Despegar More Upbeat on Latin America Economic Climate Than in U.S. and Europe

Skift Take

Latin American economies often seem to be on the brink of collapse, but there are positive developments on the inflation front, according to Despegar.

Dennis Schaal

Online travel this week

While U.S. and European online travel agencies worry about the impact of inflation and lower travel demand, Argentina’s Despegar Latin America sees a more stable economic climate at home.

This is particularly due to inflation in its two largest markets, Brazil, which accounted for 37 percent of its third-quarter transactions, and Mexico, which accounted for 19 percent.

“As we have noted over the past few months, we see that the macro situation in Latin America is a bit different than in the US or Europe, but inflation has picked up in the early stages of the year,” CEO Damian Skokin said. This was reported to financial analysts last week while reviewing the company’s third quarter financial performance. “If you look at Brazil, there’s been deflation in the last couple of months, and Mexico has been stable. Thus, our view is more optimistic on the macro in the region as a whole compared to the US and Europe.

He added, “Latin America is used to dealing with inflation very effectively.”

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Despegar saw positive results in adjusted earnings before interest, taxes, depreciation and amortization in its fourth quarter for the quarter ended September 30. By that measure, the company posted a profit of $12 million in the third quarter of 2022, compared to a loss of $10.3 million a year earlier.

The company said strong demand for travel, including the opening of international markets, as well as an increase in its acquisition rates, or commissions, drove the improvement.

On a standardized net income basis, Despegar narrowed its third-quarter loss to $9.3 million from a net loss of $23.9 million a year ago.

Revenue reached $145.6 million, up 10 percent from the 2019 pandemic.

Despegar seems to have thrived in recent years, in part, through acquisitions, including loan originators and buy-now, pay-later. Coin Brazil 2020, travel agency The best day ever 2020 in Mexico and travel agency Viajnet 2022 in Brazil. Despegar also acquired a 51 percent stake in the channel manager Will remain In 2022 and the third quarter, Despegar reported 21,600 vacation rentals under its Stays brand. This Stays is expanding its domestic market beyond the borders of Brazil.

Despegar said it increased market share in Brazil, where third-quarter wholesale orders rose 9 percent compared to the previous quarter as international markets opened up. In Mexico, wholesale orders fell 9 percent sequentially, largely due to seasonality.

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Many large online travel agencies do not release fintech offerings, but Despegar provides some visibility. Its financial services business, which includes Coin, saw its total portfolio value rise 136 percent year over year to $17.8 million in the third quarter. Acquired to expand Despegar’s total addressable market beyond travel, Coin accounted for a small portion of Despegar’s transactions, about 1 percent in the third quarter.

Chief Financial Officer Alberto López Gaffney said during an earnings call last week that Despegar Coin is slowing down the number of loans it makes — purchases are down 25 percent — and is calculating and pricing credit risk more efficiently. Coin’s loans last an average of five months, the company said.

“In the quarter, Coin posted an EBITDA loss of $5.2 million,” Lopez Gaffney said. “For those of you new to Despegar’s growth strategy. Let me remind you that we bought Coin because it expands our target market and increases conversion rates, rates, and average ticketing among other benefits.

Other developments like its larger peers Expedia Group the and Booking Holdings Seeking to grow loyalty programs in strategic initiatives, Despegar is expanding its program.

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The company reported third-quarter loyalty program memberships to 9.3 million, up 63 percent from the second quarter. About 5 percent of Despegar transactions involve redeeming points, according to the company.

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