Small Caps | 10:35 AM
Web Travel’s interim results provide analysts with increased confidence in management achieving FY27 goals.
- Web Travel’s interim earnings ‘beat’ consensus
- Improving take rates, Americas outperforming
- Outperforming WebBeds grabbing market share
- Should investors worry about competitors responding through price discounting?
By Mark Woodruff
Analysts now have greater confidence in online travel agency Web Travel ((WEB)) meeting its FY27 targets after FY26 interim earnings beat the consensus expectation by 4.5% due to improving trends for market share, margin, and return on invested capital (ROIC).
Web Travel’s main activity is the online sale of travel products, predominantly hotel rooms.
Since the September 2024 de-merger resulted in the spinoff of the Business-to-Consumer (B2C) division into the online travel agency (OTA) Webjet Group ((WJL)), the group’s business comprises the much larger Business-to-Business (B2B) wholesale division called WebBeds, which also offers a wide range of ground and transfer services.
The company sources inventory from hotels and travel suppliers, connects, aggregates and merchandises this content in its technology (the WebBeds marketplace) and distributes to a global network of travel buyers, who sell to travelling customers.
Morgans believes WebBeds has a strong growth outlook, operating in a highly fragmented industry with a large addressable market, and highlights the company's consistent track record of winning market share.
Bookings for Web Travel rose by 18% compared to the first half of FY25, with the Americas outperforming due to ongoing client wins and market share gains from existing clients.
UBS considers these are “solid” interim achievements in light of material global travel headwinds, in particular in the Middle East. The business continues to materially outgrow the market, driven by expansion into new customers and markets and stronger conversion, the analysts explain.
Total transaction value (TTV) for the half rose by 22% to $3.2bn compared to the same period last year, as the top three regions reported growth materially above the market, particularly in the Americas.
In euro terms, TTV in the Americas, Europe, and the APAC region grew by 27%, 12%, 12, respectively, and flatlined in the Middle East & Africa region.
Revenue increased by 20% to $204.6m, while underlying earnings rose by 17% to $81.7m driven by the aforementioned TTV and revenue growth.
Should management keep this momentum going, Jarden believes the Web Travel share price has scope to materially re-rate, reflecting its large total addressable market (TAM) and rising ROIC.
Guidance and Targets
The Revenue/TTV margin of 6.5% slightly beat guidance of 6.2-6.4% and management believes at least 6.5% for FY26 is on track, with a similar margin expected in FY27.
With the revenue margin already at 6.5% and a rising share of directly contracted hotels, Ord Minnett sees upside risk to margin guidance. Jarden agrees, seeing the target as conservative, given the benefits of contracted supply.
Macquarie explains the group’s percentage of inventory which is directly contracted is above 60% in all regions, except the Americas leaving the aggregate above 50%. Management plans to add more people in contracting in the Americas.
Citi notes revenue margins have been stable for three halves, and although below peer levels, the true differential is smaller than it appears. It’s also thought the differential is more than compensated for by sustained and meaningful share gains.
WebBeds earnings rose by 21% to $94m in line with revenue growth and the planned increase in expenses, with a 45.9% earnings margin, up 0.4% on the first half of FY25.
Operating expenses deteriorated by -22%, reflecting CPI increases and re-inclusion of bonuses, as well as planned headcount investment in the WebBeds business, according to the company.
Guidance is for FY26 underlying earnings of between $147-155m. Revenue margin guidance of at least 6.5% for FY26 and FY27 was also provided.
Jarden views FY25 and 1H26 as a reset period in which management recalibrated margin expectations and invested to strengthen contracted volume and conversion capability. These initiatives are expected to accelerate TTV, earnings, and ROIC into FY27 and beyond.
With consistent execution, Jarden expects the market to regain confidence in the group’s ability to expand EBITDA margins and progress toward its TTV target of more than $10bn by FY30.
Delivering on management's TTV and margin targets will underpin strong earnings growth over the next few years, suggest analysts at Morgans. Unlike 1H26, this broker now wants to see this momentum translate into stronger profit growth, which is seen as achievable.
Profit (NPATA) for the period was $48.6m, down -7.4% on the prior year due to materially higher corporate costs, D&A, interest and tax.
Morgans notes cash flow exceeded expectations and the balance sheet remains in a solid net cash position.
Management explains the cash and cash equivalents $481.1m balance rose by $117.5m from March 2025, largely due to growth in TTV and efficient cash collections and cash management.
Improving take rate
Take rate, also called commission or platform fee, refers to the share of transactions' total value (gross merchandise volume) that the marketplace/platform retains for facilitating the booking.
For travel marketplaces/OTAs, this fee is typically charged to hotels, airlines or other suppliers, not directly to travellers.
While Morgan Stanley highlights ongoing erosion in take rates across recent periods, the 6.5% FY26 target still looks attainable given the company’s history of stronger second-half outcomes and management’s earlier confidence despite a 6.2-6.4% first-half range.
This broker sees potential upside to take-rate guidance, supported by early second half TTV growth of 23%.
Should industry-wide take-rate pressure resume, the analysts see Web Travel as the most earnings-sensitive among peers.
The broader trend of lower take rates across the sector has persisted in recent peer updates, a dynamic which meaningfully erodes Web Travel’s earnings power, cautions Morgan Stanley.
Competition
Shaw and Partners notes structural trends continue to consolidate the bedbank market around Web Travel, European-based Hotelbeds and Expedia, with technology increasingly distinguishing the larger players from smaller rivals.
The broker is monitoring Google’s agentic AI push into travel but sees any impact as medium term.
UBS sees mostly positive read-throughs for Web Travel from competitor Hotelbeds’ FY25 result.
This broker highlights Web Travel’s interim TTV growth of 22% was materially stronger than Hotelbeds’ 6%, indicating Webjet is gaining share at a significantly faster pace.
On the flipside, Hotelbeds appears prepared to use pricing over the next 12 months to reaccelerate TTV growth, which could create a more competitive and potentially more challenging operating backdrop for Web Travel, UBS cautions.
Four sources of growth
Management is focused on delivering its FY30 TTV target via winning new customers, enhancing supply sources, expanding geographic reach, and improving conversions.
For the half, the strongest driver of TTV growth was improving conversion, highlights Morgans, with management explaining the network effect is underpinning above-market performance.
As Web Travel expands, the broker explains the business becomes increasingly relevant to both travel buyers and hotel partners. With the market growing around 5% and WebBeds delivering 22%, it is clearly continuing to gain share.
To source new customers, the aim is to strike new partnerships with innovative OTA’s, particularly in the Americas and APAC. To that end, management increased customer diversification across wholesale customers during the period.
Following the interim result, Macquarie has increased conviction management can balance strong TTV growth in lower-margin regions with the optimisation of supply mix.
Management estimates underlying market growth of around 5%, stronger than Citi expected given the macro backdrop. This suggests to Citi analysts the group is benefiting from solid geographic diversification and exposure to short-haul international travel.
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