Fwd: Travel’s next startup opportunity

Hi there,

Busy week for many of us in Travel and Mobility Tech: Phocuswright Europe in Barcelona just wrapped up.

Two spontaneous takeaways from our team on the ground:

AI was everywhere. As expected, everyone’s talking about it, but no one really knows what it actually means for the future of travel booking. Hype first, answers later. But lots of experiments!
Tours & Activities, somewhat, stole the spotlight. The sector is rightfully hailed as travel’s “last great offline frontier,” which echoes our recent breakdown of Airbnb’s re-entry into the experience space.

Now to this week’s research.

Two weeks ago, we asked if JetBlue had just sold off its innovation crown jewels by offloading JetBlue Ventures.

Today, we’re eyeing an even more valuable piece of the airline puzzle: loyalty programs.

Unpopular opinion? They’re due for a serious shake-up.

Case in point: 3 out of the 9 winners at Phocuswright’s Startup Challenge came from the loyalty space.

Turns out, the next (immediate) big wave of travel innovation might not be AI.

It might be loyalty.

Scroll down to find out why.

Your Lufthansa Innovation Hub Team

Research

To the occasional traveler, frequent flyer programs usually feel like just another retail gimmick.

Complicated point systems.
Blackout dates.
Endless fine print.

A marketing scheme that’s more of a hassle than help.

But for road warriors and business travelers, these programs have long been a kind of golden ticket: priority boarding, upgrades, lounge access, and the occasional “free” first-class flight – if you’ve played the game right.

Over the years, they’ve become symbols of savvy travel, even lifestyle flexes for frequent flyers.

And make no mistake. Airlines didn’t just invent this game; they perfected it.

In fact, the modern loyalty program was born in aviation.

American Airlines’ AAdvantage, launched in the early 1980s, is widely credited with pioneering the concept of tracking customer behavior to drive repeat purchases, long before the term “retention engine” became a startup cliché.
What started in the skies eventually spilled into nearly every consumer-facing sector, from hotel chains and credit card companies to grocery stores and coffee apps.

But for airlines, loyalty programs have always been more than a marketing tool.

They’re serious business.

Especially in the U.S., loyalty has grown into a high-margin, high-stakes empire.

Fueled by lucrative co-branded credit card partnerships, where banks buy miles in bulk to reward customers, these programs can now account for more than 20% of an airline’s total revenue (see Southwest in the chart below).
In some cases, the loyalty arm is worth more than the airline itself.

And it’s not just an American phenomenon.

Across Europe, major legacy carriers (including our parent company Lufthansa) have built billion-dollar loyalty machines of their own.
These programs now represent powerful standalone business units with sizable P&Ls and strategic leverage.

But here’s the twist:

Despite their profitability, these once-beloved programs are coming under increasing scrutiny.

The Growing Loyalty Backlash

In recent years, frustration with airline loyalty programs has been growing louder.

Frequent travelers, once proudly flashing their elite status, are increasingly questioning the real-world value of these programs.
Earning perks feels harder, redemption options are more limited, and the goalposts keep shifting.

But untilrecently, much of this discontent was mostly anecdotal: loud voices on social media, sporadic complaints, and the occasional think piece, for example, in the New York Times.

So, we went looking for harder data.

First stop: Trustpilot, a popular consumer review platform where customers share open-ended feedback about their experiences with brands and services.

Our finding: A staggering 95% of airline loyalty program reviews between 2019 and 2025 are rated just one star, the lowest possible score.

In all fairness, the sample may be somewhat skewed:

Platforms like Trustpilot tend to attract more feedback from those with particularly strong (and often negative) experiences.
In general, people are more likely to post reviews when they’re angry, not when they’ve scored an upgrade to business class.
But even so, 95% is far from noise. It’s a warning sign.

To cross-check the signal, we tapped a broader and more neutral source: social media.

We scraped about 10,000 recent posts across major platforms like X (formerly Twitter), Facebook, Instagram, Reddit, and a few consumer forums, specifically targeting discussions around airline loyalty programs.
Using natural language processing (via our data tool Quid), we analyzed the sentiment behind each post.

The result?

A more balanced picture than Trustpilot, yes, but still troubling.

As of Q4 2024, one in three social media posts about airline loyalty programs carries a negative tone.
Even more importantly, negative sentiment has been rising steadily over the past two years.

This is not just a few disgruntled voices yelling into the void.

It’s a growing trend that airlines can’t afford to ignore.

But what exactly is behind this dissatisfaction?

