SiteMinder (ASX:SDR) first-half 2026 annual recurring revenue, or ARR, increased 27% in constant currency, driven by a 14% increase in subscription revenue and a nearly 40% increase in transaction revenue. Shares rose more than 10%.

Why it matters: The company continued to see significant business momentum in transaction revenue from the release of new products, despite a softer global travel environment.

  • The business also became more efficient. The company’s lifetime value to customer acquisition cost ratio, or LTV/CAC, continued to increase to 6.7 times, from 6.1 times last year, driven primarily by higher average revenue per user and gross margin improvements.
  • Channels Plus, which was launched last year, is starting to see network effects take hold. Around 7,000 of SiteMinder’s hotels can now use the channel, which has attracted nearly 50 demand channels, including sizable channels like Agoda, Trip.com, and Hopper.

The bottom line: We increase our fair value estimate for narrow-moat SiteMinder by 2% to $11, reflecting the time value of money. Shares screen as materially undervalued as the market fears AI will either disrupt SiteMinder’s software, or the businesses of the demand channels it facilitates.

  • Although we acknowledge productivity improvements in AI would lessen the scale advantages that SiteMinder currently enjoys versus competitors, our understanding of these improvements is that they remain limited when viewed across the full software development workflow.
  • Additionally, SiteMinder enjoys other advantages from its scale, which seem durable beyond development costs, namely network effects from Channels Plus and the proprietary data it has about its larger customer base, which can be used in room pricing.

Big picture: SiteMinder remains the most vaunted hotel e-commerce platform, as evidenced by the industry awards it receives, including the highly prestigious best hotel e-commerce platform award by HotelTechAwards, which it has won four years in a row.

SiteMinder is mostly unaffected by AI

We expect SiteMinder’s strategy to be wide-ranging, including a focus on attracting new customers, increasing penetration of its current product suite, and developing and launching new products. We view SiteMinder’s strategy as appropriate, despite its wide-ranging nature, as all three focus areas provide large and highly winnable opportunities.

We expect SiteMinder to take significant market share within the hotel industry. SiteMinder’s market share among hotels currently sits in the midsingle digits, yet SiteMinder is the leader in its space, and has twice the market share of its closest competitor. We expect scale-based cost advantages to drive consolidation in the channel manager industry, as subscale players are pushed out of the market and scaled providers, like SiteMinder, take share. Specifically, we expect SiteMinder to take dominant market share in larger single-location hotels and in hotel chains outside of the largest chains.

We also expect SiteMinder to increase its take rate through increased penetration of its existing product suite, especially through adoption of its transaction-based products. We estimate that transaction-based revenue currently makes up around 10 basis points of the gross booking value, or GBV, of SiteMinder’s customers. For comparison, SiteMinder Pay has a take rate of around 2%-3% of payments that are processed through a hotel’s website or, from fiscal 2025, also on payments processed at a hotel’s premises. Similarly, SiteMinder Demand Plus has a take rate of 15% on incremental demand generated through search engine optimization.

Finally, we expect SiteMinder’s new products to be significant growth drivers, especially Channels Plus. We expect Channels Plus, which aggregates several smaller channels into a single channel, will see rapid adoption among SiteMinder’s existing customers and help attract new customers. Although the take rate of this product is like that of payments, we expect its uptake to be much higher, due to its more differentiated nature, as well as the clear value it provides.

Bulls say

  • SiteMinder is the world’s largest e-commerce software provider for the global hotel industry, at twice the size of its nearest competitor.
  • SiteMinder has a large and highly winnable market opportunity, consisting of increased market penetration, product penetration, and increased digitization of the hotel industry through new products.
  • SiteMinder’s Channels Plus product is a unique and highly valuable product that will accelerate customer acquisition and take-rate expansion.

Bears say

  • SiteMinder’s end markets are highly cyclical.
  • SiteMinder’s market share currently sits in the midsingle digits, which leaves significant room for new competitors to come in.
  • SiteMinder has a history of losses and may struggle to achieve profitability.

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years.