With the opening of borders just around the corner, Aussies are keenly booking trips to see friends, family or just another city. With the uptick in bookings, the travel industry is slowly but surely snapping back to resemble its pre-COVID self.
Travel booking behemoth Webjet (ASX: WEB) is glad to see demand growing again in both their direct to consumer and business divisions.
In the 6 months to Sep 30, 2021, Webjet was cash flow positive, with $446 million in the bank, and a cash surplus of $3.5 million per month. This is in stark contrast to the $5.5 million average monthly cash burn in FY21. Investors who have stuck by them will be glad to hear that they now plan on paying their deferred FY20 interim dividend of $0.09 in December.
WebBeds is a B2B division of the business focussed on providing accommodation services to the travel industry. The business operates as an intermediary, sourcing services from travel suppliers and merchandising them for distribution to clients, who on-sell to the travelling public.
As financial pressures of the pandemic have impacted the industry, the amount of competition in the marketplace has dropped. WebBeds is soaking up the demands and is taking advantage of the opportunity to grow revenue by expanding domestic offers in all regions, notably North America.
Despite predominantly domestic bookings, the average booking value of each transaction is up 37%, now at $401. This number will increase more as larger markets open. Costs for the WebBeds business are down 31% compared to pre-COVID levels thanks in part to their new organisational structure complete with dedicated CEO.
Webjet’s flagship booking business has returned to profitability, driven primarily by domestic markets. As more markets open, bookings are expected to rebound stronger. The average booking value for this division is now $620, up 9% from 1H21. Domestic bookings are expected to return to pre-COVID levels in 2022 assuming state borders remain open. International bookings are also set to increase significantly as airlines recommence routes.
Looking to expand international market share, Webjet has made some savvy investments. This month saw the acquisition of Canadian travel technology company Trip Ninja. Webjet saw value in Trip Ninja’s key products which automate manual processes when it comes to complex itineraries. Travel Ninja’s tech will be integrated into the Webjet platform to offer more features to existing customers. Webjet also plans on selling Trip Ninja’s tech to other travel industry companies, potentially through another B2B division.
Webjet also made a 25% investment into LockTrip Holdings in March 2021. LockTrip operates a hotel marketplace with blockchain technology which will be integrated into Webjet’s platform.
Lastly, GoSee, rebranded from Online Republic in October 2021, is another Webjet business that acts as a booking platform for car and campervan rentals. The business has seen bookings increase as more Aussies holiday at home. Running costs are down 30% compared to pre-COVID levels. That being said, the global shortage of hire cars is impacting inventory and the closure of the trans-Tasman bubble has affected business in New Zealand.
With revenue starting to return and costs materially down, the Company is well on its way to recovery and is now shifting focus to global employee engagement and retention.
Webjet is truly hoping to capitalise on the travel industry’s recovery and their geographic diversification, hopefully with a return to pre-COVID booking levels by 2H23.
Samantha Freidin is a business journalist at Emerald Financial whilst also completing a Masters of Marketing and Digital Communications at Monash University.
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