Web Travel’s fiscal 2025 underlying earnings before interest, taxes, depreciation and amortisation (”EBITDA”) fell 13% to $121 million, near the top of the $117 million-$122 million guidance. Total transaction value is up 37% in fiscal 2026 to-date, with management projecting “record EBITDA” and reiterating its long-term TTV target.

Why it matters: Factors which plagued fiscal 2025 earnings (customer incentives, tactical pricing in Europe, demerger distraction) won’t just disappear in the new year. Furthermore, the renewed focus on rebuilding higher-margin, directly-contracted inventory requires time and resources.

  • This is why fiscal 2026 TTV margins (revenue/TTV) are likely to be even lower, at 6.5%, from 6.7% in fiscal 2025. However, strong TTV momentum can mask many ills, with our forecast 21% TTV growth forecast translating to a 16% revenue lift in fiscal 2026.
  • It shows that the fundamentals of Web Travel’s B2B hotel intermediary model are intact. Granted, investments in resources are needed to continue the growth, capping WebBeds’ near-term EBITDA margins at mid-40% levels. But eventually operating leverage should drive margins toward 50%.

The bottom line: We retain our $6 fair value estimate on Web Travel. While fiscal 2025 underlying EBITDA was 5% above our expectations, we reduce our fiscal 2026 forecast by 4%, reflecting higher investment required to resurrect TTV margins. Our long-term forecasts are largely intact.

  • Web Travel is re-establishing its identity as a digital-centric, data-driven growth stock. Management has bold long-term goals, namely, lifting WebBeds’ EBITDA margins to 50% in fiscal 2027 and hitting $10 billion TTV by fiscal 2030.
  • We are less ebullient, expecting 48% and $8.3 billion, respectively. However, even on those assumptions, shares in the no-moat-rated group are still trading at a 12% discount to our intrinsic assessment.

Business strategy

Web Travel Group demerged its B2C units in September 2024, and is now a pure global online B2B accommodation bookings provider.

Web Travel Group’s only operating business is its B2B booking platform, WebBeds. The business contracts supply from independent hotels, chains and third-party providers, aggregates and supplies the inventory to travel retailers. The business allows smaller hotels to increase distribution channels. For travel intermediaries, WebBeds increases the available inventory for end customers.

The B2B accommodation market is estimated to be $70 billion, when measured by total transaction volume, or TTV. Around 80% of this market is made up of independent hotels, representing a significant target market of suppliers lacking the distribution and marketing resources to maintain limited vacancies without the use of a B2B distributor.

Web Travel Group’s key objective is to grow market share, through leveraging scale and technology, to be one of the lowest cost travel providers. Since inception in 1998, Webjet has completed six acquisitions. Acquisitions within the B2B sector allow Web Travel Group’s WebBeds to quickly increase scale and inventory through access to new hotel contracts. In turn, the company can expand its customer base.

This strategy has proven successful to date, with the most recent purchases of Jacktravel in 2017 for $330 million and Destinations of the World in 2018 for $240 million significantly boosting WebBeds’ B2B TTV. Unfortunately, this has concealed organic growth, the rate of which is difficult to ascertain given the highly competitive and cyclical nature of the industry.

Web Travel bulls say

  • Investments made to increase the technological capabilities of the group generate scalability benefits as travel activities return to prepandemic numbers.
  • Growth potential is significant as WebBeds is currently the world’s second-largest B2B accommodation booking provider, but with only a 4% market share of the fragmented $70 billion global B2B accommodation market.

Web Travel bears say

  • Travel conditions are likely to remain volatile due to uncertain economic conditions.
  • Travel suppliers may increasingly leverage their own technological capabilities to engage in direct bookings with customers.

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Terms used in this article

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