When executives seek innovation, they typically turn to startups touted by venture capital. But the pandemic has blamed many startups. This gives an advantage to lesser-known travel agencies that have self-funded their progress. Many of them have been more agile and innovative during the crisis.
A case in point is MaxMilhas, an online travel agency in Brazil. This week he bought another travel innovator, Hotels offer. Both companies have been primed. They did not disclose the terms of the deal.
First, a bit of history: MaxMilhas, based in Belo Horizonte, is not well known outside of Brazil. But it is important in the richest country in Latin America. While he has only sold over 7 million plane tickets since his founding in 2013, he has surpassed his weight among online gamers and has proven himself as a model that is mostly unknown elsewhere. .
Unlike most online travel agencies, it offered a marketplace to redeem tickets purchased with frequent flyer miles. MaxMilhas roughly means ‘maximize kilometers’ in Portuguese, and the company offers a mix of metasearch and agency models.
Before the pandemic, MaxMilhas sold around 60% of the volume of airline tickets in Brazil as Lift-off/To take off, Latin America’s largest public online travel company, sold to Brazil before the crisis, the startup said.
“We started our business in 2013 with approximately 28,000 reis, or approximately $ 5,000,” said Max Oliveira, co-founder and CEO of MaxMilhas. “We have increased our sales since then – with the exception of the mentorship we received from Startup Accelerator 21212 and some job credits the federal government gave to qualifying startups some time ago.”
The pandemic forced MaxMilhas to lay off 167 workers, but it kept 280. If you count the freelance contractors, the online-only flight booking service now has nearly 400 workers.
Most of its sales were made for domestic recreation and family travel. It has therefore been less affected by the pandemic-related restrictions on international travel than some other online players who have derived the majority of their income from international and business travel tickets.
However, airline ticketing is no longer as lucrative as it once was. MaxMil therefore sought to develop in hotel reservations by buying Lance Hotéis.
The Lance Hotéis brand will disappear and MaxMilhas will absorb its back-end technology. Here’s what this technology does: It allows consumers to choose a hotel and then claim a discount off the advertised rate on a sliding scale, between, say, 1% and 20%. The online travel agency then checks with the direct-to-do hotel to approve the offer.
“The acquisition of MaxMilhas is a clear sign that OTAs [online travel agencies] in Latin America invest heavily in land services, as they usually start their activities by selling good prices for air, ”said Fernão Loureiro, who heads Consultants Loureiro.
“Airline tickets have tight margins and a limited commission offer, compared to the pre-pandemic period,” Loureiro said. “So the alternative for metasearch and OTA brands is in the hospitality industry – a sector that is still very complex, fragmented and with poor revenue management in Latin America and many other regions. “
MaxMilhas as an air mileage game
How does MaxMilhas work?
Let’s say you have 10,000 frequent flyer miles with a Brazilian airline. You are not a business traveler, so you only earn a small number of miles on any airline. It is difficult for you to redeem miles for cash.
Imagine you want to fly to Mexico in a few months. You can offer to sell your 10,000 miles through the MaxMilhas peer-to-peer marketplace. Some people can offer more money for your miles, others less, depending on when they need it.
MaxMilhas fights fraud by verifying that a seller’s miles are legitimate and a buyer’s money is real.
Now when you as a consumer want to buy a flight to Mexico, you go to MaxMilhas and search for your flight, as if you were looking for a flight on Skyscanner, Kayak or the Brazilian brand Mundi of Kayak. You will see tickets on sale from airlines in a metasearch template. But you’ll also see how much it would cost if you bought it with miles in the MaxMilhas Marketplace, after including a MaxMilhas tapering charge of between 12% and 25% of the ticket value.
Sometimes it will be cheaper to buy a ticket from the airline. MaxMilhas will allow you to buy the ticket while remaining in its interface, like a classic online travel agency offering customer service.
What if you opted for the miles option instead?
“MaxMilhas will send a crawler to the seller’s account to use the seller’s miles to issue a ticket to the buyer on behalf of the buyer as a passenger,” Oliveira said. “We then deposit money into the seller’s account within 33 days of ticket issuance to allow for a stamp to combat fraud.”
Airlines in Brazil have been cautious about their collaboration with MaxMilhas. On the one hand, it has been a source of online ticket sales. It also increased the demand for tickets from people who might not otherwise have thought that they could afford to buy a ticket.
“A survey we did found that 25-30% of our customers said they couldn’t take a trip without the lower price they found on our site,” Oliveira said. “They are discretionary and price sensitive leisure travelers who often travel with family to visit relatives. Our average discount is 40 percent.
On the other hand, airlines are losing some direct sales. About 60% of research on MaxMilhas before the pandemic found that it was cheaper to book miles-based tickets than the retail fares found on the airlines’ own websites, even after factoring in fees, a said Oliveira.
Brazilian airlines have limited the number of tickets a person with frequent flyer miles can issue in any given year to typically 25.
MaxMilhas, for his part, hasn’t sold business class tickets because he knows these are particularly lucrative for airlines, and he doesn’t want to cannibalize their sales, Oliveira said.
MaxMilhas faces competition, of course. outraged lift-off, it now competes, through its hotel offer, Hurb (formerly Hotel Urbano) is a local player, but it has minority support from Booking Holdings. Submarine is the online brand of the established travel giant, CVC Corp, which considers itself the largest group of travel and tourism companies in the Americas. Internationally, companies such as Points.com and Booking Holdings’ Brand RocketMiles are potential threats.
But MaxMilhas executives believe they have a competitive advantage by being innovative.
“We liked the Lance Hotéis technology because it was creative,” Oliveira said. “They could have just connected to a booking engine like Cangooroo or an aggregator like Hotel beds to source, but instead, they’ve created direct relationships and brought a product to the market that others don’t, which encourages word-of-mouth marketing.
Another area of potential interest is in creative forms of travel protection or travel insurance. MaxMilhas has had acquisition talks with a company that offers services in this space.
Oliveira remains frustrated with the difficulty of finding and booking a ticket online today. He believes the travel industry needs to further simplify the process of purchasing flights for consumers.
“Not much has changed in recent years,” Oliveira said.
Meanwhile, the founder believes his startup is better positioned than some rivals to come out strongly from the pandemic given its stable financial situation and its core audience of customers primarily interested in leisure and family travel. to the country over the next year. Adding hotel reservations can help increase the total size of transactions the business can generate on average.
For more background on Latin America’s largest economy, read the Skift story earlier this month: Brazil travel tech scene flourishes despite pandemic.