Despegar Corp. (NYSE: DESP) is a leading online travel company that specializes in providing comprehensive travel agency services. With a robust presence across 18 markets in Latin America, the company offers a wide range of travel-related products, including tours, corporate packages, vehicle rentals, and hotel bookings. Its destinations cover popular global spots like Paris, Cancun, Rio de Janeiro, Rome, Barcelona, and Las Vegas.

Diving Deeper into the Despegar Business

The company’s operations are structured into three main segments: Air, Packages, Hotels, and Other Travel Products, and Financial Services.

• The Air segment focuses on facilitating the sale of airline tickets, leveraging Despegar’s extensive network and technology platform to offer competitive fares.
• The Packages, Hotels, and Other Travel Products segment provides tailored travel packages, combining lodging and activities to meet diverse customer needs.
• Meanwhile, the Financial Services segment supports the company’s operations with services like credit scoring, fraud identification, and information technology, enhancing transaction security and customer trust.

Despegar’s strong focus on Latin America, a large and fragmented market, has allowed it to gain deep insights into the region’s consumer behavior and travel preferences. This understanding enables the company to offer personalized travel solutions that cater to the unique needs of its customers. Additionally, Despegar employs a multi-channel distribution strategy, reaching customers through Business to Consumer (B2C), Business to Business (B2B), and Business to Business to Consumer (B2B2C) operations.

Combining an extensive inventory of air and lodging options, cutting-edge technology, and operational excellence, Despegar is positioned as a premier travel brand in Latin America. The company’s innovative approach, which includes providing payment and financing solutions, ensures that it remains a leading player in the competitive $2 trillion global travel market.

A Look into the Despegar financial performance

Despegar.com Corp. delivered strong financial results in the second quarter, showcasing continued growth in both revenue and profitability. The company reported total revenues of $185 million, reflecting a 12% year-over-year increase. This growth was primarily driven by robust demand in its key markets, Brazil and Mexico, where consumer activity remained healthy.

However, the company faced significant foreign exchange (FX) headwinds across the region, which were stronger than anticipated and impacted the overall results. When adjusting for FX fluctuations, Despegar’s revenue growth was an impressive 46% year-over-year in constant currency terms, positioning it as a leader in the global travel industry.

Brazil

Despegar’s largest market, demonstrated strong demand trends, with transactions growing by 26% year-over-year. This growth occurred despite challenges such as the floods in Rio Grande do Sul, which impacted 5% to 8% of the company’s transactions in Brazil during the quarter. The average selling prices in Brazil, however, decreased by 8.3% year-over-year to $472, mainly due to FX pressures. Despite this, the growth in transactions drove gross bookings to expand by 22% on a constant currency basis, reaching $618 million. On a reported basis, gross bookings grew by 15%.

Mexico

Mexico, the company’s second-largest market, also showed solid performance. Gross bookings increased by 9.4% year-over-year to $294 million on an as-reported basis, with a 6% growth in constant currency. This growth was fueled by an improved revenue mix, particularly from higher-margin international travel packages, which contributed significantly to Mexico’s gross bookings. Additionally, Despegar focused on expanding its market share in air travel, with domestic air travel being a key contributor to the growth in the quarter.

Broader Despegar Performance in Latin America

In the broader Latin American region, gross bookings declined by 10% year-over-year to $460 million. This decline was primarily due to FX pressures that reduced average selling prices in markets like Argentina and Chile. However, when excluding the effects of currency fluctuations, gross bookings in these regions surged by 67% year-over-year. The company remains focused on enhancing profitability by increasing its non-air revenue streams, reflecting its strategic shift towards more diversified revenue sources.

Takeaway for Despegar

Overall, Despegar’s Q2 performance underscores its ability to navigate challenging market conditions while maintaining strong growth, particularly in its core Latin American markets. The company’s efforts to diversify its offerings and focus on high-margin segments are expected to continue driving profitability in the coming quarters.