Sem Escala is a Brazilian online travel agency (OTA) that's taking on the digital leaders of the nation's fast-growing market.
Sem Escala (which means "nonstop" in Portuguese) is entering into a field dominated by Brazil's largest OTAs: Decolar.com and Hotel Urbano.
Decolar.com was the first OTA to reach size and branding in the Brazilian market. Its business model was based on a flight search engine that allowed customers to scan for the best prices from different airlines. It evolved into offering a more diversified portfolio of products, including hotel booking and vacation packages.
Founded in 2011, Hotel Urbano originally aimed to be a group deals site. But the popularity of group deals fizzled out, sinking other daily deal brands, such as Groupalia/Privalia.
Yet Hotel Urbano's OTA division prospered. In 2012, it is estimated to have surpassed Decolar.com in pageviews, and this year, possibly in hotel bookings. Hotel Urbano recently received an injection of US$20 million.
Some other competitors to Sem Escala include CVC, Submarino Viagens, Booking.com, Viajanet, and Expedia.com.br. Other international players that have recently entered the fray are Mexico's Best Day and the UK's TotalStay.
This group forms a formidable block of competition, but Sem Escala believes it can partly fuel its growth by converting the existing customer base of its traditional travel agency parent.
Q&A with Marina Linhares, product manager:
Revenue model and strategy for profitability?
We're already profitable, at about 10% on annual revenue.
Sem Escala, as an OTA, has costs far below a traditional travel agency, thanks partly to its XML platform. The company builds its own packages from inventory that comes direct from international and national suppliers, allowing it to reach higher profit margins than many other local operators.
On average, we charge commissions of 10% of national airlines, 6% of international airlines, and 25% on hotels and packages.
What is your strategy for getting customers?
For almost two decades now, our parent company has served as a travel agency focused in high-end retail and corporate clients. Sem Escala is an offshoot of this traditional local travel agency.
We plan to convert our existing clients from our traditional travel agency, plus add incremental users through online marketing.
The same customer who uses our dedicated service to help organize large complex trips, for example, often resorts to an OTA to buy a simple one-day business-trip flight ticket. We're aiming to capture that incremental business, on the sales pitch that we provide high-touch support in case something goes wrong, such as a canceled flight.
If we can convert at least one-third of our customers who buy from the Fun Tour to using Sem Escala for additional trips, and the average bill of their additional trips reaches at least R$ 400 (in tickets, accommodations or packages), we can be on track with our profitability target.
Sem Escala will hire the best e-commerce public relations and marketing company that is specialized in tourism. The promotion will be directed to social media, Google AdWords, magazines, and radio.
How did your initial idea evolve? What's your "Plan B"?
In the light of the success of players like Decolar.com and Hotel Urbano, we decided we needed to diversify our business model. The rising trend in mobile usage also can better be taken advantage ofby an OTA than a traditional travel agency.
Our main goal for Sem Escala is to become one of the top 10 OTAs in Brazil.
If this original vision fails, we plan to target instead either to the corporate travel market or the B2B market, such as by powering the engines of local traditional travel agencies (perhaps on a white-label basis).
Our technology platform has also been designed for these particular formats of business.
Description of the team?
For now, the executive team is comprised of Monica Leles, who is the main executive responsible for contracts and relationship management; João Carlos da Costa, who is sales executive; and Marina Linhares, who is responsible for development, implementation and testing of the online platform, as well as for being the product and marketing manager.
After being spun off, the team ought to be comprised by a supplier/product manager, a marketing manager, and support personnel.
Funding arrangements?
Being incubated inside an ongoing travel agency with recurrent revenues, costs are fairly constrained. The budget is comprised of payroll, plus monthly fees for the IT/website structure. Costs are currently being funded by Leles and da Costa, the two major partners.
Where do you see yourselves in 3 years' time?
In three years' time, Sem Escala will be among the top ten OTAs in Brazil for visits and bookings. However, our biggest challenge is not only to be among the top ten among OTAs but to also be the leader in our segment for quality, upmarket services, exceeding the number of sales and volume of our major competitors.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Some local players aren't transparent about their pricing, or use pressure tactics on customers. Sem Escala offers crystal clear rates and fees.
Sem Escala as a supplier of hotel bookings, air tickets and packages is just the start -- just the first module of business. We want Sem Escala to launch unique products that anticipate market trends in luxury, romance packages, experiential travel, and other sectors. We want to be more than just one more OTA.
Tnooz view:
Sem Escala looks primed for growth. It shared with Tnooz its detailed budget plans, which are surprisingly sensible for a young startup.
Brazil itself is a growth market for online travel, rising on trends that transcend the country's past year of economic turbulence. In 2012, the tourism sector grew 13% in 2012 over the previous year, to a gross of $57 billion.
A few factors driving the trend include a new emerging middle class that has been taking advantage of travel thanks to new financing options, such as the ability to pay for holidays on the instalment plan.
The government is also funding tourism infrastructure improvements in anticipation of hosting the 2014 World Cup and the 2016 Summer Olympics, with a goal of stimulating domestic -- not just in-bound -- tourism.
Sem Escala is off to a strong start, and we're eager to see how it progresses.
NB:TLabs Showcase is part of the wider TLabs project from Tnooz.