With destinations as intriguing and
diverse as Machu Picchu, Patagonia, the Amazon rainforest and the Galapagos
Islands to vibrant cities such as Rio de Janeiro, Buenos Aires and Mexico City,
Latin America is home to a active travel industry, attracting both local and
international visitors.
According to Phocuswright's Phocal Point database, total gross travel bookings in the
region were worth $60 billion in 2018 and are predicted to increase to $69
billion in 2020 and $78 billion in 2022.
IATA’s 20-year Air Passenger Forecast from October 2018 predicts Latin America will grow by a
compound annual growth rate of 3.6% through 2037, serving a total of 731
million passengers.
That is all good news considering the region’s
economic and political challenges in the past several years.
According to Brazil-based Phocuswright analyst, Carolina Sass de Haro: “We have to consider that the political and economic
turmoil that happens often is just a given.
"We are used to living like that. Of
course, it does affect tourism and everything, but you see entrepreneurship and
the industry moving despite what is happening with the political and economic
crisis.”
One sector in Latin America that is
experiencing substantial innovation is ground transportation – a critical
component of the travel experience for both locals and international visitors.
Latin America is the most urbanized
region in the world.
According to a report from the World Economic
Forum, between 1950 and 2010, the proportion of people living in cities grew
from 30% to more than 85%. And by 2050, it’s predicted 90% of Latin Americans
will live in cities such as Mexico City, São Paulo, Buenos Aires, Rio de
Janeiro, Bogota, Lima and Santiago.
“No part of the world has urbanized
more rapidly,” the report says.
In the third piece in our series on
Latin America, we take a look at what is happening in the transportation sector
with a focus on ground transportation options both between and within the
region’s massive cities.
Bus transport
Due to their affordability and availability, buses are one
of the primary forms of transportation in Latin America.
“We don’t have trains in the region - they are not relevant.
So you are either traveling by plane – which is not always cheap – or by bus.
It’s a main transportation option that is very relevant regionally,” Sass de
Haro says.
But modernization is still a work in progress for bus
systems in most Latin American countries.
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According to Eleonora Pazos, head
of the Latin America division at the International Association of Public
Transport: “Privately operated bus networks became widespread and are now the
main mode of transport within large Latin American cities, but a lack of
institutional framework and oversight by governments has often led to inefficient
systems with poor quality and excessive informality."
The region’s largest country – Brazil – is also ahead of the
others in terms of modernizing its transportation systems.
Pazos says, “Ticketing systems in Brazilian cities are
already sophisticated, moving billions of transactions a day; Rio de Janeiro is
a prime example with its integrated ticketing system (20,000 validators
installed) across bus networks, trains, ferryboats and metro networks.”
And as digital ticketing systems become available, travelers
are readily adopting this option.
According to Phocuswright’s Latin America Online Travel Overview, Third Edition,
online sales for bus tickets in Brazil grew 150% in 2015 versus 2014.
One of the largest providers in Brazil is ClickBus, an online
travel agency for bus tickets founded in 2013. The company now provides
ticketing through more than 100 bus companies to more than 4,600 destinations
on 100,000 routes.
Julian Deutschle is hoping to drive similar digital adoption
in Chile.
Deutschle and three friends from college moved from their
home of Germany to Chile in 2013 to try to tackle the country’s fragmented,
offline bus transportation system.
“None of us spoke Spanish, and we didn’t have any money - so
I think it was the worst conditions to start something like this so far from
home,” he says.
With the help of a few angel investors from Frankfurt, Deutschle
and his friends launched Recorrido in 2015, initially providing just price
comparison among bus companies but quickly adding ticket sales as well.
Since then, Deutschle says the company has sold nearly five
million tickets through its website and mobile app, on routes provided by about
50 of the largest bus operators in Chile. But that’s still just a small piece
of the market.
“We estimate in Chile around 70 million passengers each year
travel by bus,” he says.
“And there are about 120 bus operators, although many are
very, very small. But it shows the potential which is left in Chile.”
Recorrido provides operators with the back-end systems to
enable online ticketing. And while it has been challenging to do those
integrations with some suppliers that have little to no technical systems to
start with, Deutschle says the bigger challenge has been shifting the mindset
of suppliers.
No part of the world has urbanized more rapidly.
World Economic Forum
“It’s a very old industry and informal,” he says.
“A driver might have started with one bus and today owns 400
buses. But they never went through formal education – it wasn’t necessary to
grow the company – but today to analyze all these sales channels, for example
selling through agencies, online, they can have difficulty looking at it from a
business point of view. So we had to convince them that selling tickets online
is an amazing opportunity for them.”
And as some of its partners have had success – Deutschle
cites one operator that has grown from 10 buses to 150 since enabling online
sales through the platform – the suppliers have now been coming to Recorrido to
request integration.
The company has raised about $1.4 million in funding. In
September 2018 it added online bus ticketing service in Peru, where it now has five
bus operators connected, and Deutschle says Recorrdo will expand to another
country this year.
“We think it’s just natural for Latin America to have really
efficient ground transportation. The key for this is to have the offer online,”
Deutschle says.
“And our mission is to be the biggest bus ticket platform in
Latin America.”
Bikes and scooters
According to Research and Markets, the global electric
scooter market is expected to reach more than $28 billion by 2025.
In the densely populated major cities around Latin America,
vehicular traffic is often at a standstill so its no surprise that options such
as electric scooters and electric and traditional bikes are gaining traction –
and fast.
E-scooter company Grin launched in Mexico City little more
than a year ago – in April 2018.
Around the same time, bike and scooter company
Yellow launched in Brazil – created by the co-founders of ride-hailing app 99
that sold to Didi for nearly $1 billion in January 2018.
By last fall, the two startups had each raised about $75
million and in January they merged to form Grow Mobility – launching with a
total of 135,000 vehicles and an additional $150 million in new funding to
expand across Latin America.
For now, Grow is operating the Yellow and Grin brands in
nearly a dozen cities in Brazil and just the Grin brand in its remaining
markets, which in addition to Mexico City now includes the capital cities of Bogota,
Santiago, Lima, Montevideo and Buenos Aires, with plans to continue expanding
throughout the region.
“Every city where we are present, we have a traffic problem
and a mobility problem. We have public services, but they are overloaded,” says
Beriana Mendoza, director of communications for Grow Mobility.
In announcing the merger, Grow
Mobility alludes to plans to become a “super app,” saying the “Combined company
plans to provide transport, digital payments, food delivery, and other critical
everyday services for the region.”
Mendoza says the company already has a commercial agreement with delivery app
Rappi, but the next priority is to development a payment system.
“In Latin America, many of our potential users are left
behind because they don’t own a credit card, so the payment issue is a very
good opportunity” she says.
In addition to rapid adoption by locals, Mendoza says they
are seeing tourists embrace the use of bikes and scooters as well to navigate
the region’s congested cities.
“Tourists know this way of transport in other cities, for
example in the United States, so they find it here and they are comfortable
using it,” she says.
“And if you travel the city on a scooter, it’s a very
different perspective for sightseeing. You can leave it, take it again, walk
for a while. It’s a great alternative and we want to be part of the simplest
solution for all travelers.”