The online long-distance and organized travel agency Exoticca wants to keep the pulse of a year 2022 especially good for the travel sector after the stoppage of the global coronavirus pandemic. For this year, it intends to overcome the barrier of 200 million euros in total turnover, thanks to the growth obtained from the sale of its products through third-party physical establishments. To achieve this, the Barcelona-based startup is going to rely on television in key markets, such as the United States or the United Kingdom, which will imply a strong investment that will come largely from the new round that it plans to close throughout the year. year, after the 20 million debt raised after the summer from the specialized fund Claret.
When Covid broke out in March 2020, Exoticca was selling record numbers. And everything stopped. Faced with some of their competitors, they decided not to go into a ‘hibernation mode’, but tried to maintain activity after the lifting of the first restrictions. They launched several shock measures. According to its CEO, Pere Vallés, three worked. One was the free cancellation policy with a refund of 100% of the cost. Another was setting very low prices, for which it had to convince its service providers in the destination countries. “We told them we are going to continue investing but we need you to give us prices that have not been seen before,” says Vallés.
The third measure also involved a technological evolution: extending travel times. Traditionally, airlines only offer their ‘slots’ for the following months. The Spanish company changed this paradigm and offered the possibility of reserving a long-haul product for the next three years. They developed an algorithm to try to predict flights and their prices in the future. Of course, increase your margin in the final sale price, with the aim of covering the risk of error in that prediction. This will allow them to maintain assets when almost no one moves in the sector. According to their own figures, in November of that 2020 they had recovered the income level of February, prior to the outbreak of Covid.
In that 2020 they entered, according to their own figures (they do not consolidate accounts in any company and the Spanish subsidiary only contemplates the data of the Spanish business), about 33 million euros compared to 48 million the previous year. Beyond not bringing revenue to zero, it showed, as Vallés acknowledges, a much closer relationship with its suppliers while many of its competitors were forced to stop. This strategy of keeping the blind open meant that in 2021, when there were still two variants of the highly contagious disease, it doubled to 75 million. And 2022 arrived, with a lot of family spending still to be executed. Billing reached 124 million according to the first closure that has been carried out. All this despite the fact that they have had to navigate supply problems, due to the capacity at airports or hotels to respond to that demand.
Exoticca’s model tries to attack a very complex niche of travel: long-distance and organized travel, which turns out to be a kind of ‘Tetris’ to try to fit all the pieces. Each of the products contains between 20 and 30 components -from flights to excursions to hotels- that are hired by the start-up in each country and are offered ‘packaged’ to the end customer. Traditionally these products are sold in physical agencies and require several visits. They reduced times in the purchase. And to try to win in this battle, they try to disintermediate as much as possible and go directly to whoever provides that service in the country. To pave the way, we offer your ‘software’ for free to manage reservations, the calendar, etc. In addition to digitizing and unifying the offer, you have access to a lot of data from those providers on consumer trends.
With this model and with a tourism already fully recovered, in 2023 they want to continue accelerating, although not at the 100% rate of last year. According to Vallés, the marked budget stands at 200 million euros. The measurement of three-year travel reservations has been maintained and also the increase in their margins, which are around 30% of the final price paid by the client. To accelerate, they seek to enter more strongly in television advertising within their key markets such as the United States (which represents 60% of their sales), Canada (15%) and the United Kingdom. They have already done some tests in the last few months. This requires a strong investment for which it will be necessary to have more muscle.
Go for TV and physical agencies
In September they raised 20 million debt from the specialized fund Claret Capital, partners of others such as Jobandtalent or Playtomic. It was a way of postponing the ‘examination’ of the valuation, which is not public but which the Dealroom data platform places in a range of up to 160 million. “We do not consider that it was the best moment to set a new assessment,” Vallés adds. Now, during 2023, they do intend to return to the market to lift. They will try to teach what managers are now looking for: profitability or at least its visibility. In the last quarter of 2022, according to its own figures, it reached 300,000 euros of positive Ebitda. The last expansion they executed was in 2021 with 25 million and with the emergence of the American 14W and the renewal of K Fund, Bonsai or Kibo. In total, it has eight funds, which share 65% -none of them exceeds 15% of the capital-.
Its competition continues to be the traditional physical agency, since practically all of this type of travel is still in its hands. Other firms have emerged in recent years, although they followed more of the hibernation strategy during Covid. The French Evaneos is one of them and has just raised 20 million capital. The German Tourlane is another, but it has not raised capital since the end of 2020. There is also the Australian Tourradar. “There is no official data, but everything indicates that they are now recovering pre-Covid levels,” Vallés adds.
Despite the fact that these physical agencies are their main competition, they have decided to bet on them as a sales channel. Exoticca is not a distributor, but all the products they sell are their own, with their brand, and designed and added by themselves. They have offered more than 4,000 agents in their main markets their own technology to digitize the entire process and thus be able to generate travel proposals on the client’s first visit. This measure had internal debate. But finally they have put it into operation and it has contributed to the acceleration. “We have offered prices that are better than what they have and that are at least equal to what they could find on the internet; we are not going to compete on price,” says the CEO. This will be a key ‘leg’ of growth in 2023 in which they will go out again to ‘examine’ with investors.
