Latin American travel firm Despegar eyes takeovers, robust growth

Argentine travel booking firm Despegar.com plans to boost revenue and scout for takeover targets across Latin America, providing an optimistic outlook for the year ahead, its CEO said.

The company has raised its guidance for key metrics in 2023 twice since November and while it doesn’t report its fourth-quarter results until March, analysts estimate 2023 revenue to grow some 29 percent to around US$691 million compared to the prior-year period, according to data compiled by Bloomberg.

The backdrop is leading Despegar to search for takeover targets, as it looks to grow its footprint and capitalise on a handful of deals over the past five years, including that of Brazil’s Viajanet in June 2022, Chief Executive Officer Damian Scokin said in an interview.

“We are always willing to take advantage of good opportunities to consolidate the market,” Scokin said. “We see a very solid 2024 for the whole region.”

Despegar carries a long list of potential targets in Brazil, Mexico and Colombia, but Scokin declined to give company names.

For the time being, Despegar doesn’t require new external financing and plans to wait for interest rates to drop before refinancing its US$150 million note due in September 2025, he said.

The company’s bullish forecast comes despite a string of Latin American carriers struggling with the pandemic’s lingering financial impacts. Even Gol Linhas Aereas Intelligentes SA’s fall into Chapter 11 bankruptcy last week and its ensuing restructuring can be seen as a positive driver for travel in the long term, Scokin said.

“Gol’s restructuring process is to gain competitiveness vis-a-vis leaner and more cost efficient carriers, which is something that is naturally growing in Latin America,” Scokin said.

To be sure, in Brazil, airfares have surged nearly 50 percent since the beginning of 2023, according to government data. They jumped more than 23 percent in the first half of December alone versus the prior-year period, the data show.

Still, regional passenger totals this year are expected to reach 113 percent of 2019 levels, according to a December 2023 report from the International Air Transport Association.

The picture for Despegar is a bit dimmer in Argentina, where consumers made up less than 15 percent of bookings and revenue during the first nine months of 2023, Scokin said. The company in December recorded a contraction in Argentina amid concerns over President Javier Milei’s peso devaluation and plans to eliminate government subsidies and end price controls.

Despite that, the 57 year-old expects demand in South America’s second-largest economy to “rebound from previous levels.” He’s recently had to tie the salaries of some of the roughly 1500 Argentina-based employees to the US Dollar to shield them from inflation, running at more than 200%.

As investors look for signals on Milei’s performance, Scokin said Despegar will be able to adapt. “The company has thrived in all environments in Argentina,” he added.