Venture capital-funded startups are a common choice for executives looking to innovate. Many startups have been left behind by the global pandemic. This has given rise to lesser-known travel businesses that self-fund their growth. Many have shown greater agility and innovation during times of crisis.
A case in point is MaxMilhas, an online travel company in Brazil. This week it bought another innovator in travel, Lance Hoteis. Both were founded on their own. The terms of the deals were not disclosed by either company.
Let’s start with some background: MaxMilhas is not well-known outside Brazil. It is however, a significant player in the richest country of Latin America. Although it only has sold 7 million tickets to date since 2013, its success has been impressive among online competitors and has proven a unique model.
It offers a platform for the trading of tickets purchased with frequent flyer miles, which is a departure from other online travel agencies. MaxMilhas in Portuguese means “maximizing miles”, and it offers a mix of agency and metasearch models.
MaxMilhas sold about 60% of Brazilian airline tickets before the pandemic. This was Decolar/Despegar’s biggest online travel company, Latin America, according to the startup.
Max Oliveira is co-founder of MaxMilhas and its CEO. He said, “We launched the company in 2013, with approximately 28,000 reis or around $5,000.” We’ve seen a significant increase in our sales, except for the mentoring that we received through the Startup Accelerator 21212 and some credit granted by the Federal Government to qualified startups.
MaxMilhas had to fire 167 employees due to the pandemic, while it retained 280. The online flight-booking service has nearly 400 employees if you include outsourced contract freelancers.
Its sales are mainly for domestic family and leisure travel. It has suffered less from the international pandemic restrictions than other online companies that make a large portion of their income through international and business travel tickets.
However, flight ticketing has become less lucrative than it was in the past. MaxMilhas bought Lance Hoteis to increase hotel booking.
MaxMilhas will take over the technology behind Lance Hoteis’ brand. This tech allows consumers to choose their hotel, then ask for a discounted rate on a sliding-scale basis — ranging from 1% to 20%. In order to confirm the offer, the online travel agency connects directly with the hotel.
“The MaxMilhas acquisition is a clear sign that OTAs [online travel agencies] in Latin America are investing strongly in terrestrial services, as they usually start their businesses selling good prices for air,” said Fernao Loureiro, who runs Loureiro Consultores.
Loureiro stated that air tickets are more expensive than they were in the past and offer a smaller commission. Metasearch and OTA brands have no other options than hospitality, which is still a complex and fragmented industry with low revenue management in Latin America.
MaxMilhas as a Airline Mileage Play
What is MaxMilhas’ working principle?
Imagine that you are a frequent flyer with Brazil and have 10,000 miles. Because you are not a business traveler, your mileage is limited to any one airline. You won’t be able to exchange the miles for anything of value.
Now imagine you are planning to fly to Mexico within a few months. MaxMilhas has a peer-to-peer platform that allows you to offer your 10,000 miles for sale. Depending on the time they require your miles, different people may offer you more or less money.
MaxMilhas prevents fraud by verifying that the seller has legitimate mileage and that the buyer is paying real money.
If you are a customer and want to buy a ticket to Mexico, then you can go to MaxMilhas to search for the flight. This is just like if you searched for a plane on Skyscanner or Kayak. In a metasearch search model, you’ll find tickets available for purchase from airlines. You’ll see the price of the tickets if it were purchased with MaxMilhas miles. This is after MaxMilhas has added a sliding-scale charge that ranges from 12 to 25 percent of its value.
Sometimes, it will be less expensive to purchase a flight directly from an airline. MaxMilhas allows you to purchase the ticket from within MaxMilhas’ interface. It functions as an online agency that provides customer service.
But what if you chose the miles option?
Oliveira stated that MaxMilhas would send a web crawler into the seller’s account in order to use seller’s miles for a ticket to be issued to the buyer under the buyer’s name. To prevent fraud, we deposit the money in the account of the seller within 33 days.
MaxMilhas has been a source of online ticket sales for Brazilian airlines. It has provided a means of selling online tickets. People who may not have otherwise thought that they would be able to afford tickets are now more inclined to purchase them.
Oliveira stated that a survey showed that between 25 and 30 percent of customers would be reluctant to travel if they didn’t find a lower price on our website. These are discretionary, price-sensitive leisure travelers who often travel with their families to visit family. The average discount we offer is 40%
However, some airlines are losing direct sales. Oliveira stated that about 60% of MaxMilhas searches before the outbreak found it cheaper to book mileage-based tickets than retail airfares on the airlines’ sites. This includes fees.
Brazilian airlines limit the number of tickets that frequent flyer miles holders can issue each year, which is typically 25.
MaxMilhas has, on its part, not sold business class tickets, Oliveira stated. It knows that these are particularly lucrative for airlines and doesn’t want them to lose their customers.
MaxMilhas is up against many other competitors. MaxMilhas faces competition from Despegar’s Decolar. Submarinoviagens is the online brand of established travel giant, CVC Corp, which calls itself largest group of travel and tourism companies in the Americas. Companies like Points.com or Booking Holdings RocketMiles are potentially dangerous.
MaxMilhas executives think they are in a unique position to be innovative.
Oliveira stated that the Lance Hoteis technology was attractive because of its creativity. They could have connected to Cangooroo, an aggregator such as Hotelbeds, to obtain supply. But instead, they built direct relationships with other people and created a product that was in demand. This encourages word of mouth marketing.
Creative forms of travel protection and insurance are another area that could be of potential interest. MaxMilhas is currently in talks to acquire a company with some related services.
Oliveira is still frustrated by how hard it is today to search for and book an online ticket. Oliveira believes that the online flight booking process must be simplified for customers.
Oliveira stated that “not much has changed over the past years.”
The founder feels that his startup has a better chance than others to survive the crisis because of its financial stability and core customer base, who are primarily interested in domestic leisure and family travel over the coming year. The company may be able to increase its average transaction volume by adding hotel bookings.
For more context on Latin America’s largest economy, read Skift’s story from earlier this month: Brazil’s Travel Tech Scene Is Blossoming Despite the Pandemic.
Publited at Fri 27 August 2021, 18:16:09 +0000