To dig deeper, we turned to Point.me, a specialist platform known for its detailed assessments and rankings of global airline loyalty programs.

Their methodology breaks down program quality into multiple criteria, such as ease of redemption, value per mile, program transparency, and partner airline availability.

Here’s what we found:

Most airline loyalty programs underperform across the board.
Only one category, “availability of partner airlines”, meaning how easily you can redeem your points with non-home carriers in the same alliance, had more programs rated positively than negatively.
For everything else, at least half of the programs fell short of expectations.

What’s causing this dissatisfaction in program quality and customer trust?

Some Call it the Loyalty Betrayal

The rising dissatisfaction with airline loyalty programs is not simply the result of shifting customer expectations.

A major part of the story lies with the airlines themselves, who, over the past few years, have fundamentally altered the design and value proposition of their loyalty schemes.

Some might say this is eroding the very loyalty these programs were meant to foster.

Starting in 2023, a wave of program overhauls swept across the industry.
And unlike past updates aimed at expanding partner networks or adding perks, the recent changes have largely been unfavorable to customers.

Here’s what happened:

Historically, frequent-flyer programs were designed to reward miles flown.
The more you traveled, especially on longer routes, the more points you accumulated, making the system particularly attractive to frequent business travelers and aviation enthusiasts.

But that logic is rapidly disappearing.

In 2023 and 2024, major carriers, including Delta, United, Emirates, and others, transitioned to revenue-based models.
That means elite status and point earnings now hinge primarily on how much money travelers spend, not how often or how far they fly.

One of the biggest gut-punches to longtime members?

The elimination of fixed award charts.

Many airlines, including American and United, have adopted dynamic pricing for award tickets.
So instead of predictable mileage thresholds (e.g., 60,000 miles for a transatlantic business-class flight), redemption prices now fluctuate like cash fares.
That same seat might now cost 150,000 miles, or more, depending on demand.

Travelers who spent years saving miles for aspirational redemptions are now finding themselves priced out, while the rules keep changing with little warning.

The result?

A growing sense of disillusionment.

Airline reward programs, once seen as relationship builders, are now viewed as extractive and often misaligned with customer expectations.

Unsurprisingly, the backlash has been loud:

Delta’s overhaul of SkyMiles triggered such intense public outcry that the airline had to walk back several changes.
United and British Airways also faced mounting criticism after reducing elite perks and inflating redemption costs – both airlines were forced to reverse parts of their rollouts following customer uproar.

The irony is hard to miss: loyalty programs are undermining the very loyalty they were meant to build.

And while travelers once put up with small changes in exchange for aspirational rewards, the recent wave of devaluations has broken that contract.

For many, the magic is gone.

So, if loyalty is no longer earned through flying, and the rewards feel increasingly out of reach, what’s next?

Let’s look at where opportunity might still lie.

Startups Are Taking on Loyalty’s Broken Promise

There’s a bright side to all of this.

When legacy systems underdeliver, especially in high-margin categories where customers are both loyal and willing to spend, opportunities for disruption tend to emerge quickly.

And that’s exactly what we’re seeing in the travel loyalty space.

The frustration with today’s airline reward programs has triggered a wave of entrepreneurial response.

Founders and investors are sensing a moment: a chance to reimagine loyalty from the ground up.
Venture capital has followed suit: In 2024, investment in travel loyalty startups reached an all-time high, nearly half a billion dollars.

At the Lufthansa Innovation Hub, we’re closely tracking a new generation of loyalty disruptors, and we’re seeing some exciting patterns.

Many of these startups are no longer treating loyalty as a rigid points system.
Instead, they view it as a layer of emotional experience, tailored to individual preferences and designed to spark a genuine connection between the brand and the traveler.

In practice, this means shifting from transactional rewards (think: earn 5,000 miles, get €50 off) to more flexible, surprise-driven benefits like early access, exclusive events, and personalized perks based on actual behavior and values.

This evolution is particularly relevant for younger travelers, especially Gen Z, who have never experienced the “golden age” of traditional loyalty programs.

They don’t miss award charts or predictable redemption tables. Instead, they expect brands to reward them with relevance, not just rebates.

And as this generation’s share of travel spending grows, so too does the pressure on airlines to rethink what loyalty should actually mean in 2025 and beyond.

Curious which startups are leading the loyalty revolution?

Then stay tuned.

Our next TNMT edition will spotlight the most promising loyalty disruptors shaping the future of air travel.

