Despegar.com Soars to New Heights in 2024 Amid FX Challenges and Strategic Shifts

Despegar.com (NYSE: DESP), Latin America’s leading travel tech platform, delivered a year of resilience and innovation in 2024, defying foreign exchange (FX) headwinds to achieve record financial and operational milestones. With Adjusted EBITDA surging 52% year-over-year (YoY) and strategic moves like its $1.7 billion merger with Prosus, the company is positioning itself as a global player. Yet, its journey is not without hurdles—FX volatility and regulatory risks loom large. Let’s unpack the data to assess the investment case.

Financial Resilience: Beyond the FX Noise

Despite a 1% YoY decline in reported Q4 2024 gross bookings to $1.5 billion, Despegar’s performance shines when adjusting for currency fluctuations. FX-neutral gross bookings soared 38% YoY, driven by robust demand and a 457-basis-point expansion in Travel Package sales (now 36.1% of bookings). This shift underscores the company’s success in upselling higher-margin products like bundled trips, which carry fatter margins and reduce reliance on volatile commoditized services.

Revenue rose 8.7% to $221.4 million in Q4, but the real story lies in its Adjusted EBITDA, which jumped 18% to $51.5 million, with margins expanding 187 basis points to 23.3%. For the full year, FY2024 Adjusted EBITDA hit $175.2 million—52% higher than 2023—exceeding its own guidance. This profitability surge reflects cost discipline and scale advantages from its B2B and white-label partnerships, which now account for 18% of bookings (up 418 basis points YoY).

Operational Strengths: Tech-Driven Growth and Customer Loyalty

Despegar’s AI-powered SOFIA travel assistant, launched in 2024, is a game-changer. By offering personalized trip planning, SOFIA has boosted customer engagement: app transactions now represent 53.6% of total bookings (up 864 basis points YoY), signaling a shift toward direct consumer relationships. Meanwhile, its loyalty program added 32.5 million members—a 41% YoY increase—locking in recurring revenue from repeat travelers.

Geographically, the company’s strategy is paying off unevenly. While Brazil and Mexico faced FX-driven booking declines (8% and 15% YoY, respectively), Rest of Latin America (RoLA) surged, with gross bookings rising 12% YoY and 83% FX-neutral. RoLA’s ASP (average selling price) jumped 56% to $1,111, highlighting its premium positioning in markets like Chile and Argentina.

Strategic Moves: Mergers, Divestitures, and Partnerships

The crown jewel of Despegar’s 2024 strategy is its $1.7 billion merger with Prosus, a Dutch internet investment firm. Approved by 94.7% of shareholders, the all-cash deal at $19.50 per share is expected to close in Q2 2025. Prosus brings capital and scale, potentially enabling Despegar to expand beyond its traditional Latin American footprint into global markets.

Equally notable is the divestiture of its Destination Management Company (DMC), BDexperience, which freed up resources for tech innovation. Partnerships with HBX Group (expanding lodging inventory) and Expedia (a 10-year outsourcing deal) further solidify its position as a one-stop travel tech hub.

Risks and Headwinds

1. FX Volatility: The Brazilian real and Mexican peso weakened sharply in 2024, masking true performance. A stronger dollar could continue to depress reported figures.
2. Regulatory Delays: The Prosus merger hinges on regulatory approvals, which could delay synergies.
3. Seasonality: Southern Hemisphere demand peaks in Q4, but Northern markets like Mexico face weaker summer travel.

Conclusion: A Compelling, if Volatile, Growth Story

Despegar’s 2024 results underscore a company in transition: from a regional player to a tech-driven global force. Its 52% YoY EBITDA growth, 38% FX-neutral gross bookings expansion, and AI-powered differentiation all point to a solid foundation. The Prosus merger, if completed, could unlock $2 billion+ in synergies, making DESP a compelling buy at its current valuation (trading at ~6x 2024 EBITDA).

However, investors must weigh these positives against FX risks and execution uncertainty. For those willing to bet on Latin America’s travel rebound and Despegar’s tech leadership, the stock offers asymmetric upside. As CEO Damian Scokin noted, “2024 was about laying the groundwork for 2025 and beyond”—and the groundwork looks solid.

Final Take: Hold for the merger’s closure, then reassess. The path forward is clear, but the execution will define the next chapter.