Tour Vacation Group
TOUR VACATION GROUP FOUNDED A LUCRATIVE BUSINESS SELLING PERFECT VACATION WITH ACCESIBLE PAYMENT PLANS. NOW IT'S GOING ONLINE.
For Latin America’s burgeoning lower middle class, a vacation seemed an unattainable luxury, and a trip to an island paradise no more than a pipe dream. But now vacationers are boarding a charter flight to San Andrés Island in the Caribbean, thanks to low prices, installment plan payments and a vertical, all-inclusive business structure devised by a young Columbian entrepreneur.
“We offer people a trip that often they have never even dreamed of. We tell them, ‘you deserve it, and you can take it because we’ll offer you the means with which to do so,’” says Carlos Londoño, founder and president of Tour Vacation Group (TVG).
In 2012, TVG sold 153,000 tourist packages to its destinations in San Andrés, Panamá and Leticia, a small city in the Colombian Amazon, achieving revenues of $84.5 million. By 2013, the company was aiming for 238,000 passengers and $135.7 million in revenues. “We have always moved volume,” says Camilo Mariño, managing director of the Bogota-based firm.
Tour Vacation Group targets the nascent lower middle class with all-inclusive, five-night trips costing $500 per person. The average 2.7-person family that makes up its customer base can cover their basic needs, but they lack the up-front cash to pay the $2,000 or so (including taxes and fees) vacation price tag. Instead, TVG lets them choose monthly installments of around $80.
The default rate on the payments is less than 10 percent, Mariño says.
TGV’s story begins during Londoño’s second semester at the Colegio Nueva Granada, “the preppiest school in Colombia,” where he was studying industrial engineering. Working for a tourism services wholesaler, he sold his first package to 95 students. His $3,000 commission “struck me as a huge amount of money because my mother used to send me a monthly allowance of $150,” he recalls.
In the late 1990s Londoño launched Tour School, which became the exclusive representative of Hoteles Decameron, the largest all-inclusive chain in Colombia, Ecuador and Peru. That relationship continued until 2003, when he lost the exclusivity arrangement on student tourism.
This sudden hole in his business propelled Londoño to implement an idea that he had been mulling over. “A product at half the price but of the same quality was needed," he explains. "So I began looking for hotels that could provide the all-inclusive concept." When traditional operators balked at the price tag he suggested, Londoño decided to do it himself.
He began by leasing Hotel Galaxia, a small hotel that he called "the worst in San Andrés.” The owner had let the Galaxia fall into decay after 1991 when the island lost its status as a free port. Londoño repainted the building, replaced the beds and televisions and renamed it Hotel On Vacation.
“I opened it in June 2003, but I was unlucky. The employees and an associate in Tour School ‘mutinied,’ and I had to sell them the company in order to pay off debts.”
Londoño was left without the business that he had planned to use as a financing platform. So he started again by launching Tour and Travel. When a partner who had been a Sheraton representative dropped out of the business after negotiations over low-cost airfare packages proved difficult, Londoño realized he needed to set up charter flights.
TVG was finally born in 2005 as a merger between Tour and Travel and Hotels On Vacation. The aim was to offer “the same beach, sea and breeze, but at half the price” on San Andrés Island.
As he expanded, Londoño followed the strategy that he had honed with the Galaxia. He sought hotels with extremely low occupancy rates – under 5 percent – or which had been abandoned, and renovated them in order to offer “good air conditioning and good food and cocktails.”
The chain now has seven hotels in San Andrés, plus another under construction by its affiliate Eco Building (which also provides maintenance for its properties) and Magic Hill, a hotel that accommodates time-share vendors. In Panama, TVG has an agreement with a local hotel chain, and construction is planned on the firm’s own 800-room hotel. TVG has opened an ecological hotel in Leticia.
Tour Vacation Group sells its packages via travel agents across the country, but, after participating in ECLA, Londoño and Mariño set up a call center and web page. Previously, its sales model consisted of agents throughout Colombia. Although highly successful, “it was incredible that we were not online because we were missing out on the vast opportunity a web page offers,” Londoño says.
The pair delved into online issues at ECLA. Due to security problems inherent in Colombia’s Internet system, and the fact that the target market is largely unbanked, TVG decided to develop a mixed sales platform. Clients learn about the company’s vacations via their websites (www.viajepormenos.com or www.onvacationhoteles.com) then book by telephone through the call center.
“The call center is progressing really well. We initially started selling $100,000 per month and now we have much higher expectations because this strategy allows us to attend to a large number of clients that seek us out and whom we do not need to convince,” Londoño says.
The experience of studying with other Latin American entrepreneurs through Columbia University’s ECLA program allowed Londoño to question and compare many of TVG’s operating strategies. “It awakened the need to seek other elements that would strengthen me and my business. That's why I am now taking a Master’s Degree in Positive Leadership in the Instituto Empresa in Madrid,” he says.
So deep was the bond created among the ECLA participants that Londoño, together with classmate Tomás Bercovich, helped the founder of ForexChile, a trading platform that had sought financing abroad. Bercovich, the founder and CEO of Cuponatic Chile, and Londoño invested in ForexChile in order to ensure that the classmate was named managing director of the company, which was what he needed in order to wrestle back the reins of the firm, Londoño explains.
Mariño, who had met Londoño at university, says that what he learned in ECLA classes and discussions ended up being reflected in TVG. “What you learn allows you to improve and simplify your firm’s operations in order to optimize them,” he says. “All of the participants became great friends and we remain in contact. We consult each other when a problem arises, and in July we’re all going to meet on San Andrés Island.”
TVG, Londoño says, has favorably impacted tourism in San Andrés. In 2012 the company sent more than 120,000 tourists there, and it directly employs more than 600 people. The hotel that TVG recently built in the Amazonian city of Leticia could win an award for the sustainability principles that governed the project, Mariño says.
Partly due to its growth and partly motivated by what they learned during their studies at ECLA, TVG is restructuring in order to grow in an orderly fashion and become more corporate. Londoño’s new challenge is to deploy his business plan in the Mexican, Peruvian and Venezuelan markets.
“I once heard an entrepreneur say something that I liked a lot: You must always persist, resist, insist, and never desist. I would add that you need to have big dreams. Otherwise, you won’t really achieve anything good,” Londoño says.