Mondee began its journey of expanding offerings via seven acquisitions during the pandemic. Now it's starting another acquisition spree, and all signs point to that being a good move.
Mondee is scooping up Brazilian online travel marketplace Orinter for $40 million, its first acquisition since going public last year, the company said Wednesday.
Mondee provides travel agents access to a marketplace for booking on behalf of their customers. Travel agents access that marketplace, as well as ancillary software products to manage their business, through a Mondee software platform. Orinter offers a similar marketplace service to travel agents for hotels and ground transport, but without the tech platform.
The acquisition gives Mondee access to Orinter’s network of contracts, which spans throughout Brazil and the rest of South America. And Orinter’s nearly 5,000 travel agents now have access to Mondee’s tech and network, enabling them to expand offerings to their customers. The $40 million deal is comprised of cash and Mondee common stock.
This is the beginning of an acquisition spree, according to Orestes Fintiklis, vice chairman for Mondee and the company’s chief corporate strategy and business development officer.
“This is what we’ll be doing over the next two years, and you will be seeing a lot of M&A coming,” Fintiklis said.
Mondee’s strategy is to expand offerings and market reach, and accelerate growth, by acquiring only companies that add specific capabilities beyond what Mondee already has, he said.
“If you want to expand product and expand geography, you can do it on your own organically, but it’s going to take you another 20 years. Or, you can buy a company and then supercharge it by giving it your distribution and your technology,” Fintiklis said.
Companies like Booking Holdings and Expedia have consolidated much of the fragmented business-to-consumer travel industry. Now, Mondee’s executives want to do the same with the business-to-business-to-consumer sector, he said.
“It’s very ripe for consolidation, especially in the geographical dimension,” Fintiklis said. “We aspire to be the biggest B2B2C player globally in travel.”
Continued Expansion Plans
About 80 percent the Mondee’s bookings are for flights, the rest now comprised of hotels and car rentals. The company plans to soon expand offerings to include cruises, theaters, theme parks, sporting events, and other ticketed events, Fintiklis said.
Another newer source of revenue for the company, clients can use Mondee fintech products for payments, fraud protection, and price freezes. The company also sells travel insurance and more.
In its continued geographical expansion, Mondee is focused first on Latin America — hence the Orinter acquisition — then India and Europe, in that order.
The company during the pandemic opened the use of its product beyond just traditional travel agents to include home-based agents and more, he said. The company is seeing an uptick in social media influencers downloading the tech and selling to followers. Businesses can also subscribe to Mondee as a service, giving employees access to discounted travel as a benefit.
Mondee earlier this week announced a new affiliate program through which agents agree to use the company’s services exclusively in exchange for lower wholesale prices.
Mondee owns 6 percent of the flight market in North America through sales by 50,000 travel agents. The end goal is that the exclusively agreement will increase bookings of Mondee’s newer hotel and other offerings, which he said are much more lucrative. He said thousands of agents are in line for exclusivity with the company.
“This is a game changer,” Fintiklis said.
Mondee was founded in 2011 and acquired seven travel tech companies in the next year, focused solely on selling flights wholesale to travel agents. Mondee invested nearly $200 million between 2012 and 2015 to create a software platform for its segment of the market. The company grew 40 percent each year since 2015, and 70 percent last year, Fintiklis said.
It made no other acquisitions until the pandemic hit, and the company took advantage of low acquisition costs to begin expanding its offerings. All of the most recent acquisitions, along with all going forward, are meant to accelerate organic growth, Fintiklis said. Besides acquiring to add offerings and create value on both sides, he said the company only buys when the valuation is highly accretive.
The firm Tigress Financial Partners estimates that Mondee will grow bookings revenue by nearly 140.8 percent this year to $2.3 billion, driven by its “advanced technology platform combined with expanding content and distribution,” according to a report it issued in December.
The firm estimates that the company’s share cost will rise to $16 by the end of the year, according to the report.
Mondee went public in July 2022 via special purpose acquisition company, or SPAC, with a market capitalization of approximately $740 million. The stock debuted on market at $11.05 per share. Following a bumpy ride since then, the share price sits at around $10.75 today.
Of all the travel tech companies that went public via SPAC, however, Mondee is the only one trading above $10 a share. Some of the major travel SPACs have lost on average more than 65 percent of their value from market debut. Though Mondee operated at a loss before going public, the company is now cash flow positive.
Ivan Feinseth, chief investment officer and director of research at Tigress Financial Partners, said the company’s business challenges going forward are the usual suspects: finding growth opportunities and dealing with their execution and competition.
“But I think that they will manage through that,” Feinseth said. “There’s a lot of growth opportunities.”
And the consumer demand for travel agents, along with software agents can use, is alive and well, especially with continued strength for travel demand that all companies in the industry are seeing.
“There’s a significant growth in adoption for the assisted booking, or travel agent booking,” Feinseth said. “People have said the travel agent’s dead, killed by the internet — not true. More and more consumers — especially for more expensive, more complex travel, especially cruise travel — rely heavily on travel agents.”
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Tags: affiliates, fintech, mergers and acquisitions, mondee, travel agents, travel technology
Photo credit: Salvador is the capital of Brazil’s northeastern state of Bahia. Pixabay