Webjet flies lower in first half as domestic tourism flattens out

Online travel agent Webjet announced a 4.1% reduction in net profit for the half-year ended December 2012, its half-year report reveals.

This fall in profit comes despite a 13% increase in revenue.

Webjet managing director John Guscic attributed the reduced profit to both a flat domestic leisure-travel market as well as the costs coming from their Middle East-based hotel start-up Lots of Hotels.

“We are pleased with the continued strong profit growth achieved in a generally flat leisure-travel market,” he said.

The report details unit-price deflation in the domestic leisure travel market of about 4-5%.

This comes after ABS statistics revealed more Australians headed overseas than ever before. The lure of cheap international flights and the spending power of the dollar have resulted in Australians making the most of these conditions and opting for cheaper overseas travel instead of visiting domestic destinations.

Tourism and Transport Forum acting chief executive Trent Zimmerman told SmartCompany the local tourism industry needs to strive for quality experiences at competitive prices for it to grow in this climate.

“The key to the success of the Australian tourism industry is to ensure its competitiveness,” he says.

“Now that doesn’t mean competing on price with our regional competitors – wages, construction and operating costs are far higher in Australia than in Asian destinations, so that’s not going to happen – but it does mean offering quality products and experiences at a price that gives consumers value for money.”

Zimmerman believes the domestic market is critical to this as it is still far larger than the market for visiting tourists. Despite the trend of Australians heading abroad, he said 70% of tourism expenditure in Australia still comes from the domestic market.

He believes local operators such as Webjet need to target shorter term domestic travel.

“With more and more people travelling overseas, Australians are tending to take shorter domestic trips, so operators are working to capture that segment of the market.”

The half-year report from Webjet advises the recent Zuji acquisition from the US company Travelocity remains on track for the end of the March quarter, holding $24 million in cash for the purchase.

Webjet invested heavily in its future during the first half-year, spending $2.3 million dollars on infrastructure upgrades including a move to cloud-based hosting, development of mobile platforms and the setting up of Lots of Hotels systems.

Webjet is forecasting strong growth by the end of the financial year, with a revised EBITDA (earnings before interest, tax, depreciation and amortisation) and net profit growth guidance of 15%. This figure excludes Zuji transition and transaction costs, trading results for Zuji and start-up costs for Lots of Hotels.