CHAPTER 7: TECNOLATINAS PROFILES
Despegar.com: The Right Strategy to Win the Market
Estimated Valuation: USD $1.3 Billion
Industry: Software & Services Country: Argentina
CEO: Roberto Souviron
HQ: Buenos Aires, Argentina
Fulltime employees: 4,000
Soon to become the third Argentine technology company to be listed on Wall Street’s NASDAQ index (after MercadoLibre and Globant), Despegar.com is the number one travel marketplace in Latin America, and one of the most profitable companies in the tech sector in the region, with a turnover of USD$4 Billion in 2015, according to its own data.
This places Despegar.com as the fourth largest travel agent in the world.
Founded in 1999 by Martin Rastellino, Cristian Vilate, Alejandro Tamer, Federico Fuchs and Roberto Souviron – now serving as CEO, Despegar.com currently operates in 21 countries. With over 4,000 employees distributed throughout its offices in 11 countries. However three locations concentrate most of its staff: Argentina, with 1,200 employees, Brazil, with 1,500, and Colombia with 1,000.
Of its workforce, over 900 people are devoted to programming and developing the digital applications necessary to conduct Despegar’s business, which means this travel operator has a strong focus on technology, and is one of the main employers of coders, software engineers, and tech professionals in the region.
In order to achieve its current magnitude, the company had to overcome several challenges, the biggest of which was perhaps the lack of confidence most Latin Americans showed for online payments at the beginning of the 2000s, and their reluctance to share their credit cards online, and to make transactions that involved a significant amount of money through this cannel. It was the growth of the online retail sector, but especially Despegar’s low fares, attractive offers, and simplicity to find and buy airplane tickets, which motivated many users to take the risk and start purchasing online. This not only benefited this site, but the entire e-commerce ecosystem in the region, which suddenly saw this barrier brought down.
A great effort in making the site usable and friendly, allowed users to do something that before seemed impossible, to compare rates and search for opportunities in multiple airlines at the same time. Combined with a powerful customer support team, the site developed a winner combination with led it to build itself a solid reputation, which led the company to breakeven point as soon as 2003, only four years after its foundation.
This great achievement was also possible due to the company’s early efforts to internationalize its business, launching in 9 countries within its first ten months. Additionally, it made a big effort to consolidate itself as an undisputable leader by acquiring competitors such as Viajo.com in 2012, and by establishing strategic partnerships with sites within the travel niche like ciudades.com and viajeros.com, thus creating a strong brand presence on the web. At the same time, the company has invested strongly in traditional advertising since day one, fostering brand recognition throughout the region, and direct traffic to its website.
While initially the business focused on airplane tickets, over the years it has diversified to include hotels, car rental, and vacation packages. Today, the site allows users to browse through over 34 thousand hotels in every country, making it one of the most complete accommodation booking sites in the world. Despegar.com also has agreements with Disney, Universal Studios and other entertainment companies, which allow it to sell tickets to some of the most popular theme parks straight to its customers, which creates a definitive advantage over its competitors. It is estimated that for every 100 users that visit the website, one buys one of these deals, making it a very strong selling point.
Today Despegar.com has over 250 million registered users, leading all other sites in the travel niche on the region.
Up until April 2015, Despegar.com had reported investments of USD$21 million, with funds such as Tiger Global Management and Sequoia, among others. This means the company shares investors with companies like MercadoLibre, Navent, Google, Apple and WhatsApp (Acquired by Facebook in 2014). That same month, it was announced that Expedia, the leading player in the online travel retail industry in the world – which owns sites like Venere, CarRentals, and Trivago – would invest $270 million in the company, thus becoming a new minority partner.
Despegar.com has showed that through innovation, a great user experience, and a wide offering it was possible not only to grow a world class business in Latin America, but also to bring down prejudices, and form new habits within the region’s consumers, who have massively adopted the site as their go-to place when it comes to travelling and now don’t even hesitate to buy tickets and holiday packages on it, and the Internet in general.
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