Tiger-Backed Hotel Urbano Sees Startup Turning Profitable in ’15

Joao Ricardo Mendes And Jose Eduardo Mendes
Joao Ricardo Mendes and Jose Eduardo Mendes. Photographer: Dado Galdieri/Bloomberg

Hotel Urbano, the online travel agency that was the top recipient of venture capital funding in Brazil last year, is on the cusp of generating its first profit, one of its founders said.

The company expects to generate earnings before interest, taxes, depreciation and amortization in 2015, founder Jose Eduardo Mendes said in an interview at the company’s Rio de Janeiro offices last week. He declined to provide absolute forecasts, citing confidentiality agreements with investors.

“More and more, we’ve come to understand that we have some screws to tighten,” Mendes said. “The main focus of this year is to make the operation profitable. We’re focusing a lot on profitability, not just in new business niches but also in improving our bread and butter.”

Hotel Urbano is an example of the burgeoning scene of Internet entrepreneurs in Brazil that has begun to attract investments from U.S. venture capital firms. Local entrepreneurs are betting they can do better than international competitors in a market with plenty of consumer quirks -- including a penchant to pay for just about everything, from electronics to groceries, in installments.

Venture capital firms quadrupled investments in the country last year, and Hotel Urbano took the industry’s biggest haul with $52 million, according to the Emerging Market Private Equity Association. The investments were led by Insight Venture Partners and Tiger Global Management, which were early investors in companies including Twitter Inc. and Facebook Inc.

Mendes, 32, said the Brazilian hotel booking company now has its eyes set on an expansion in Latin America, to markets such as Colombia, Chile and Mexico. It is also dipping its toes into the Airbnb Inc.-like business of renting out private residences to travelers with last month’s announcement of a 5 million reais ($1.57 million) investment in Voltem.com

Mendes said the company is targeting an initial public offering in 2017. The company may also eventually seek out a strategic partner, he said, citing the company’s “good relationship” with Expedia Inc. and Priceline Group Inc.

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