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Hotel Urbano raises $20M to ride Brazil’s big online travel wave

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Image Credit: Jemps

It’s a great time to be a Brazilian travel startup. The technology and tourism industries in Brazil are erupting at the same time, and Hotel Urbano is at the epicenter of all the action.

The online travel agency announced that it has raised $20 million in its third round of financing from Insight Venture Partners. The company is growing fast, and the capital will support its continued growth.

Brazil is one of the hottest emerging markets for startups. Internet use is growing at a rapid pace there, and the country recently reached 100 million Internet users. Venture capitalists are beginning to look toward Brazil for investment opportunities. Brazil’s hosting the 2014 World Cup and the 2016 Summer Olympics, events that attract millions of tourists, and the country has an expanding middle class. Accordingly, the online travel market in Brazil is blowing up – it’s on track to surpass $7.5 billion in online travel sales this year.  According to eMarketer, this is a “bellwether” for consumer-facing e-commerce and online travel sales serve to “anchor” an overall shift from offline to online purchasing.

Hotel Urbano is a fairly straightforward site for making travel plans. It launched in 2011 and expects to surpass $450 million in revenue in 2013. It has 15 million registered customers, and the company claims its 7.7 million Facebook fans are more than any travel brand in the world. The site presents listings for hotels, national travel packages, international travel packages, holidays and special deals, cruises, and tours. You enter a location and Hotel Urbano presents an array of relevant results. It has 180,000 accommodations options, in 35,000 destinations, across 83 countries.

All signs point that the Brazilian tech and tourism scene will continue to grow. However the country is volatile. The Brazilian government has spent an estimated $15.4 billion on the World Cup and the extravagant spending (among other things) set off a string of protests around the country. Citizens are angry that money is being funneled into the sporting events and tourism when it could go toward schools, health care, etc … The protests put spotlight on Brazil’s social and economic inequalities and the plight of its poor. More than 2 million people have protested. This does not present an encouraging environment for tourists or investors, but has not curbed Insight Venture Partners support of Hotel Urbano.

A study from the MIT Sloan School of Management said that “fast follow” companies are good bets for Brazil. These are companies that take proven business models and customize them for emerging markets, à la Rocket Internet. For a market like Brazil that is still unpredictable, this route can mitigate some of the risk. Furthermore these companies set themselves up for acquisition by established companies looking to capture that market. Online travel is about as safe of a bet as you can get in Brazil.

Insight Venture Partners invested in the company’s first round in 2011 as well as its second round in 2012.