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Discover the World

October 2014

How to Successfully Launch Travel Sales in Brazil

Discover the WorldHow to Successfully Launch Travel Sales in Brazil

Seeing Green in BrazilWe have all heard over the last several decades how important BRIC (Brazil, Russia, India, China) countries are to a business’s global strategy. This has been tempered in recent years as growth rates have lessened and political events may have taken over. Still, almost every travel business eyeing international growth is looking at these markets at some level.

Brazil is a particularly attractive market these days for good reason and should continue to be considered as part of a global expansion.

This is because it is:• A potential growing engine of the

world economy

• The gateway to the whole of South America

• The country with the fastest growing middle class (about 100m),

• A relatively safe place to do business

• The 7th biggest economy in the world (forecasted to be the 5th within ten years)

Moreover, the government has recently established a new National Tourism Plan, which includes the goal of becoming one of the five main tourist destinations in the world by 2022. In order to achieve its goals, the Brazilian government has launched a series of reforms that include economic liberalization, social reforms and a growing investment in infrastructure. This plan will also benefit outbound tourism as they proceed to build 800 regional airports in cities with more than 100,000 people.

In Brazil your employee costs you almost double of his/her salary. An employee paid 880 BRL per month actually costs 1500 BRL. This does not include the numerous benefits often offered.


Land of Opportunities but also RisksOf course with any fast growing and developing market, reaping rewards requires taking on some risks. Brazil is challenging for a number of reasons.

1. Challenging bureaucracy

2. Developing infrastructure

3. Volatile economic policy

4. Complex and confusing requirements

5. High inflation

6. Inadequately prepared workforce,

7. A growing imbalance of economic distribution in cities

8. Crowded markets with established competition

9. A large informal economy

10. Protectionist legal and regulatory system

11. High value on strong personal relationships for conducting business

12. A “liberal” perception of time for appointments and contracts

13. Strict liability rules

14. ROE variation with depreciation ahead

We could devote an entire paper on the complexity and encumbrances of the tax system in Brazil. Companies should consider hiring a tax professional to navigate the difficulties. Moreover, the cost of hiring and firing is quite high. In a survey of 144 countries, Brazil ranks 114th in terms of human resource social costs. Mandatory labor tax & contributions and profit taxes represent almost 41% and 22% of business commercial profits, respectively. As a result, Brazilian company costs are 29% higher than the Latin America average and 24% more than the average in OECD countries.

In addition, while Brazil boasts a corporate tax rate of only 15%, an additional surtax of 10% and a social security contribution of 9% bring the effective corporate rate to 34% (2009 Index of Economic Freedom). A foreign company within Brazil is automatically granted resident status if it is incorporated within the country.

So, while Brazil is clearly an opportunity market to consider in your international strategy, you must go in with your eyes wide open and should consider in advance how to mitigate your risks.

Brazil’s labor laws are set out in 900 articles!

When dismissing your employee, you must notify him one month in advance plus three days per year of work or pay him the amount equivalent to a month salary.


Market Headlines for BrazilA snapshot of the Brazil travel market reveals the following trends.

Strong emerging economy translates to a positive travel outlookBrazil market size, maturity cycle development, income growth, emerging middle class, new potentials in middle term, demographic population aging, rising disposable incomes and geographical factors show a positive scenario for the travel business.

Departures by Purpose of Visit 20011 (Forecast Departures by Purpose of Visit 2014/2017)


Brazilians spend like no other on their travelThis advance purchase, long stay, brand conscious, avid shopping group is amongst the highest in spending while traveling. Brazilians spend more per capita when they travel than any other nationality and rank 5th overall in international travel spend.

Outgoing Tourist Expenditure by Category: Value 2008/2010/2012

Forecast Outgoing Tourist Expenditure by Geography: Value 2012-2017


Aging leisure market will spend heavily on travelWith high spending power and excess leisure time on their hands, travel expenditures for Brazilians age 60+ will expand significantly even during low season. A growing middle class population coupled with easy access to credit, should boost demand for travel and luxury goods.

Travel to the USA is set to growDue to flight frequency and USA visa acceptance upticks, the outbound business to the USA, inparticular to NYC, Miami and Washington, continues to grow at 28% per year with 1M passengers visiting the USA in 2014 and 2M/3M forecasted to visit the USA by 2017.

