Here, there and everywhere: travel giant CVC uses discounting and volume to rule Brazil’s domestic tourism industry
Margarida O. Pfeifer
Thirty-three years in business, Brazil’s biggest travel agent, CVC, has sent no less than 8.2 million Brazilians on vacation. Last year alone, the company put 1.3 million people on charter flights, bus excursions, and sea cruises, making the three-letter name synonymous with package travel in the country. Out of every five packages sold to Brazilians, three are offered by the company. “Our goals are bold, because the potential for tourism in the country is enormous,” says Guilherme Paulus, president and owner of the company.
Paulus says be discovered during the 1980s the marketing power of selling travel packages–travel plans that include ticket, lodging, one or two meals daily, transfers, and city tours–on a wide array of destinations and budgets, and the company has not stopped growing since. This year, executives foresee another 25% growth and the company is aiming to triple its own sales offices to 500 and to start selling abroad, where its presence is still limited–it has just two offices in Argentina and one in Uruguay–by opening up sales offices in Latin America and in Europe. The company also is preparing to go public, executives say, by 2008.
Such ambitious plans include diversifying the business. The company already leases 184 airplanes per week during high season; it’s about time, managers say, CVC started its own airline. Last year, the company obtained permission to do so from Brazil’s airline regulator and expects to begin operating FG Airlines this year, under the name Samba. The company also has made inroads into the hotel industry: It owns a hotel and resort in Gramado, in southern Brazil, and expects soon to open the first Tahitian-style resort in Brazil–270 apartments and 50 bungalows on the water at Mosquero Beach, in the northeastern state of Aracaju. “In Brazil, there are 80 million people who are employed full-time; they all have to use their vacation time, plus they receive a third of what they earn on top of their salary for traveling purposes,” says Paulus. “Today, only 5 million travel as tourists. There is more than enough potential, it’s just a matter of creating the offer for travel.”
Coming up with itineraries that fit the budgets of Brazilian consumers is the company’s specialty. It now offers packages to more than 150 destinations. Trips range from a three-day bus excursion from Sao Paulo to Rio de Janeiro for US$135 to a 21-night cruise from Brazil to Argentina for $4,400. A week in Paris doesn’t cost more than $1,800. Everything is payable in installments of up to 10 payments and are interest-free. Paulus started off by planning bus excursions for steel workers in Santo Andre, his hometown and CVC headquarters. He says the secret is negotiating. He bargains down the price of hotel suites, restaurants and plane seats just like retailers bargain with suppliers on the price of a home appliance. “I try to buy services in the same way televisions, stoves and washing machines are sold, in great quantities,” Paulus says. “When you buy and sell in bulk, then it’s possible to offer good prices.”
The company’s strategy is a perfect fit for Brazilians. CVC can offer such low prices because, analysts note, its size dictates it and volume of purchasing tends to set prices in the sector overall. Paulus himself says that his company pressures suppliers and gets discounts of up to 50%, depending on contract conditions. “But we don’t kill our business partners,” he says.
Otherwise, Paulus says, he wouldn’t have been able to keep the same suppliers for so long, such as the Gloria Hotel in Rio de Janeiro, which has done business with the travel agency for three decades. “The advantage for the hotel is the amount of room nights CVC guarantees during low-occupancy periods,” says Viviane Cardoso, sales assistant at Gloria Hotel, which has 610 rooms. Meb Viagens, a travel agent in Sao Paulo, reports 90% of its activity is generated by CVC’s travel-package sales–it sold 2,000 of them in 2005. Meb Viagens executives say it’s quite natural for a company of such heft to set prices. “CVC is the absolute leader, but it’s also creative and bold,” says Vania Melo, supervisor at Meb.
The company declines to reveal earnings, but some numbers suggest its dimensions. According to Paulus, CVC is responsible for $660 million of the $3.80 billion turnover in the Brazilian tourism sector in 2005. The company’s investment in publicity is proportional to its power in the business. Last year it spent $112 million on advertising, placing it among the top 12 advertisers in the country. “CVC is one-of-a-kind because its moves in the national tourism scene are amazing,” says Leonel Rossi Jr., director of international affairs for Abav, which represents travel companies and agencies throughout Brazil.
Distribution. The company’s blue-and-yellow logo running in newspapers and magazines also benefits its business partners, such as Brazilian airline TAM, whose planes carry more than 95% of the travel agent’s tourists. “The partnership with CVC is very attractive to TAM. We are mentioned in their advertisements and we make money just by making our planes available during otherwise idle time,” says Wagner Ferreira, marketing and commercial vice president for TAM. “The contracts are full-risk for CVC. That is to say, it buys all the seats on the plane and takes on the risk.”
The number of leased flights goes a long way to profiling a typical customer. The cheapest bus excursions, which two decades ago represented 60% of the company’s business, now make up just 17%. The change of the traveling public allowed the company to strengthen its position in the cruising industry during the last few years. Nowadays, CVC leases four ships–including the Blue Dream and the Grand Voyage, at 800 passengers each–and keeps two of them near the Brazilian coast year-round. It is negotiating a fifth vessel to begin sailing this year. Since consumer travel in Brazil is financially concentrated in the middle class, CVC has looked for these clients in strategic places. It has opened sales counters in shopping malls and supermarket chains, including France’s Carrefour and Extra, as well as department stores, such as C&A. “There is always someone close to buyers who is selling our packages,” says Valter Patriani, commercial vice president and Guilherme Paulus’ right-hand man for 29 years. “Our secret is distribution.”
CVC has grown by adapting travel to the pocketbooks of ordinary
Customers in 2005 1.3 million
Goal, customers 2006 1.6 million
Travel-package sales, annual US$660 million
Weekly charter flights in high season 184
Owned sales points 154
Goal, owned sales points 2007 500
Accredited travel agencies 2,700
Domestic and international suppliers 7,000
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