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AGENDA. Current situation How the idea was born What is Despegar.com Strategy / business model Economic outlook for Latin America Competitive Environment Proposed Solution. The Vision. Be the leading provider of on-line travel services in Latin America . Current Situation.

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Agenda l.jpg
AGENDA

  • Current situation

  • How the idea was born

  • What is Despegar.com

  • Strategy / business model

  • Economic outlook for Latin America

  • Competitive Environment

  • Proposed Solution


The vision l.jpg
The Vision

Be the leading provider of on-line travel services in Latin America.


Current situation l.jpg
Current Situation

…we are towards the end of 1999…

…the internet is changing the way business is done…

Five MBA graduates (3 from Fuqua) are developing a business plan for an on-line travel agency to serve Latin America

Their objective ?

To become one of the first Latin American e-ventures to be financed by US Venture Capitalists


E travel an opportunity in latin america l.jpg
E-TRAVEL: AN OPPORTUNITY IN LATIN AMERICA

  • Successful business models

  • Expected market growth (Internet, Tourism, LatAm)

  • Industry structure:

    • Geographically disperse

    • Information intensive buying process

    • No dominant players

    • Substandard customer service

    • High transaction costs

    • Lack of transparency


E travel is the most important on line commerce category in the usa l.jpg

Insurance/Financial Services

Computer Software/Hardware

Travel

Books

Magazines

Music/Videos

Flowers/Gifts

Automobiles

Toys

Office Products

Specialized Sporting Goods

Consumer Electronics/Appliances

Apparel

Groceries/Food

General Sporting Goods

Tools/Home Repair

Home Furnishings

Cigars

CONSUMER COMFORT WITH BUYING ONLINE

INTERNET BUSINESS OPORTUNITY

Source: Morgan Stanley Dean Witter

E-TRAVEL IS THE MOST IMPORTANT ON-LINE COMMERCE CATEGORY IN THE USA

Total 98 online

spending: $4,390 MM

Source: NUA Internet Services



Expected on line ticket sales in latin america in million l.jpg
Expected on-line ticket salesin Latin America (in $ million)


Strategy based on 5 concepts l.jpg
STRATEGY BASED ON 5 CONCEPTS

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS


Regional expansion enables scale and operational synergies l.jpg

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS

REGIONAL EXPANSION ENABLES SCALE AND OPERATIONAL SYNERGIES…

Synergies

Scale

  • Access to 120 M consumers with buying power similar to USA/Europe

  • 9 M internet users in Latin America in 1999

  • Travel market worth over US$ 16 billion

  • Development of a brand with regional presence

  • Cross selling of products between countries

  • Regional alliances

  • Larger base to support start-up costs

REGIONAL

EXPANSION


Local presence provides competitive advantages l.jpg
LOCAL PRESENCE PROVIDES COMPETITIVE ADVANTAGES

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS

  • Better understanding of the market

  • Access to better fares

  • Customer service

  • Payment method adjusted to local regulations

  • Content adjusted to local market requirements

  • Increased control over operations

DESPEGAR ALLIANCE

MANAGER

DESPEGAR INC.

PRINCIPAL ADVISOR

COUNTRY

MANAGER

CALL CENTER

MGT.

TEAM

TRAVEL

AGENCY

ARGENTINA

BRAZIL

MEXICO


Brand awarness is critical to the generation of traffic l.jpg
BRAND AWARNESS IS CRITICAL TO THE GENERATION OF TRAFFIC

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS

TRAFFIC

Online and Offline advertising campaigns

Alliances

Public Relations

  • Brand & Product

  • TV

  • Radio

  • Magazines and newspapers

  • Billboards

  • Banners

  • Links

  • Travel suppliers

  • Internet sites

  • Co-branding promotions

  • Press coverage

  • Special events


One stop shopping leads to increased sales and customer retention l.jpg
ONE-STOP-SHOPPING LEADS TO INCREASED SALES AND CUSTOMER RETENTION

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS

Service Offering

Commerce

Content

Community

Convenience

Customer Service

  • Travel guides

  • Professional reviews

  • Weather

  • Airport real time scheduling

  • Destination video clips

  • Maps

  • Chat

  • Bulletin

  • Travel log

  • Customer reviews

  • Photo Album

  • Meeting Place

  • Self service

  • 24 - 7

  • Home delivery

  • Pick-up locations

  • e-tickets

  • Quotes by request

  • Local 800 call center

  • Fare alerts

  • Fare finder

  • Trained travel agents

  • VOIP

  • Chat service

  • Loyalty programs

  • Flight, hotel and car rental

  • Vacation and cruise packages

  • Travel guides

  • Insurance

  • Travel mall

  • Travelers checks


For the different market segments l.jpg
... FOR THE DIFFERENT MARKET SEGMENTS RETENTION