Leisure Departures by Type 2007-2012

Forecast Departures by Destination 2012-2017


The addressable market is large and accessibleThe Brazilian travel market is consolidated with well-defined market segment allowing companies to target their investments to the segments that will drive optimum return.

Tour Operators/Consolidators continue to maintain a strong market positionAs the base of outbound travelers continues to grow, the Tour Operator channel continues to expand quickly compared to other markets. There is a general transition from mass to more independent travel. The market is dominated by large, local market players.

OTAs have emerged and are growing rapidly OTAs are the fastest growing online travel segment, outpacing

supplier sites. The OTA landscape is consolidated and consists of global, regional and local players. Brazil will be a key driver of luxury travel seeking service and exclusivity.

Business travel is complex and will continue to be outsourced to TMCs. The GDS channel will continue to grow as a resultThe GDS channel has experienced slow adoption and maintains a relatively small market share compared to developed markets. In spite of this, the channel continues to grow as the larger companies outsource their business to the TMCs that enforce hotel programs and look to drive travel policy compliance. Business travel is dominated by TMC Joint Ventures, servicing primarily São Paolo/Rio de Janeiro based multinationals.

US Outbound market segments and channel growth

Search Meta SearchRevenue ??Growth ??

Booking EngineChannel Share 10%Growth 25%

GDS - CorporateChannel Share 15%Growth 10%

Online OTA’sChannel Share 17%Growth 27%

VoiceChannel Share 14%Growth 15%

MobileChannel Share 1%Growth 200%

Leisure FIT & Mass MarketChannel Share 43%Growth 11%


Nine Ways to Ensure Success in Brazil1) Relationships are still keyThe Brazilian business culture relies heavily on the development of strong personal relationships. Brazilians tend to deal with individuals, not companies. Companies that do not invest time in developing these relationships will struggle and could potentially do serious damage to their brand. Nowadays, good relationships are established faster due to technology but the quality and depth of relationships is still important. We have seen companies make the mistake of trying to rush Brazilians into making decisions or forming relationships or trying to circumnavigate the system only to find that they are locked out of key channels. Make sure to take the time to understand the necessary relationships and make all efforts to establish them in advance. Consider working with someone who has existing relationships.

2) Know the territoryConsider that Brazil’s São Paulo state alone is larger than all of Argentina. Here, the level of competition is

high, and retail prices are lower than elsewhere in the country. By contrast, in Brazil’s northeast (the populous, but historically poorest part of the country), the economy has the fastest growth, competition is lighter, but prices are higher. Short-sighted multinationals tend to flock to São Paulo and miss the opportunities in other parts of the country. It’s only recently that MNCs have started investing heavily in the Northeast, trying to catch up with regional companies in what is often described as Brazil’s “new growth frontier.”

3) Carefully consider your market entry costs Entering Brazil properly will require you to spend significant cash, take time and necessitate that you navigate through numerous legal, regulatory and administrative procedures.Consider:• A typical capital investment ranges

from $100,000 to $200,000 to establish a local office

• Start-up costs range from $100,000 to $250,000

• Brazilian laws require businesses to have a local manager who is fully liable for taxes and certain other issues

• The social costs of hiring and firing are extensive

• Navigating the tax system requires the professional service of a local law firm

• The government requires a monthly tax revenues report (a practice that seems very complex and unusual to US companies)

Brazilian famous motto: “To our friends, everything; to others, the law.”


• All documents must be translated and certified in Portuguese, and approved by your local Brazilian consulate and also notarized.

We estimate that opening a new, local business in Brazil can cost a minimum of $200,000 to $450,000 depending on the scale and take from 12 to 24 months. When considering these requirements, it prompts the question: how can you enter in a way that minimizes your time, investment and risk?

4) Follow a Phased Approach Our suggested approach is to take the market in phases, advancing to the next step once you have achieved targets. This is done by working with local partners on a performance or retainer basis. Here is a summary of the key stages:

Phase 1: Exploration We recommend doing your research in market. Visit the market and talk with potential partners, suppliers, and even learn about the competition. We also suggest participating in a few sales missions and partaking in a trade show or event. This stage is extremely important, but how do you accomplish it if you do not have contacts in the market and without major up front expense? We suggest finding a launch partner who can set up meetings, introduce you to key players and work the trade shows on your behalf. This stage ends with a commitment to the market, but we don’t recommend entering fully unless you have little doubt about your success. It would be best to make the next level one of measured investment through a partner.

