The rise and fall of HotelUrbano, the brazilian hotel booking start up, a cautionary tale

72
New York Skyline
New York Skyline

Many Brazilians rely on local upstart Hotel Urbano, which is backed by at least $130 million from travel-booking giant Priceline Group Inc. and others, according to research firm CB Insights. Expedia Inc. owns AlugueTemporada, which operates a similar service but lists only 30,000 homes in Latin America.

Hotel Urbano is an online platform that enables travelers to find and reserve accommodation and activities. It promotes tourist destinations, and assists the development of entrepreneurs in Brazil and Latam.  Users have access to travel packages, hotels, spaces for rent, cruises, and more.

Hotel Urbano has an audience of travelers on Facebook with over 11 million fans, the largest fan page on the social network among young internet companies all around the world as well in the travel market segment worldwide.

In 2013, the Rio-based startup closed 1.6 million travel bookings last year, generating over $120 million in revenue, and expects to double their revenue in 2013.

Insight Venture Partners led the $20 million Series C round, bringing the firm’s total investment in HotelUrbano to over $40 million. They are the exclusive venture capital investor in the startup since making a Series A offer three weeks into the company’s operation. Insight’s Bradley Twohig sits on the board.

In 2014, the Brazilian online travel agency Hotel Urbano had 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.

In 2015, Priceline  the world leader in online travel and related services, and Hotel Urbano, one of Brazil’s largest and fastest growing online travel companies, announced that the two companies had entered into a strategic partnership consisting of a commercial agreement and a minority investment by The Priceline Group. As part of the partnership, The Priceline Group would provide access to accommodations outside of Latin America from its global network of 680,000+ accommodations partners to Hotel Urbano. In addition, Priceline made a $60 million investment in exchange for a minority interest into Hotel Urbano.

The partnership was supposed to give consumers in Brazil and Latin America access to even more great accommodations around the world through The Priceline Group’s network.  Hotel Urbano will use Booking.com to power its non-LATAM retail hotels product on an exclusive basis, and The Priceline Group will also be the preferred provider for Hotel Urbano’s global packages.

At the time Darren Huston, President and CEO of The Priceline Group was saying “Brazil is a dynamic, fast growing market and both of us are growing very rapidly within this region,” said “We are excited to partner with Hotel Urbano to help globalize their offering and let their customers experience the best of what both of us have to offer.”

“The Priceline Group has truly global scale and partners with the world’s best and most diverse accommodations worldwide – from hotels to villas and beyond,” said Joao Ricardo and Jose Eduardo Mendes, co-founders of Hotel Urbano. “We are not only committed to bringing our customers access to the best experience out there, we are committed to expanding our presence in Latin America, and look forward to having this unique partnership with The Priceline Group as our first major step in this regard.”

Then came the troubles, “In March 2016, the Company received an operating performance update from Hotel Urbano, which showed disappointing 2015 results, significantly reduced forecasts and the need for additional funding in the near term,” the Priceline Group stated in a Securities and Exchange Commission filing.

“This update combined with increased political turmoil, the declaration of a public health emergency related to the Zika virus and sustained poor macroeconomic conditions in Brazil in the first quarter of 2016 indicated a potential other-than-temporary impairment in the fair value of the Company’s investment.”
via skift

So the founders came back,

Brazilian business publication Valor International, however, reports the Mendes brothers repurchased the stakes of Insight Venture Partners, Tiger Global Management and the Priceline Group, which collectively held more than a 50 percent stake in Hotel Urbano.

João Ricardo Mendes told Valor International that he and his brother repurchased the stakes, adding he may seek new partners in the future. The Mendes brothers continued to sit on the company’s board after stepping down in November 2015.

José Eduardo Mendes and Joao Ricardo Mendes held a 34 percent stake in Hotel Urbano when they stepped down as CEO and and chairman, respectively, last year but remained on the board.

Brazil has been through economic turmoil in the last couple of years and Hotel Urbano similarly was hard hit as the number of hotels on the site and bookings plummeted.