REGIONAL

EXPANSION

NEW

SEGMENTS

LOCAL

PRESENCE

SERVICE

OFFERING

BRAND

AWARENESS

  • Potential markets: Spain, Brazil, Argentina, Mexico, Colombia, Chile, Venezuela and Uruguay;and US Hispanic

  • Leading E-travel provider with a recognized brand, consumers’ top of mind

  • Additional possible services: solutions for budget/young travelers (Despegar Joven), thematic solutions for special interest groups (ski, soccer, honeymoon, etc.), rich editorial content, planning tools, and community features

B2C

(LEISURE)

  • Main target: small companies with limited travel sophistication

  • Potential key partnerships: Accor Corporate Services and Carlson WagonLit Travel

B2B

(CORPORATE)


Latin america positive outlook for 2000 l.jpg
Latin America: Positive outlook for 2000 RETENTION

Positive factors

  • Sound fiscal & monetary policies

  • Low expected inflation (few double digit inflation rates)

    Negative factors

  • US economy growth is expected to slowdown

  • Uncertainty on stability of economic policies

Forecasted GDP growth: 4%




On line competitors l.jpg
On-line competitors RETENTION

  • Viajo.com

    • Main on-line competitor in Latin America

    • Offers tickets, complete tourism packages, language translation, extensive travel content

    • Operates both on-line and off-line stores

  • Regional portals

    • Terra and Star Media have entered alliances with agencies

  • US on-line travel agencies

    • Expedia and Travelocity have launched sites for markets outside the US


The threat the opportunity l.jpg
The Threat & The Opportunity RETENTION

THREAT

OPPORTUNITY

  • Similar portals in development

  • Viajo.com @ Mexico

  • “Despegar Network” in place

  • Simultaneous deployment in LatAm

  • First-mover advantage

The Timing is NOW


The venture capital l.jpg
The Venture Capital RETENTION

Despegar.com needs

8 M$ to accomplish a Regional Roll-out

Despegar.com will be financed by 100% Equity (all VCs)

Management team is presenting its Business Plan

to the 1st Round of US Institutional VC Investors


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Questions ... RETENTION


Case key learnings l.jpg
Case Key Learnings RETENTION

Identify Project’s Risks

 Affect Cash Flows Affect the Cost of Capital

Set up Cash flows

Sensitivity Analysis

Real Options


Project s risks cash flow implications l.jpg

RETENTION

Project’s Risks Cash Flow Implications


Project s risks cost of capital implications l.jpg

RETENTION

Project’s Risks Cost of Capital Implications

Calculator

Adjustments

Cost of Capital

Averaged

  • Brazil

  • Argentina

  • Mexico

  • Venezuela

  • Colombia

  • Chile

  • Macroeconomics

  • Political/Legal

  • Force Majeure

  • Financial Risks

Weighted

Per country

Gross booking


Project s risks cost of capital implications25 l.jpg

RETENTION

Project’s Risks Cost of Capital Implications

*

(*) Industry Beta adjustment corresponds to Travel and Tourism, Internet effect is considered in Cash Flows.


Project s risks cost of capital implications26 l.jpg

RETENTION

Project’s Risks Cost of Capital Implications

Re = 23.47%

Despegar’s Capital Structure: 100% Equity, no Debt


Cash flow setup l.jpg

RETENTION

Cash flow Setup

%

Internet

users

Share

Of

Travel

POPULATION

COUNTRY

E-TICKETSBOOKINGS

COMPANY

E-TICKETSBOOKINGS

%Online

buyers

Share

Of

eMarket

Spending

p/person

Untapped

Mkt


Cash flow setup28 l.jpg

RETENTION

Cash flow Setup

REVENUES

Ticket Bookings CommissionsOthers: Rental Car + HotelsAdvertising

Corporate Expenses

IT

Personnel

Operations

Operating

Countries Expenses

Marketing Costs

NPV = $ 50 M


Sensitivity analysis l.jpg

RETENTION

Sensitivity Analysis

Monte Carlo: Mean NPV = $ 25 M


Real options l.jpg

RETENTION

Real Options

  • Delay Option

  • Abandonment Option

  • Expansion Option

  • Brand or Knowledge Building Option


Thank you l.jpg
Thank you !! RETENTION


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