despegar acquires best day mexico for us$136 million
Contxto – It was clear Despegar—an Argentinian price-comparison travel company—was in love with this North American country, but now it seems to want Mexico all to itself.
In what could be considered Latam’s largest OTA deal to date, Despegar acquires Best Day Travel, in order to increase its local operations and dominate the market.
And it actually makes sense, if you consider 75 percent of Best Day’s revenue came from Mexico and the remaining 25 percent from its other markets including Brazil, Argentina, USA and Canada, as an aggregate.
“This acquisition is important to consolidate our objective of expanding our operations in Mexico, the most important tourist market in Latin America and the seventh most important destination worldwide,” said Damian Scokin, Despegar’s General Manager in a press release.
Despegar’s Best Day, so far
Back in 2019, Best Day recorded around US$140 million in sales and an operating margin (EBITDA) of US$8 million. Not only does the company provide online intermediary services, but it also provides a call center, 190 physical kiosks located mainly in Mexico, as well as land transport, touring and recreation activities.
This operation could become Latin America’s largest OTA deal to date, and Despegar could expect to increase 25 percent its current total revenue. But this is not “news, news,” let’s also, remember that last year Despegar started its M&A hunt by laying its hands on Brazil’s Viajes Falabella, last year.
Let’s just wait and see if Mexico’s anti-monopoly government agency (Cofece) has something to say—*cough, cough* Cornershop.
The Latam hospitality and travel market
With so much opportunity in the travel and hospitality industry in Latin America, it comes as no surprise that Despegar is ambitiously acquiring competitors here and there.
In fact, in 2018 gross travel booking in the region resulted in over US$60 billion. Oh, but there’s more, you can expect that number to reach the US$69 million this year and even US$78 million by 2022.
Now, Mexico alone, represents around 38 percent of the entire travel in the region, which validated Despegar’s point in increasing local brand and operational presence.
Interestingly enough, despite Latin America’s regular political turmoil, the industry doesn’t seem to react as roughly as the local upheavals. Travel industry has been growing at an average annual growth rate of 6 percent from 2005 until 2017.
Wanna hear more? We recommend you listen to the following podcast episode: Despegar adquiere a Best Day – La regulación de trasporte chilena, Gympass firma con WeWork. You can find the time stamp available in the description.
-VC
