Sin ttulo de diapositiva

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(No Transcript)
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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

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The Vision

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

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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

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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

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E-TRAVEL IS THE MOST IMPORTANT ON-LINE COMMERCE
CATEGORY IN THE USA
Total 98 online spending 4,390 MM
Source NUA Internet Services
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Expected on-line travel market in Latin America
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Expected on-line ticket salesin Latin America
(in million)
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STRATEGY BASED ON 5 CONCEPTS
REGIONAL EXPANSION
NEW SEGMENTS
LOCAL PRESENCE
BRAND AWARENESS
SERVICE OFFERING
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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
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LOCAL PRESENCE PROVIDES COMPETITIVE ADVANTAGES
REGIONAL EXPANSION
NEW SEGMENTS
LOCAL PRESENCE
BRAND AWARENESS
SERVICE OFFERING

• 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
TRAVEL AGENCY
CALL CENTER
MGT. TEAM
ARGENTINA
BRAZIL
MEXICO
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BRAND AWARNESS IS CRITICAL TO THE GENERATION OF
TRAFFIC
REGIONAL EXPANSION
NEW SEGMENTS
LOCAL PRESENCE
BRAND AWARENESS
SERVICE OFFERING
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

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ONE-STOP-SHOPPING LEADS TO INCREASED SALES AND
CUSTOMER RETENTION
REGIONAL EXPANSION
NEW SEGMENTS
LOCAL PRESENCE
BRAND AWARENESS
SERVICE OFFERING
Service Offering
Customer Service
Convenience
Community
Content
Commerce

• Travel guides
• Professional reviews
• Weather
• Airport real time scheduling
• Destination video clips
• Maps

• Chat
• Bulletin
• Travel log
• Customer reviews
• Photo Album
• Meeting Place

• Local 800 call center
• Fare alerts
• Fare finder
• Trained travel agents
• VOIP
• Chat service
• Loyalty programs

• Self service
• 24 - 7
• Home delivery
• Pick-up locations
• e-tickets
• Quotes by request

• Flight, hotel and car rental
• Vacation and cruise packages
• Travel guides
• Insurance
• Travel mall
• Travelers checks

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... FOR THE DIFFERENT MARKET SEGMENTS
REGIONAL EXPANSION
NEW SEGMENTS
LOCAL PRESENCE
BRAND AWARENESS
SERVICE OFFERING

• Potential markets Spain, Brazil, Argentina,
  Mexico, Colombia, Chile, Venezuela and
  Uruguayand 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)
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Latin America Positive outlook for 2000
Forecasted GDP growth 4

• 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

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Economic indicators
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Economic indicators
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On-line competitors

• 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

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The Threat The Opportunity
THREAT
OPPORTUNITY

• Similar portals in development
• Viajo.com _at_ Mexico

• Despegar Network in place
• Simultaneous deployment in LatAm
• First-mover advantage

The Timing is NOW
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The Venture Capital
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 ...
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Case Key Learnings

• Identify Projects Risks
• ? Affect Cash Flows ? Affect the Cost of
  Capital
• Set up Cash flows
• Sensitivity Analysis
• Real Options

? ? ? ?
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Projects Risks Cash Flow Implications
?
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Projects 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
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Projects Risks Cost of Capital Implications
?

() Industry Beta adjustment corresponds to
Travel and Tourism, Internet effect is considered
in Cash Flows.
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Projects Risks Cost of Capital Implications
?
Re 23.47
Despegars Capital Structure 100 Equity, no Debt
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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
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Cash flow Setup
?
REVENUES Ticket Bookings CommissionsOthers
Rental Car HotelsAdvertising
Corporate Expenses IT Personnel Operations
Operating Countries Expenses Marketing Costs
NPV 50 M
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Sensitivity Analysis
?
Monte Carlo Mean NPV 25 M
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Real Options
?

• Delay Option
• Abandonment Option
• Expansion Option
• Brand or Knowledge Building Option

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Thank you !!