Some suggestions on improving the dropdown:

1. Change continent grouping to more general list
Africa
Americas
Asia and Oceania
Europe

This list requires less mental efforts in selecting the target item, it's more rough, but more efficient. Your original list requires good knowledges in geography and for some users it will be hard to select appropriate item.

2. Limit the list to two levels
Three level hierarchy (Continent->Country->State) requires too many physical efforts while selecting the destination. Hierarchy (Continent->Country) in information architecture provides support for selecting the destination, but too many physical efforts is bad UX. Provide the same additional information, but in a different way, see the image below:

The Country hierarchical level was changed to inline info

3. Test the UI
"looks ugly for my customers" is bad feedback, but it's the good sign of bad UX. Test the UI with objective metrics: number of errors and time of task execution. The less errors user make and less time he spend on the task, the more satisfied he is.

Some suggestions on improving the dropdown:

1. Change continent grouping to more general list
Africa
Americas
Asia and Oceania
Europe

This list requires less mental efforts in selecting the target item, it's more rough, but more efficient. Your original list requires good knowledges in geography and for some users it will be hard to select appropriate item.

2. Limit the list to two levels
Three level hierarchy (Continent->Country->State) requires too many physical efforts while selecting the destination. Hierarchy (Continent->Country) in information architecture provides support for selecting the destination, but too many physical efforts is bad UX. Provide the same additional information, but in a different way, see the image below:

The Country hierarchical level was changed to inline info

3. Test the UI
"looks ugly for my customers" is bad feedback, but it's the good sign of bad UX. Test the UI with objective metrics: number of errors and time of task execution. The less errors user makes and less time he spends on the task, the more satisfied he is.