Press Picks

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DIGITAL ID ON IPHONE – Apple’s iOS 26 will allow travelers to securely store and use their passports within the Wallet app, with airlines expected to start supporting the feature by the end of 2025.
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TOP TRAVEL INVESTORS – Phocuswire profiles top venture capital firms betting big on travel innovation in 2025, from generative AI startups to sustainable transport platforms.
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SAF TRADING PLATFORM – SABA and SAFc Connect are building a digital ecosystem for tracking sustainable aviation fuel usage, improving transparency, and corporate accountability in decarbonizing air travel.
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FUTURE TRAVEL SCENARIOS – The World EconomicForum outlines four distinct futures for global tourism and mobility, shaped by climate urgency, tech disruption, and geopolitical shifts.
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Deal Tracker

– VC –

Wander – the US-based operator of smart homes intended for vacations and workcations, raised $50M in a Series B funding round led by QED Investors and Fifth Wall, with participation from other investors. Thefunds will be used to accelerate its expansion.

Kolet – the French travel eSIM provider raised $11.14M in a Series A funding round in combination of debt and equity led by Daphni with participation from other investors, including former Expedia Group CEO Peter Kern. The funds will be used to enhance the company’s app with new features to better meet travelers’ connectivity needs.

Firefly Aerospace – the US-based manufacturer of orbital launch vehicles offering affordable and accessible options for reaching space raised $50M in a Series D funding round from Northrop Grumman. The funds will be used to support the production of the company’s developed rocket.

Holidu – the Munich-based travel search engine platform raised $46M in a later-stage funding round from 83North and other investors. The funds will be used in accelerating its artificial intelligence roadmap, expanding its property management software, and further expansion in strategic markets.

Qashio – the Dubai-based expenses management platform offering solutions for travel and hospitality companies raised $19.8M in early-stage funds in a combination of debt and equity, led by Rocketship.vc, with participation from other investors. The funds will be used to support expansion across the MENA region.

Eve Air Mobility – the Brazilian eVTOL company secured $15.8M in grant funding from FINEP as part of Brazil’s sustainable aviation technologies initiative. The funds will accelerate the development of advanced digital solutions and the TechCare platform for eVTOL operations.

Rapido – the India-based bike and taxi booking platform raised approximately $15M in a Series E funding round led by WestBridge Capital (San Mateo), with participation from other investors.

Zingbus – the India-based intercity bus services provider, raised $12.56M in an early-stage funding round from undisclosed investors.

Truely – the Singapore-based eSIM services provider raised $2M in an early-stage funding round from Disrupt Ventures, Kopital Ventures, and other investors. The funds will be used to add new features and scale its network.

Adventuro – the UK-based trip planning and outdoor activity management platform, raised $420K in angel funding from Lifted Ventures and other investors. The funds will be used to support its growth, develop the platform further, and increase brand awareness.

The Tarzan Way – the India-based AI-powered travel tech startup raised approximately $233K in seed funding led by Inflection Point Ventures, with participation from other investors. The funds will be used for enhancing the product development and streamlining the operations.

Acai Travel – the US-based AI-powered corporate travel management platform secured an undisclosed amount of funds from Amadeus. The funds will be used to reduce operational costs and enhance the traveler experience across the travel ecosystem.

Hong Jing Drive – the China-based provider of autonomous driving software, raised an undisclosed amount in a Series C1 funding round from Bojiang Capital and Quzhou Industrial Development. The funds will be used in market expansion in the field of intelligent autonomous driving.

Firefly – the UK-based sustainable aviation fuel producer raised an undisclosed amount in an early-stage funding round from Builders Vision.

– M&A –

OfferFit – the AI-based self-learning decision engine designed to send personalized offers to customers based on their segments was acquired by Braze, the customer engagement platform working with travel players like Traveloka, tiket.com and Skyscanner, for $325M.

Dantaxi – the Denmark-based taxi booking app was acquired by Uber, for an undisclosed amount.

AWAI – the provider of dynamic travel packaging solutions was acquired by Nezasa, the travel technology provider, for an undisclosed amount.

Crave – the UK-based provider of digital services to guests in hospitality platforms was acquired by The Hotel Communication Network, the provider of in-room hospitality technology to assist guests in interacting with the hotel, for an undisclosed amount.

Cybevasion – the French travel search engine platform was acquired by Holidu, the travel search engine platform, for an undisclosed amount.

RezMagic – the US-based event management software solutions provider was acquired by Juniper Travel Technology, the distribution solutions for travel platform, for an undisclosed amount.

Lucia – the US-based freelancer marketplace for the travel industry was acquired by Tern, travel planning and booking platform, for an undisclosed amount.