The Brazilian online travel agency Hotel Urbano has gotten a 120 million Reais ($50 million) reservation from the powerhouse venture capital and private equity investor Tiger Global Management and previous backer Insight Venture Partners.
With both the World Cup and the Olympics right around the corner, the Brazilian travel industry is exploding as the country frantically tries to increase its stock of accommodations for the expected tourist boom.
“Today we have 450,000 hotel rooms in Brazil, and this number will almost double,” said Hotel Urbano co-founder Joao Ricardo Mendes.
Some of the cash from the round led by Tiger Global will go to support a push the company is making to conduct direct negotiations with hotels across the country. Unlike the U.S. market, which is dominated by a few national brands, 85% of the 14,000 hotels currently operating in Brazil are individually owned, Mendes said.
The Rio de Janeiro-based company is also looking to expand its sales and marketing efforts internationally and Mendes sees the World Cup and the Olympics as the starting shot in a race to increase the number of tourists making Brazil a top tourist destination. However, the economic impact of hosting major international sporting events has been mixed.
“Barcelona before the Olympics wasn’t one of the top travel destinations in the world,” Mendes said. “Now it’s number 10.” In fact the city of Barcelona attracted more tourists at 8.4 million than the entire country of Brazil (which receives between 6 million and 8 million tourists per year).
Founded in 2011 Hotel Urbano has grown alongside the Brazilian middle class. The company started with 5 employees and now has more than 500. Its revenues will reach nearly R$1 billion (roughly $427.4 million) by the end of this year, up from R$90 million ($38.5 million) in 2011, and the company operates two concept stores in addition to an online presence that includes 10 million fans on its Facebook page.
Hotel Urbano’s revenue primarily comes from its hotel booking service, which accounts for roughly 65% of the money coming in. The remainder is from the package booking service it offers. Competitors like Decolar (the Brazilian site for travel service Despegar.com) derive most of their revenue from airline bookings, according to Mendes.
For Tiger Global, the investment in Hotel Urbano is just the latest in a string of large commitments to startups worldwide. The private equity and venture investor has bet big on e-commerce startups in India, China, and several in Brazil in addition to its big stakes in U.S. tech companies.
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