International Sports Events In Brazil Is A Lucrative Opportunity For Online Travel Companies

by Trefis Team
Rate   |   votes   |   Share

Brazil’s GDP (Gross Domestic Product) growth rate declined steeply from 7.5% in 2010 to 2.7% in 2011 and 0.9% in 2012, due to a contraction in consumption and investments. [1]  Although the growth picked up in 2013 to 2.3%, it was still lower than the historical average of 3.1% achieved by the country between 1991 and 2014. The nation is presently hosting the 2014 FIFA World Cup (commenced on June 12) which could bring its slowing economy back on track.

Soccer is a popular international sport and many travelers are visiting Brazil to see this year’s World Cup. Global distribution system Amadeus’ Travel Intelligence division reported that air ticket demand from Europe to Brazil for the World Cup (June 12 – July 14) has increased by 60% compared to the same period a year-ago. The U.S. has also seen a surge in travel demand to Brazil, with air ticket bookings to the country increasing by 68% for the May–August period. [2]

The Fifa World Cup, along with the Summer Olympics that Brazil will host in 2016, will help travel companies such as Priceline, TripAdvisor and Expedia generate incremental revenues through the sale of air tickets, hotel accommodations and car rentals. In this article, we discuss how international sports tournaments will increase the flow of tourism to Brazil, and then briefly highlight the kind of exposure the online travel companies have in Brazil.

See our analysis of travel stocks: Priceline | TripAdvisor Expedia

Global Sports Events Will Increase Brazil’s Appeal As A Tourist Destination Among Foreign Travelers

Brazil had about 5.9 million international visitors last year. For the FIFA World Cup, its government spent more than $11.5 billion on building 12 stadiums, airports, ports and roads in the country. The World Cup, along with the improved infrastructure facilities, is expected to lift the number of foreign tourists past the 7 million mark in 2014. According to the Brazilian Tourism Board EMBRATUR, about 600,000 foreign and 3,000,000 Brazilian tourists are expected and will spend over $11 billion during the World Cup.

Each foreign traveler is expected to attend four matches on an average and spend nearly $2,500 during the World Cup, amounting to $3 billion in revenues. [3] For the complete year, foreign tourists are estimated to generate over $9 billion, an increase of more than 35% from 2012. [4]

National Secretary of Public Policies, Vinícius Lummertz said during an interview with The Rio Times, “We hope tourism in Brazil rises to a new level after the World Cup. With infrastructure improvements that increase the competitiveness of Brazil as a tourist destination, and the high exposure of the country abroad, I expect to see a significant increase in foreign tourists—but mainly more Brazilians traveling through Brazil.” [5]

Brazil is the largest economy in Latin America and the seventh biggest economy in the world. Tourism accounts for about 3.6% of the country’s$2.05 trillion GDP and is growing faster than the global average. Hence, it plays a vital role in Brazil’s economic growth. The sector employs about 10 million people, and the World Cup is expected to generate 500,000 more jobs. Aldo Rebelo, Brazil’s minister for sports, expects the World Cup to add 0.4% of growth per year to Brazil’s economy until 2019, via higher taxes and tourism and non-tourism related expenditures. [6]

Despite the huge costs already incurred, we expect Brazil to continue on infrastructural investments in the next couple of years since it will also host the Summer Olympics in 2016. This would mean high quality infrastructure in Brazil for many years to come. Since better infrastructure helps aid tourist activity, the number of foreign travelers to Brazil should cross 10 million by 2017, as suggested by Flávio Dino, the President of EMBRATUR. [7]

Opportunity To Pump Up Hotel Commissions

Hotel occupancy rates and room rents in the 12 Brazilian host cities have shot up due to a large influx of travelers. Average hotel rents in these cities have increased by over 120% since last year, even though thousands of rooms were constructed for the World Cup. According to leading travel review website TripAdvisor, Rio de Janeiro is the most expensive of all cities at $445 per hotel night stay for a 3-4 star hotel. [8]

Although average daily rates for hotel rooms are expected to cool off post the World Cup, we believe that there won’t be a sharp fall because of the 2016 Summer Olympics and the high inflation rate (6.4% in May 2014) in Brazil. This will benefit travel companies that have invested in Brazil, since higher room rents translate into better commissions, and therefore into better revenue per room night.

Understanding The Exposure Of Our Travel Companies To Brazil/Latin America

Priceline: Priceline is experiencing rapid growth in Asia-Pacific and Latin America via its and websites. Latin America, where Priceline has about 15% share of online travel bookings, is the fastest growing region for the company and registered an 86% growth in travel bookings last year, according to Piper Jaffray data published by Skift. [9] Priceline is particularly strong in Brazil, where its brand is the top ranked website for online travel by percentage (21%) of visits. To cater to this year’s World Cup travelers, Priceline has both its agency and merchant model of bookings operating in Brazil.

Expedia: International operations account for about 44% of Expedia’s gross bookings, nearly half of rival Priceline’s 85%. However, it is increasingly expanding into high-growth markets such as Asia-Pacific and Latin America to increase its international exposure. Currently, it is more focused on Asia-Pacific since it is the fastest growing overseas market.  Its website has a mere 2% market share in Brazil by visits.

Expedia has taken important steps in recent years to close the gap with its competitors in Brazil. For instance, it launched its flagship Expedia domain in the country in 2012. It also undertook a social media initiative last year that helped increase hotel room night bookings by 84%.

TripAdvisor: Among all regions, TripAdvisor derives the lowest percentage of its revenue—4% out of $945 million in 2013— from Latin America. However, this is twice the percentage contribution in 2011. TripAdvisor is expanding in the region by regularly adding websites in local languages. The company has launched mobile city guides for travelers for the 12 Brazilian cities that are hosting this year’s World Cup. [10]

See More at TrefisView Interactive Institutional Research (Powered by Trefis) | Get Trefis Technology

  1. Brazil Overview, The World Bank, 2013 []
  2. FIFA World Cup 2014: Amadeus reveals spike in traveller demand, Breaking Travel News, June 16, 2014 []
  3. Brazil Expects World Cup 2014 to be a Football Carnival and Economy Booster, Business 2 Community, June 11, 2014 []
  4. Foreign Tourism to Bring US$9.2B in 2014 to Brazil: Daily, The Rio Times, January 2, 2014 []
  5. Strong Outlook for Brazil’s Tourism Industry Next Year, The Rio Times, November 26, 2013 []
  6. Football World Cup 2014: Brazil & FIFA set to rake in money, The Economic Times, June 1, 2014 []
  7. (Brazil welcomes new tourism record, Breaking Travel News, December 16, 2013 []
  8. TripAdvisor Reveals The Costs To Visit Brazil’s Soccer Host Cities, TripAdvisor, May 28, 2014 []
  9. The Big Growth Opportunity Left for the World’s Biggest Travel Company, Skift, April 16, 2014 []
  10. TripAdvisor Launches Free Mobile City Guides For Brazilian Host Cities, SeekingAlpha, June 12, 2014 []
Rate   |   votes   |   Share


Name (Required)
Email (Required, but never displayed)
Be the first to comment!