‘We’re not shy of the battle’: Webjet to take on Expedia, Booking.com in online hotel market
Webjet chief executive John Guscic has criticised snap decisions by state governments to close their borders as the ASX-listed travel group prepares to battle Expedia and Booking.com in the market for online hotel bookings.
“Australia clearly needs to do a better job aligning state activities and developing consistent guidelines to determine when and why borders can be shut,” Webjet CEO John Guscic says. “Until that happens, it’s going to diminish consumer confidence in booking tickets.”
The recent moves by state governments to abruptly reimpose border controls in the wake of Syndey’s northern beaches COVID-19 outbreak have been a cruel setback for Australia’s travel industry, which has been battered by the global pandemic.
Webjet was forced to raise $346 million in a deeply discounted equity raising in April, and then another €100 million ($163 million) via a convertible note in July before unveiling a $143 million loss for 2020. Its share price, at $4.89 on Friday, is half what it was a year ago, although is well above its April nadir of $2.26.
“We made a decision early on to raise a significant amount of capital – we knew that there’d be an uneven recovery and that it was never going to be as simple as a first wave,” says Guscic via a Zoom call from Tunis, where he has waited out the pandemic (he’s normally based in Mallorca, Spain).
That and a rigorous cost cutting drive that included sacking 800 of its 2400 staff means the group will be able to outlast the virus, he says, and puts it in a prime position to capitalise on a radically changed global travel market in which many competitors have fallen by the wayside.
“Everything’s been geared around taking costs out, being efficient and being ready to utilise technologies that haven’t been deployed in our industry to make sure we’re a more profitable business in 2025 than we were in 2019,” he says.
While best known in Australia for its consumer-facing air ticket booking website, the company has since 2018 made most of its money from its industry business WebBeds.
The business wholesales hotel rooms across Europe, the Americas, the Asia Pacific, the Middle East and Africa by making mass, discounted accommodation bookings and then on-selling the rooms to travel agents, tour operators and airlines.
Now the company is in the process of building a new consumer facing online hotel bookings site which will launch in the second half of 2021.
“It’s one of the strategic drivers that we’ve thought about for a long time and we’ve waited to come up with an idea that we think is compelling,” Guscic says. “If [customers] are planning their air tickets, we’ve got to make it compelling for them to book their hotels with us [too].”
In doing so, Webjet will be going more directly head-to-head with the global behemoths Expedia and Booking.com which dominate the online hotel booking space.
“We’re not shy of the battle,” says Guscic . “Booking[.com] has been a global behemoth who have engorged themselves on every market they have entered into and we’d like to think that our new offering will give them something to think about.”
Guscic sees a gradual recovery in global travel with two-thirds of airline capacity returning to the skies and two-thirds of hotels reopening by the end of 2021, before the industry hits 80 to 90 per cent capacity in 2022.
Booking[.com] has been a global behemoth who have engorged themselves on every market they have entered into and we’d like to think that our new offering will give them something to think about
webjet CEO John Guscic
While declining to give a timeframe, Guscic says that following its cost-cutting initiatives Webjet only needs the travel market to return to 50 per cent of its previous levels for it be profitable again.
Leisure travel will be the main driver, he says, with the video conferencing technology most professionals have become accustomed during the pandemic massively denting business travel demand.
“That’s got major implications for the broader industry,” he says. “Who’s going to fill the pointy end of the aeroplane? How do hotels manage their yields when they’re selling primarily to leisure travellers who are typically more cost conscious?”
While there was a spike in bookings when Australia’s domestic borders were temporarily opened late last year, Guscic expects a recovery to hinge on a successful vaccine rollout here and abroad.
Webjet has already built the functionality to record customers’ immunisation status in its booking systems in anticipation that vaccination will be mandatory for anyone travelling abroad, something Qantas boss Alan Joyce has flagged for his airline.
Guscic says Webjet is positioned to take a greater share of the market post-COVID after many bricks and mortar travel agents shut their doors for good during the crisis. Fellow ASX-listed group Flight Centre has closed around half its 700 local retail stores since the start of the pandemic.
In the brief window where Australian state borders were open, Guscic says Webjet captured 10 per cent of all airline bookings compared to around 5 per cent normally.
Business reporter at The Age and Sydney Morning Herald.
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Source: Thanks smh.com