Two Latin America
travel management technology providers completed significant fundraising rounds
in recent months, and while their approaches to the market are different, they
agree that the region is ripe for travel management digitization.
Brazil-based
travel and expense platform Onfly, which was founded in 2018 and has grown to
more than 2,000 clients, in April announced a $40 million funding round to accelerate tech
development and sales and marketing. A month prior, Mexico City-based spend
management platform Mendel, which launched an online booking tool and travel
module last year, announced closure of a $35 million funding
round with which it will
invest in technology and expand its footprint and team.
Both companies are bringing digitization to a market that
still largely relies on manual processes for booking corporate travel. Alan
Karpovsky, Mendel’s CEO and cofounder, estimated that about 20 percent of
corporate trips in Latin America currently are booked through online booking
tools. "Most of the big companies still rely on phone or email with their
agencies," he said.
For Onfly, the majority of whose clients are based in
Brazil, the market has "a lot of unmanaged travel, said Marcelo Linhares,
Onfly's CEO and cofounder. He estimated about half of clients are coming from
legacy agencies, while another half are largely having employees book via
online travel agencies or directly from airline websites.
The Latin America market presents several obstacles for
corporate travel technology providers beyond low adoption, Karpovsky said. Tax
regulations in the region are a "headache" in working around
invoices, tax credits and VAT recovery, and currencies are volatile. Air
content remains fragmented in the region as well, he said. The large OBTs,
including those offered by legacy agencies, also are more difficult to use in
the region because they are not localized to market needs, he added.
"It’s a pain to build technology in these markets,
and we see that as an opportunity," Karpovsky said.
Legacy agencies are the main competitive set for Onfly,
which Linhares said is operating under a "very similar" business
model to Navan and TravelPerk.
"We understand that the business travel industry is
in a transformation, shifting from the offline model to an online model,"
he said. "We offer a platform where customers can book trips, flights,
hotels and rental cars, and employees can utilize our expense tools during the
trip with a mobile app, and travel management can analyze it in real time."
Mendel, on the other hand, aims to partner with agencies,
offering a travel and expense solution onto which a TMC can layer on its
services. Karpovsky noted that has been a challenge, convincing TMCs that
Mendel is a potential ally rather than a threat, as it talks to the major
agencies.
"Our vision is that the agency must keep the
customer, and we can override the card or the policy engine or online booking
tool," he said. "It’s really hard to sell software to a large
corporate, and it’s even harder to sell a software and ask them to remove their
agency, remove your invoicing and connections and do everything for them."
With the recent investments, both
companies are planning geographic expansion. Onfly already has some clients in Mexico,
and along with planning to continue expansion there, it will be branching out
into Colombia, Chile and Argentina.
"Our idea is to dominate Latin
America," Linhares said. "The five countries are 95 percent of the
economy of Latin America."
Mendel is on a similar expansion
path. Beyond its current markets of Mexico and Argentina, it is now opening in
Chile and eventually plans to be open in Colombia and Brazil. The company also
is aiming for profitability by the end of this year, according to Karpovsky.
"We see travel as a big blue
ocean in Latin America, with all these opportunities," he said. "It's
not like in the U.S. or Europe, where you have 10, 15, 20 different players. We
think we are well positioned to capture this market with this strategy to be
allies for the agencies."