Small Caps | 2:50 PM
The trillion dollar global accommodation market is ripe for disruption with improved revenue generation as SiteMinder aims to grow its share.
-Channel Manager to Smart Platform: Becoming the central nervous system for hotels
-Unlocking a trillion-dollar opportunity through deeper connectivity
-Growth Drivers from Channels Plus, Dynamic Revenue Plus, and the Push Into Real-Time Pricing
-Analysts' Perspectives highlight monetisation potential and long-term upside
By Danielle Ecuyer
Positioning itself for growth amidst an enormous market opportunity
Listing on the Australian stock exchange in 2021, SiteMinder ((SDR)) has evolved into a smart cloud-based platform for the global hotel/accommodation sector that could be described as the central nervous system for a very disaggregated industry ripe for disruption in terms of booking solutions and revenue maximisation.
Analysts envisage the potential for SiteMinder to build on its existing successes from start-up to a technology solutions company with over a $2bn market capitalisation, most importantly turning cashflow positive at the latest August FY25 results.
Investors are always looking for the next TechnologyOne ((TNE)) or WiseTech Global ((WTC)) at earlier stages of corporate development to catch the next ten-bagger.
Whilst brokers are not promising the success can definitively be replicated, SiteMinder has been putting in place the infrastructure and platform blocks to build on its achievements and accelerate the monetisation of its platform.
Building the positive case for product add-ons
Prior to its recent Investor Day in late September, the company delivered its latest research on the global hotel industry which outlined future potential revenue via “deepened system connectivity”.
Some 65% of hoteliers believe faster fully integrated systems could generate a minimum of 6% additional annual revenue, which equates to billions in extra revenue for the global accommodation sector with an estimated value of US$1.2trn.
The survey also revealed 92% of hoteliers say speed has emerged as highly significant, with 58% believing it is “business critical”. While manual data inputs for the industry remain commonplace, some 36% of hoteliers reported updating pricing monthly or less, and 70% spend over eleven hours a week on tasks that could be automated.
AI solutions also have a place, with 43% open to exploring AI-driven solutions.
As often stated by technology investor Cathie Wood of ARK Invest, technological shifts are happening “faster, cheaper, better” — but are they in the case of SiteMinder?
Investor Day left some unanswered questions
The Investor Day update illustrated SiteMinder IQ of $85bn-plus in gross booking value; 2.4m rooms; 130m-plus reservations; and 250m-plus room nights across the platform of revenue management, guest acquisition, and guest experience.
For context, there are two major aspects to the company: one is the evolution of the Smart Platform, which is the engine room for customers, and the second is connectivity for customers to other distribution channels.
Management has cleverly framed the customer experience through what it refers to as the “Revenue Flight Deck” — a dashboard of services to enhance the user experience.
Morgan Stanley liked the analogy to a flight deck, which integrates the dashboard and toolkit hotel revenue managers depend on, while countenancing the destination to realising monetisation was a little less certain.
Acknowledging management’s message to investors the global hotel sector is under-resourced and “tooled,” which lays bare an opportunity cost for revenue generation due to an absence of systems heightened by obstacles and inertia; the broker accepts the opportunity to tap into a $1.2trn total addressable market is there.
Citi was quick to point out the first Investor Day in 2023 outlined the new products, Direct Revenue Plus (DR+) and Channels Plus (C+), and the September presentation focused on execution and scaling to expand SiteMinder’s development to a revenue platform as well as a software-as-a-service business.
Channels Plus unwrapped
Taking a step back, Channels Plus is a cloud-based channel management solution aimed to help hotels and accommodation providers integrate their property management systems (PMS — the core back-office system hotels use to manage operations like reservations, check-in/check-out, housekeeping, billing, and guest profiles) with online travel agencies (OTAs), global distribution systems (GDS), and other booking platforms.
Citi sees Channels Plus as allowing hotels to bring on board new OTA channels without having to sign agreements with each of them. Equally, OTAs can offer special campaigns or discounted commissions to hotels.
Channels Plus is signing up new customers at the fastest rate of any prior product introduction. Management’s case study showed C-Plus able to generate 3% of a property’s bookings, which Moelis estimates can produce an additional 9bps of the property’s booking value for the platform.
As at June, Jarden noted C-Plus had expanded to 5,000-plus properties and 240k-plus rooms from 4,000-plus properties and 220k-plus rooms and is adding 500-plus properties a month. The product offers an opt-out setting, presenting lower barriers to entry on adoption.
Both Citi and Moelis concur C-Plus has the potential to be a “material revenue” contributor in FY27, as cited by management, particularly with the two-sided marketplace.
Channel checks by Ord Minnett suggest C-Plus has the capacity to significantly disrupt the hotel distribution chain over the medium term.
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