Phase 1Exploration

Phase 2Representation

Phase 3Strategic Partnership

Phase 4Direct Investment

The time required to set up a business is a minimum of 3-4 months to process. Opening a business account in Brazil is often difficult, requires a significant amount of time and paperwork and can take longer than a year in some circumstances.


Phase 2: Representation This implies relying on a local expert, with a real understanding of the Brazilian market, who actively works to promote your brand. This is perfect for somebody who wants to test the waters and see what the market has to offer. To reduce costs and your risk, this partner may represent a number of clients. Ensure that the partner has specific goals, a plan and realistic expectations. Check in frequently and track your investment. Likely, they will be compensated on a retainer + incentive basis as your brand is new and they are laying the ground work for the future. Once the specified goals are achieved, this triggers the next stage. If success has been achieved rapidly leaving little doubt of success, you can consider jumping to Phase 4, but usually it is wise to advance with a dedicated presence through your partner.

Phase 3: Strategic Partnership This stage expands your presence without severely increasing your investment or risk. The trigger for this is when you begin to experience rapid growth and expansion in your sales presence, your brand is becoming recognized and you feel you want to commit to the market but are not yet sure if you want to take the long term risks. In this phase, you establish a permanent presence via your partner. This can be in the form of full time representation on a performance basis or a Joint Venture with an equity stake in a local entity. If your partner is motivated by incentives, they will perform to grow your business as their success relies on your success. Your approach determines the type of legal protections you are afforded, so think carefully.

Phase 4: Direct Investment This stage occurs once you have reached the point that your business has grown so that it justifies the fixed costs of opening your own shop without relying on a third party. Your product has proven itself, and your level of certainty is unquestionable. At this point, your risks are now mitigated, and you have developed your own expertise to function independently in the market.

ISS, Cofins, CSLL, IOF, PIS, IRPF, IRPJ, IPTU. These are only some of the taxation that a foreign company has to deal with.


5) Adjust your product to Brazilian tasteCompanies might recognize the importance of localizing, targeting and personalizing communications, but executing on this can often be a challenge. It is only through the full understanding of Brazilian motivators that it’s possible to target their needs. Brazilians share passion for food, music, relationships, luxury brands and any product that can show their status back in Brazil. For example, consider:• Providing unique travel experiences

and personalized customer journeys• Selecting hotels in central locations

near shopping districts and malls• Developing packages that include

shopping value, music/dance themes

• Enabling a 2/3 month advance purchase plan and payment in installments

• Stay sensitive pricing incentives - Min stay 3 nights

• Including full breakfast – Eating in main restaurant

• Providing WIFI enabling travelers to keep in touch with family/friends/news

• Providing late checkout as flights to Brazil typically leave at odd hours

• Fixing the advanced Real exchange rates

• Providing limo transfer to/from airport so they do not have to deal with language issues

6) Get Paid, The Brazilian WayIn Brazil, payment through credit card corresponds to approximately 67 % of total payments for travel services, and 33% is in cash. 80% of travel services are paid in installments and 20% in one single payment. Therefore, in terms of purchasing power, the typical calculation made by the C Class is based on the possibility to pay in installments, and how much the installment represents in the monthly budget. Today, an increase in interest and taxes affects the cost of sales and the commission structure, adding some pressure in travel chain margins. The financial cost for wholesalers to charge a tour package in 10 installments, for example, is approximately 7% and needs to be considered in the distribution strategy and commission schemes as a sales cost.

Method of Payments for Outgoing Tourism Spending: % Breakdown 2007/2012


7) Engage in the SouthThe South may be the smallest area of Brazil, but its population is twice as large as the number of inhabitants of the North and Center-West regions. With a relatively equal development in primary, secondary and higher education sectors, this population presents the highest literacy rates recorded in Brazil, which explains the social and cultural development of the region. The southern forests were colonized by German, Italian and Slav immigrants, which gave the region a European appearance in architecture and in the physical characteristics of its population. Most of the South’s income originated through services and industrial areas such as metallurgy, textile, automobile and food sectors. There is a predominant presence of extraction activities and electricity generation, mainly through the Itaipu Hydroelectric Power Plant, the second largest in the world.

