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Travel & Hospitality Tech: Expanding Geographical Audiences for M&A Opportunities

  • Trends in geographical expansion for travel and hospitality SaaS
  • How travel and hospitality tech founders can leverage this expansion for growth and M&A opportunities

As infrastructure for the Travel and Hospitality space is well-developed and the marketplace competitive in North America and Europe, some software providers have been deciding to augment their existing growth strategy by expanding into new geographies. Software for the Short-Term Rental vertical in particular is starting to become more saturated, and expansion into less developed markets has been a rising trend.

In this article, we’ll consider whether this trend is a good strategy, what risks or challenges international expansion entails, and how this impacts a founder’s decision to sell or raise capital.

Growing Markets

According to Technavio’s Vacation Rental Market Size Analysis Report 2024-2028, the vacation rental market as a whole is estimated to grow by $56.98B from 2024 to 2028. Staycations, remote work, digital nomads, budget-friendly travelers, or preferences for unique, environmentally-friendly, or niche experiences have all contributed to the rise of short term rentals.

Europe is expected to contribute 35% to the global market growth, and while the U.S. is slowing down a little, North America still accounts for 35.2% of the STR market saturation, according to the Short-term Vacation Rental Market Size, Share & Trends Analysis Report by Grand View Research. This saturation could be due to the help of well-established market leaders Airbnb, Vrbo,, Evolve, Guesty, Hostaway, and might account for the slow down in pace. North America also accounts for 24.6% of the short-term rental platform market, according to Future Market Insights Inc.’s Short-Term Rental Platform Market Outlook (2022 to 2032).

Meanwhile, Future Market Insights Inc.’s Rental Market Outlook anticipates the Asia Pacific market to see more focused expansion—with India leading the way at an estimated 15.7% CAGR from 2024-2034, and China follows closely with 14.6% CAGR. China’s tourism is booming and enjoys government initiatives to promote the industry. India’s government also spends on sophisticated infrastructure to attract tourists, and the country is seeing more demand for personalized options, especially from millennials and digital nomads, as well as an increased supply with more property owners leveraging their unused spaces.

Latin America is expected to see significant growth in the vacation rental market as travelers seek unique and authentic experiences, particularly in South America. According to Statista Market Insights on Vacation Rentals in South America, Mexico, Brazil, and Argentina’s rental markets are booming due to its diverse landscapes and attractive local culture and lifestyle. Central America contributes the most properties, with the Dominican Republic and Costa Rica offering 40,000 properties each.

In addition to these impressive growth expectations by region, individual homeowners are starting to think of their vacation homes as an investment opportunity instead of an annual escape. Their second home becomes an asset class as they decide to rent it when they’re not using it. Individual homeowners in developing markets may be looking for software options that can cater to the international market to bring in renters but also assist in integrating with local services and providers.

Benefits of International Expansion

Most STR software platforms are based in the U.S., Canada, and parts of Europe, like Germany. There’s plenty of competition in these markets, so companies have to go head-to-head on pricing or innovation. Diversifying into other geos could be a helpful strategy to continue to grow your TAM and unlock new expansion opportunities.

Having geographic diversification among your customer base can make your company more attractive to strategic buyers, however that is dependent on who the strategic buyer is. For example, maybe you operate in Mexico, but your buyer already has a solution there. Or perhaps your Brazilian business makes you attractive to a buyer trying to expand there. Specific circumstances and a buyer’s M&A roadmap may have a bigger say in whether this trend is a good opportunity for you.

However, geographic diversity can help shield you from overall macroeconomic concerns, such as region-specific recessions, regulatory risks (Airbnb bans for example), or other market trends. A U.S. downturn could potentially be balanced out by your business in Asia. Changes in rental regulations in New York could become less of a risk when you have a healthy portion of business out of Mexico.

Challenges of International Expansion

That being said, the challenges to consider are substantial:

  • How much of your sales and marketing resources do you want to divert to a new market, building sales teams that speak the language and understand the market?
  • Do you have the time and resources to address the nuances of the vacation rental market in your new region?
  • Can you localize your products and solutions towards that market?
  • Do you have the legal team you need to help you with foreign compliance and risk assessment?

By carefully weighing these international expansion challenges, you can decide if building a localized strategy for each new market is the right move for your software business.

Opportunity & KPI Alignment

International expansion could present a compelling opportunity for software providers in the travel and hospitality industry, particularly in short-term rentals. This expansion may help position a company favorably for acquisition by a larger SaaS player or open doors for further capital investment.

However, successfully navigating international expansion requires careful consideration of challenges, and as always, a market trend is only useful if it aligns with your individual business goals. But if you haven’t thought about expanding geographically, it might be a productive exercise to see if they will converge with your internal KPIs. By thoughtfully weighing these factors, travel and hospitality software companies can determine if international expansion is the right path to help achieve their business goals.

This material and the opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. The material may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns and proposed or expected portfolio composition.

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Modified on Jun 12, 2024