Despegar reports growth in bookings and revenue, optimism from recent partner agreements

Latin American online travel agency Despegar says its gross bookings reach $1.2 billion in the third quarter of 2019, a 26% increase in a constant currency basis (8% as reported) over the same period a year earlier.

Revenues in the period totaled $132 million, up 19% on a constant currency basis (9% as reported).

In a statement accompanying the results, Despegar CEO Damian Scokin says he is encouraged by the company’s performance, which he attributes in part to the $8.6 million re-branding campaign launched earlier this year.

“The quarter’s results also reflect the success of our re-branding campaign launched in 2Q19 as we gained market share in what has remained a challenging environment in some of our key markets. Additionally, with the costs and near-term impacts associated with the re-branding campaign behind us, we are back on track reporting positive EBITDA,” Scokin says.

Scokin is also optimistic about the long-term benefits of two recently-signed partnerships.

Last month the OTA announced an API connectivity agreement with Trip.com Group (formerly Ctrip) that integrates Despegar’s direct accommodation offerings in Latin America into the Chinese OTA’s platform.

It also Despegar signed a 10-year exclusive agreement in the same month with Industrial and Commercial Bank of China Limited to launch a co-branded credit card in Argentina in partnership with Mastercard. That move is part of plans to launch a loyalty program in Argentina next year.

Scokin says these deals “will both expand our potential customer base as well as provide more products for our customers.”

Business segments

Despegar’s business is divided in two categories: air ticket sales and packages, hotels and other products, which includes car rentals, bus tickets, cruise tickets, travel insurance and destination services.

Packages, hotels and other products accounted for 42% of total transactions in the third quarter, flat compared to the same period in 2018, but revenue increased 14% in the quarter to $81 million. This segment accounted for 61% of Despegar’s total revenue, up from 58% a year earlier.

Some of that growth is due to Despegar’s June acquisition of retail travel agency Viajes Falabella, a division of the Falabella department store chain that specializes in packages. The third quarter results include three months of operates Viajes Falabella in Chile, Argentina and Peru and two months of operations in Colombia.

Air segment revenue was up just 1% compared to 2018, to $51.2 million in the third quarter.

Regarding gross bookings, Scokin says Despegar’s performance “was significantly better than the single digit contraction experienced by the air travel industry in Latin America in the third quarter in terms of gross bookings. This industry contraction is mostly explained by the macro volatility and currency depreciation experienced in the Company’s key markets, particularly Argentina and to a lesser extent Brazil.”

Mobile and more

Despegar continues to grow its mobile transactions. The company says 39% of all transactions are now completed in the app, which has been downloaded more than 57 million times.

Sales and marketing expenses in the third quarter were up 12% compared to the same period of 2018. The company says this was primarily due to the acquisition of Viajes Falabella and associated costs of operating stores within stores and telesales operations, and partially offset by efficiencies gained in direct marketing.

As a percentage of revenue, sales and marketing expenses increased only slightly, from 34.3% of revenue to 35.3% in the third quarter of 2019.

Scokin says they will continue to monitor the macro environment but remain optimistic about the long-term potential of Latin America and the online travel industry there.

“Further ahead, we remain confident that our strategic investments and new partnerships are establishing a solid foundation and creating further differentiation to deliver profitable growth,” he says.