8) Have a strategy outside Rio and São PauloBrazil is a very big country. A plane ticket from Rio to Manaus is more expensive than one to Miami. It’s important to consider this as a business trying to organize its sales management force. There are five main regions and wide cultural differences among the regions. While Rio and

São Paulo are certainly key markets in which to focus your efforts, there are significant opportunities in outer regions. Here again is where you may want to engage partners who can represent you on a variable basis. As an example of how this can benefit you, an airline that recently launched service to the country employed a representative in the outer region while they concentrated their efforts on the two major cities. The result was an upside of 33 % in terms of business results. The decision to distribute outside of São Paulo and Rio was a result of the analytical approach and a strong relationship with the main players in the travel market. The opportunity resides in the fact that these areas are more open to a personal approach, training, workshops with travel agencies and targeted partnerships. The high yield and margin is another aspect of this strategy with focus on corporate contracts, agreements with TMCs and high end customer base which impacts directly the sales and profitability results.


9) Don’t underestimate the importance of SoLoMo SoLoMo (Social, Local, Mobile) is a term representing the convergence of collaborative, location-based and on-the-go technologies, primarily used for marketing and discovery purposes. Today, the Brazilian travel market is social and interactive. Travel companies now need to consider integrating search, social media, content, blogging, and more to increase their appeal. Gone are the days where all it took was a brand and an expensive advertising campaign to temporarily attract new customers. What might not be easily visible is the role your online marketing effort plays. It’s actually significant. In most cases, traffic from blogs, social media, organic and paid search end up attracting new customers to your travel business. Without a professional SoLoMo strategy operated by a provider that has a unique understanding of the Brazilian market, you may just spend a lot of money and achieve small or no results at all.


SummaryKnowing the field and understanding the complexity of the largest market in South America is something that cannot be improvised. Security is the key in Latin America, and in Brazil this comes with partnering and relying on local trusted experts who have strong ties and relationships in the market.

The Brazilian travel & tourism market is in a great position and in great condition, growing at higher ratio than the GDP and with strong business development opportunities. The country’s macroeconomic scenario forecast that global brands are increasing their investments, and a growing number of M&A and partnerships are happening. Moreover, the development of new technologies and a growing internet access among the Brazilian population with standard devices and mobile phones is allowing companies to reach a greater audience, to integrate traditional and digital marketing, and to focus on continuity and cost reduction. However, the market is vast and varies among the regions. Each company, be it hotel, airline or cruise line, has different needs and must choose the best way to mitigate risks and enhance its growth.

The discussion above has suggested a structured approach to managing entrance into the Brazilian market, increasing the rate of success while reducing the potential risk. The more product, business processes, and locations an organization plans, the longer and more costly it can be to enter the market. The importance of partnering grows exponentially the more complex the organization.


About Discover the WorldDiscover the World has earned a reputation as a leader in global travel distribution and its success in developing a worldwide network of 85 offices in more than 60 countries capable of exceptional representation performance is unmatched. With a portfolio of more than 80 clients utilizing its sales, marketing and business process outsourcing services, Discover the World remains a dominant innovator for the travel industry.

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Clovis Ruiz Director, Discover the World Brazil+ 55 (11) [email protected]

David LeePartnering with Discover the WorldVP Global Development & Sales+1 [email protected]


Argentina, Chile & ParaguayCarlos Ryan (005411) [email protected]

BoliviaXimena Alvarez+591 2 [email protected]

BrazilClovis Ruiz+ 55 (11) [email protected]

ColombiaMauricio [email protected]

GuatemalaMonica Giron de Ufer+502.2.362.8018/[email protected]

Panama, Costa Rica & El SalvadorAdriana [email protected]

UruguayJuan Pedro [email protected]

VenezuelaLeopoldo [email protected]

Source of InformationA. Local Discover the World Office: Clovis Ruiz, Director B. EuromonitorC. Visa Credit CardD. Secretary of Strategic AffairsE. Fundação Getúlio Vargas – Administration InstituteF. Brazilian Institute of Geography and StatisticsG. Tourism Ministry

Latin America Offices

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