CheapOair Parent Enters Mexico Market Through Investment in Consolidator

Fareportal, the parent of New York-based online travel agency CheapOair, invested in a Mexican consolidator and they plan a joint venture to bring CheapOair into Mexico and eventually into additional countries in Latin America.

The consolidator is Contravel.com.mx, a B2B agency providing negotiated rates for flights, hotels, cars and cruises to travel agencies.

“Mexico will be our launch pad into Central and Latin America,” says Chris Cuddy, Fareportal’s chief commercial officer. “It will be our second Spanish speaking business after CheapOair en Español, which is for the American Hispanic audience that represents roughly 17% of the U.S. population.

“Half of the U.S. population growth over the past 2 years was from Spanish-speaking individuals,” Cuddy says. “Only Mexico has a larger Hispanic population.”

Cuddy declined to detail the amount of Fareportal’s investment in Contravel or whether the investment is a minority interest or a controlling stake.

“It’s an investment and a joint venture for launching in Mexico,” Cuddy says.

What is a consolidator?

“Consolidators purchase tickets directly from the airlines at specially negotiated rates, and then resell them to travel agents or consumers for prices 20 to 70 percent lower than published fares,” states IndependentTraveler.com. You’ll often find the best discounts on international tickets.

Fareportal has been mulling geographies for international expansion beyond CheapOair’s sites in the U.S., Canada and the UK for some time,  and now has settled on Mexico and Latin America as targets.

“We partnered with Contravel because they know the local Mexican travel market,” says Cuddy, adding that Contravel’s B2B services will stay intact and “we will grow B2C teams over time. We will be helping them build out their website and e-commerce technology for B2C.”

Cuddy says the Mexico launch will cover the gamut.

“We are hiring and training travel additional agents now in Mexico to expand our existing Spanish-speaking capacity to handle the anticipated growth,” he says.

“This will be a full launch for us — website, mobile Web, apps, 24/7 contact center support, chat, emails, and payment options, etc.,” Cuddy adds.

The Contravel Perspective

Gerardo Olavarrieta, co-founder and CFO of Contravel, says CheapOair’s launch in Mexico “will be the first American OTA that establish a fixed operation in Mexico. Other American OTAs such as Expedia operate in Mexico from call centers outside of the country.”

Other foreign online travel agencies operating in Mexico, such as those from Spain or Latin America do little to meet the needs of U.S.-based customers, Olavarrieta says. “And the pure Mexican OTAs are focused on local deals.”

“To have a strong partner base in New York with operations in five countries gives this deal a globalized view of the travel market,” Olavarrieta says. “Each party will concentrate on what each has proven to be the best part of their business — Contravel on B2B and CheapOair on B2C, sharing experience and negotiations with suppliers that can boost any or both of them.”

Ticket Volume

The joint venture comes as Fareportal, which includes CheapOair, OneTravel and corporate travel agency Travelong among its brands, announced that it expects to see its 2014 ticket sales rise nearly 23% to $4.3 billion, making it the fourth or fifth biggest U.S. online travel agency in terms of sales.

That figure can be a bit misleading, though, because CheapOair’s focus on flights means its profit margins are considerably smaller than its online travel agency rivals, many of which focus on hotels and view flights as a loss-leader.

Cuddy elaborated on the rationale behind Fareportal’s investment in Contravel: “Our objective is to become the go-to place for flights for the U.S. Latin American population. Since many Spanish-speaking travelers are from Mexico, having a local presence in Mexico was an obvious extension to this strategy.”

For Spanish speakers, here’s a Contravel.com.mx video describing the air, hotel, car and cruise services it offers to travel agencies: