“To be honest, we didn’t see it coming. We had closed 2019 with €48m in sales, up 115% compared to the previous year, and we had also launched in the US market in late 2018, which was becoming a great market for us. But it was fast, sudden, dramatic and unexpected. We went from sales of €5m per month, which was our highest point, to just €100,000 the first two weeks of April. It shook us.”
The months of March and April were quite busy for a lot of professionals and companies. But for a travel startup whose main business is sending people around the world on long trips to exotic places, the impact was even higher.
This is the story of how Exoticca navigated (and continues to do so) the covid-19 pandemic, which shut down airports all around the world and confined millions of people in their homes.
We talked to Pere Valles, CEO of Exoticca, to know what it felt like to face the coronavirus from the inside of a travel company.
Pere Valles had spent more than 14 years at Scytl as CEO when he decided that it was time to try something new. One of the iconic companies of the up-and-coming Barcelona tech ecosystem, Scytl was trying to “reinvent democracy” by building a series of tools that let people vote online.
“The years 2014 and 2015 were really tough for the company and we had gone through a lot for almost 15 years”, says Pere. “I wanted to leave the company in good hands and so the delegation process took almost a year and a half, but I knew that I wanted to move on and see new things”.
Through Albert Ferrer, who had been a board member of Scytl for several years and one of the company’s first investors, he met Exoticca. Ferrer was also one of the first business angels in Exoticca, a travel company based in Barcelona founded by Jesus Rodriguez in 2013 who had been growing at a steady pace for years.
“What I liked about Exoticca was that it was a totally different company from what I was used to, which sold directly to consumers”, adds Pere. “The other key aspect that attracted me to Exoticca was Jesus, who had a great vision to transform the vacation package and tour market within the travel vertical, which was one of the few remaining travel sectors unaffected by technology”.
This was, in fact, one of the key areas that seemed really attractive for us as investors about Exoticca’s business. With a very capital efficient model, the company had been able to build a strong brand within its niche and was slowly but surely stealing market share from traditional brick-and-mortar travel agencies.
In 2017, Exoticca had already posted sales of €10 million and a few months later Pere Valles would join as CEO to help the company achieve greater scale. “Jesus realised that he needed help to scale and with fundraising efforts, and I thought I could provide that”, he adds.
To understand how the transition took place, listen to the following audio explanation by Pere.
By the time he joined, Exoticca needed to raise a round of funding within three months. Which he did. In June 2018 we were happy to lead a €3.5 million Series A round and we’ve continued to support the company ever since.
Exoticca offers a convenient way for people to embark on long trips around the world. Certain types of consumers enjoy putting together their own itineraries and book hotels, flights and activities that specifically match their criteria. Others, and more than we actually realised at the beginning, prefer the convenience of booking on a single platform and with a single click all of those different products at the same time. Prices and availability are offered in real time, and in a matter of seconds, consumers can easily compare different options before deciding to order, with no additional time pressure or “starting from €2,500” offers. One price, one click, one trip.
Through a series of product features and commercial agreements, Exoticca brings online a buying process that up until recently mostly happened offline and through traditional vendors.
What Exoticca does is mostly disintermediate the traditional channel and value chain. “Pricing is a key key aspect for us, and our goal is always to offer prices that are at least 30% cheaper than the competition”, says Pere.
This value chain involves a series of players, both at the destination as well as at the time of booking, that Exoticca bypasses by going directly to providers in order to build a unique, appealing and affordable travel package.
In an era of mass customisation powered by the Internet, Exoticca holds a contrarian modus operandi that involves the employment of “product crafters” (humans, not bots) that are experts in different areas of the world. These travel experts are responsible for knowing their respective markets inside-out in order to offer consumers their best holidays ever.
“We think offering consumers a limited number of options is key to our business. We concentrate demand on a limited number of providers that we’ve previously vetted and that we know can offer the right amount of quality for the right price”, explains Pere. “Consumers can always change some aspects of their trips, but we provide the main structure so that it becomes a hassle-free booking experience”.
This way of tackling the travel market has resonated with consumers, and since its foundation in 2013 and until 2019, Exoticca has matched its financial projections.
Pere admits that until the first cases appeared in Bergamo, Italy, they thought the virus would have a limited impact in Europe. But reality would soon catch up and by April the company had seen a gigantic slowdown in sales and lots of cancellations of previously purchased trips.
“I had seen several crises first-hand, both at Scytl and at my previous company in the middle of the dotcom bubble”, he recollects. “But this was a bit different because it was a crisis that had nothing to do with our performance. We were not in a bad situation because we had done something wrong”.
At that point, the company had two options.
One was to hibernate, set everything on pause business-wise and wait until the pandemic stopped or at least was controlled. The second option was to try to find creative ways to reactivate sales while making sure the company was able to survive by cutting certain costs.
If those creative measures were able to slightly reactive sales, the company would be in a great position when the market turned to (somewhat) normal, thus putting Exoticca in a great competitive situation if other companies in the sector opted for the hibernation alternative.
The strategy paid off. In the first two weeks of April the company had sales of just €100,000, but in May that figure had ballooned to €2.5 million.
These creative measures that Pere describes were several, and once again mostly pivoted around the topic of securing the right prices and providers for consumers.
“We took advantage of the fact that many competitors were in hibernation to go to our existing travel partners and assure them that we were not going away, that we were going to continue to provide business to them, that we were not going to pause all of our marketing operations, that we were still in business. But in exchange, they’d have to offer us great (and often never seen before) prices”, he says.
Exoticca’s proposition had another key aspect, which was to ask partners to guarantee those prices until the end of 2022, so that when the market reopens and other competitors come back, they would have a hard time offering the same prices.
Most providers agreed with the plan.
The other key aspect in order to continue to operate was to build trust with consumers, existing and new ones. What the company did was to offer a money-back guarantee up until 60 days before the date of the trip and also to offer travel dates until the end of 2022, which is something uncommon in the travel sector.
In essence, it was the right prices from providers and the ease of mind for consumers to start spending again. And it worked.
When the first news about the vaccines appeared in November, sales numbers increased to pre-covid levels, especially in the US market.
“The US market has been great for us. The performance we’ve seen there during covid, makes us think that, in a normal situation, we have a gigantic opportunity in the US”, adds Pere.
In the middle of the biggest crisis that the travel industry has ever seen, Exoticca raised more funding (a round in which we also participated) and increased its sales in the US from €12 million in 2019 to €18 million in 2020.
A feat of gigantic proportions.
For the rest of 2021, Exoticca expects demand to really pick up in the second half of the year and for 2022 to be a normal year in the travel sector.
“People have been stuck in their homes for months and they can’t wait to travel again. There’s a lot of pent-up demand and we’re very happy to be in this position”, he concludes.
We’re also happy.
Kuddos to Exoticca and the team.
Exoticca operates a managed marketplace, which meant that it needed to apply certain measures for both the supply and demand side.