Last updated: 22 October 2015
Online travel agencies in Brazil have become more popular over the years due to the growing interest of consumers in both domestic and international travel, placing the country as the largest market for tourism in Latin America.
In this article we will provide an overview of the online travel agency market in Brazil.
One of the main reasons for the growth of the tourism market in Brazil over the years is the increase in the purchasing power of the lower social classes, which has allowed a large number of consumers to consider travelling long distances for the first time. Brazil has the sixth largest tourism economy in the world and the largest in Latin America, and according to Braztoa, the Brazilian Association for Tourism Operators, is currently employing 3 million workers.
In order to better serve consumers with practicality and efficiency, several tourism e-commerce and online marketplaces have been launched in Brazil. These kinds of websites aggregate the offers from travel agencies and airlines using a metasearch engine, similar to Google or Bing, to locate the best deals for travellers. The services provided include plane tickets, hotel accommodation, car rental and, in some cases, bus tickets. Online travel agencies, also known as OTAs, are responsible for 6% of all the sales in the Brazilian tourism market. Aware of the potential of this segment, many agencies known for their physical offices are also offering their services online, focused on the so-called self-service customers.
The OTA market revenue is expected to decrease slowly in the future up until 2018, according to estimates by Braztoa. The high exchange rate for dollars is one of the main reasons attributed to the slowdown of tourism sales, especially for overseas destinations. High inflation is another critical factor that may impact negatively on the tourism market in the next couple of years. However analysts such as e-Bit predict a growth rate of around 20% for 2015, with the sector achieving total revenue of USD 13 billion. Massive events like the Rio 2016 Olympic Games are expected to keep the market active despite the current stagnation of the Brazilian economy.
As a whole, the Brazilian tourism market is highly diversified, with many types of companies attending to different consumer profiles. Out of the 475 thousand hotel rooms available in the country 70% belong to independent brands, of which 40% are usually small businesses, with less than 20 rooms.
Impact of Mobile Applications on Tourism Sales
Mobile devices are a major gateway found by OTAs to easily reach consumers, and many of these companies have focused on the creation of apps with friendly interfaces to generate more sales. Since the use of mobile devices is growing exponentially in Brazil, it was expected that the migration between platforms would happen at the same rate. According to the portal Panrotas, Hotel Urbano, the largest OTA in Brazil, has more than 40% of the traffic coming from mobile applications, while Expedia has 35% and Decolar.com has 15%.
Research from Criteo and Phocuswright from December 2014 shows that 57% of travellers booked their last trip involving a flight using a website or app from an airline or OTA. Meanwhile, 43% of travellers who booked a trip that involved hotel accommodation used a website or app from the hotel or OTA. Data from the sector also points out that 59% of travellers are choosing to book their trip directly on the website or app from hotel chains and airlines like TAM, Azul and Gol.
Consumer Behaviour on Online Travel Agencies
The consumer profile is considered a decisive factor to the choice of channel or marketplace to purchase their next trip. Since OTAs usually have minor differences between each other, some details like payment methods, pricing and options available tend to draw specific shares of the public. For example, Viajanet is more popular among travellers from classes C and D, since it offers options such as splitting payment in up to 18 installments.
A curious fact regarding the consumer behaviour in Brazil is that expensive travel packages tend to be sold more frequently in physical travel agencies. Aware of this trend, some companies are also investing in physical channels in order to attend to this niche market which is interested in expensive destinations.
Main Players in the Brazilian Online Tourism Market
The largest online travel agencies and similar services currently operational in Brazil are:
Founded in 1999, the company Despegar.com, known in Brazil as Decolar.com, is the current leader in the sector of OTAs in Brazil. The online service is present in 21 countries and has an annual revenue of US$ 4 billion, of which 55% comes from Brazil. Recently, Expedia invested in the company in order to expand its operations in Latin America, also allowing Decolar.com to enter the Asian market. The company has a market share of 41%, boarding around 500 thousand travellers around the world monthly.
Booking.com is part of the Priceline Group, being a world leader in bookings of hotel accommodation, with around 900 thousand daily transactions. Founded in 1996, the website is translated into 40 languages and is present in 221 countries. Booking.com already has five offices in Brazil, in the cities of São Paulo, Rio de Janeiro, Natal, Porto Alegre and Salvador. The company expanded the investments in the Brazilian market, making partnerships and releasing its first TV commercials.
The Brazilian startup Hotel Urbano, one of the most relevant Brazilian OTAs, was created at the beginning of 2011 and has already profited BRL 500 million in less than three years of operations. The company was created as a deal of the day website, becoming an OTA only a year later. Hotel Urbano plans to go IPO in Nasdaq in 2016 and receive investments to open at least fourteen physical stores throughout the country. Now the company holds around 34% of the market share, with 3.9 million sales in 2014. The Priceline group recently invested USD 60 million dollars in Hotel Urbano, getting a minor participation in the website.
Created in 2006, the company was a part of the B2W group as a branch of the online marketplace of the similar name, but in July 2015 was sold to CVC. Among the largest agencies in Brazil, Submarino Viagens is also present in Argentina offering similar services, including plane tickets and hotel accommodation in over 150 destinations.
The company’s main public are the classes C, D and E, offering budget packages to several destinations, with details to help these buyers with less experience in travelling such as the translation of english terms, commonly used in the market. Created in 2009, Viajanet revenued BRL 400 million in 2012 standing as one of the largest OTAs in the country, offering plane tickets to accommodation and car rentals.
This company is an affiliate of Expedia Inc. with headquarters in Dallas, in the United States. Currently, it stands among the largest booking agencies, providing over 257 thousand accommodation bookings worldwide. Hoteis.com came to Brazil in 2012, along with Expedia which opened its first office in the country that year.
There are several new players in the Brazilian market for OTAs, especially foreign companies that are relevant in global markets and are still trying to reach a broader portion of Brazilian travellers. The most significant so far in the country are Booking.com and Expedia. There are also new players, such as Kayak Brasil, Tripadvisor and Trivago, which offer customized searches for destinations and travel packages in partnership with the main OTAs.