Skift Take

With its IPO on Wednesday, Despegar became the world's seventh-largest online travel company by market cap. Its bosses talk a good game. But its major markets may have near-term hiccups ahead.

Despegar means “to take off” in Spanish — and that’s exactly what did Wednesday in the stock market.

Latin America’s largest homegrown online travel agency had an initial public offering, and its shares rallied 22 percent above the issue price in its New York debut.

The investor interest was striking given that the company debuted at $26 a share — the high end of its planned IPO range.

The company’s share price at the close of the day’s trading was $31.78.

Financial statements say the company has 67,182,110 ordinary shares outstanding as of Wednesday, though a bit more may be in play if underwriters take the option to buy additional shares.

Based on the above figures, the company has a market capitalization of $2.135 billion — making it Latin America’s first online travel startup “unicorn.”

That, in turn, makes Despegar the seventh-largest publicly held online travel company in the world, as ranked by market capitalization.

Despegar follows in market cap after Expedia Inc., Priceline Group,, TripAdvisor, Trivago, and MakeMyTrip. As a side note: Giant travel player Airbnb has not yet announced its IPO, but experts believed that it will become the fourth-largest online travel player if it ever does.

Despegar has vaulted ahead of the market caps of several other travel agency players that are primarily online, such as eDreams Odigeo,, Yatra, and Travelzoo.

The company will use the proceeds of its IPO — projected to be between $197 million and $241 million — to underwrite its growth.

On Wednesday Despegar published its first online material for investors presenting its strategic case for growth.

Some of that growth might be simply copying what has worked elsewhere. Only one out of five airplane tickets are bought online in Latin America, compared with about one in two in the U.S. Brand building has helped companies establish market-leading positions with consumers that are difficult to unseat, and Despegar has invested a lot in building its brands.

Earlier this year, the company’s largest investor, Tiger Global, installed a new chief executive, Damián Scokin, who had previously led the merger of LAN Airlines, LATAM Airlines Group’s predecessor and the biggest airline in Chile, and TAM Linhas Aereas, one of Brazil’s larger airlines.

In an interview Wednesday, Scokin talked about how the flotation marks a new direction for the company. When asked to summarize his priorities for the next 18 months, he was succinct: “Growth.”

One path to growth would be through acquisition, and the IPO has given Scokin’s team capital to make strategic purchases.

Chief Financial Officer Mike Doyle said the company would evaluate opportunities via mergers and acquisitions through two lenses.

“Our priority would be to acquire businesses that are dominant in online travel,” Doyle said. “Companies that could help complement our supplier network would be interesting, even if they were smaller, sub-scale businesses. Companies that could bring in new skills, talent, or inventory might also be of interest.”

Scokin acknowledged that now that Despegar is on the public market, investors will expect some predictability with earnings and other financial metrics. He said he spoke at length with investors during the IPO roadshow about the fact that the nature of several Latin American economies is that there are ups and downs rather than linear growth. But he insisted that the overall trend is up in a nearly exponential way.

Expedia Angle

Worldwide, many online travel companies struggle to gain traction with users and suppliers because of the competitive edge the giant conglomerates have at playing the digital marketing game with gatekeeper platforms like Google and Facebook.

The potential competition didn’t faze Doyle.

“Our company has been in business for more than 18 years, so we have built up a lot of local market expertise in understanding the quite complex markets of Latin America,” he said. “Our real differentiator is to have our entire management team focused in LatAm only, which gives us an edge.”

Another possible edge may be Expedia.

Many investors seem intrigued that Expedia kept all of its shareholdings and is estimated to own a seventh of the company after the IPO.

Founded in 1999, Despegar operates throughout Latin America, the U.S., and Spain, but its largest market is Brazil via its subsidiary

Despegar may become a candidate for a strategic acquisition by an online travel giant, given that its geographic specialty represents something of a gap in their distribution and supply networks.

Adding to the overlap between Despegar and Expedia is the fact that Despegar’s CFO since 2013, Doyle, had previously been CFO of eLong, China’s online travel agency — also backed by Expedia. Doyle has further ties to Expedia, having been its past CFO of Asia operations.

In other words, Doyle may have some things in common to talk about whenever he next bumps into Mark Okerstrom, Expedia Inc.’s new president and CEO and its former CFO. One possible topic: Experience in helping a business take off.


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Tags: despegar, latin america, online travel agencies

Photo credit: CEO Damián Scokin (second from the left) rings the bell for the start of trading for online travel agency Despegar on the New York Stock Exchange on Wednesday. From left to right, pictured are CFO Mike Doyle; CEO Damián Scokin; co-founder Roberto Souviron; Chris Taylor of the NYSE; and Ines Lanusse, head of investor relations. Despegar

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