS, including revenue management and back-of-house point solutions, all of which help the end client improve margin performance
• There are two opposite drivers: PMS businesses (and to an extent booking engine & channel manager vendors) traditionally have low churn and steady subscription or subscription-like revenue streams, but low growth. On the other hand, “solutions around the PMS” often have higher growth but higher churn and lower quality revenue streams. Ultimately, end clients will benefit from deeper integrations between fewer software vendors, boosting NPS scores, average revenue per logo and ultimately retention figures

4. Market outcomes have been divided into the „haves“ and „must nots“

• All things being equal, we have seen stronger market appetite (and valuation levels) for companies with B2B business models, at least USD 10m in ARR and / or a strong Rule of 40 profile. In contrast, demand has been mixed for companies with B2C business models, revenue below EUR 10m and continued cash burn
• B2C business models in particular have been under scrutiny with consumer sentiment languishing. However, deals have been getting done; Vitruvian’s USD 100m investment in Klook and Quadrille’s EUR 60m investment in Exoticca both demonstrate appetite for select, leading assets in the space

5. The industry remains highly fragmented and Europe continues to have multiple local champions

• The presence of local champions and innovative start-ups has created an environment where many European vendors need to acquire or be acquired to expand their products internationally and have critical scale to optimise their go-to-market and product strategies
• Although consolidation is ongoing, the reality remains that the European market is highly localised. We expect to continue to see geographic-driven transactions like Mews’ acquisition of HS3 as a way to short cut long sales cycles and reach critical scale  in key geographical markets

Time Evolution of valuation multiples across travel and hospitality

MEDIAN EV / NTM REVENUE EVOLUTION

Source: S&P Capital IQ as of 16th March 2025

Travel & Hospitality tech companies that adhere to the rule of 40 today attract higher valuation multiples

Source: S&P Capital IQ as of 16th March 2025

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