Brazilian and Argentine tourists are sticking close to home as wild swings in currencies have made long-distance trips weigh more on wallets, according to Despegar.com, the largest online travel booking service in Latin America.
Traveling to the U.S. has become a luxury. Trips to Miami and New York dropped about 30 percent each, according to company data, bumping the latter off the top 10 list for Argentine tourists. Brazilians are also avoiding the U.S. — trips to Orlando, Florida, dropped 24 percent. Travel from Argentina to Rio de Janeiro, meanwhile, increased 37 percent in August compared to a year earlier, and trips to domestic destinations like Salta and Cordoba are up as much as 45 percent.
“Exchange rate fluctuations are hiccups that affect international flights, but they don’t change our view that the tourism industry is growing in the long term,” said Marcelo Grether, head of business development, strategy and planning at Despegar. “The number of people buying tickets hasn’t changed — what has changed is the destination.”
Latin American currencies have withered under rising U.S. interest rates and a sell-off in emerging markets, exacerbated by local situations like elections and deficits. August was by far the worst this year for both: Argentina’s peso tumbled some 26 percent, while Brazil’s real dropped 7.3 percent. The peso is down about 50 percent this year, while the real has lost 12 percent, according to data compiled by Bloomberg.
While the number of transactions at Despegar went up 18 percent in the second quarter compared to a year ago, analysts are questioning whether the slowdown will eventually hit the company. Itau and Morgan Stanley trimmed their target prices for Despegar after second-quarter earnings on concerns that the weaker currencies would hurt demand.
The company’s not standing still. It’s offering travel packages, installment payments and its own version of Airbnb Inc. accommodations to grow and offset the regional economic downturn, said Juan Pablo Alvarado, head of legal and corporate affairs.
“Maybe this year more people will buy lower-cost flights,” Alvarado said. “But if they have a good experience now when things settle back into place, we hope they’ll choose us to go to Europe with the whole family.”
The Buenos Aires company is always on the alert for acquisition opportunities, the executives added, and it may consider implementing loyalty programs further down the line.
Shares of Despegar, which raised $332 million in an initial public offering in September 2017, have dropped by almost half over the past year amid a rout in Argentine stocks. Tiger Global Management, the company’s largest shareholder, sold part of its stake in the IPO and said in August that it was looking to shed more of its holdings.
“Funds like Tiger’s have a certain lifespan, and at some point look to give their funds liquidity,” Alvarado said. “We knew they would look to exit their position at some point. Now, we are looking to give investors long-term value.”
This article was written by Carolina Millan and Fabiola Moura from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to firstname.lastname@example.org.