Having customers stay then pay is a good differentiator but will Webjet's partnership with Travelport limit it from competing with other hotel aggregators? CEO Richard Noon tells our writer no.

Webjet Australia, which defied travel industry gloom with its recent earnings announcement, is banking on its new hotel initiative, Stay and Pay, to give it further growth in the new year and believes it is sufficiently differentiated for it to carve out space in this highly competitive sector.

CEO Richard Noon told WIT, "We've tried aggregating the so called prepaid merchant models in lotsofhotels. It hasn't worked to any scale. We believe that we need a different consumer proposition to carve out space. We think avoiding the prepayment requirement of most hotel aggregators does that.

"Stay then Pay seems an appropriate consumer message for these times."

The new product, which will be released to the market at the end of August, removes the need for customers to pay upfront for their hotel booking, considered an obstacle for some customers to commit to that online transaction. They only need to pay a A$10 service fee to secure the booking with the balance to be paid at the time of staying at the hotel.

Another point of difference is Stay and Pay has been developed in conjunction with Travelport, which provides over 60,000 hotels worldwide, of which 2,000 are in Australia and New Zealand.

This has been singled out as a weakness by industry blogger Timothy Hughes who argues that the partnership with a GDS limits Stay and Pay from competing effectively with rivals such as Expedia, Travelocity or Wotif as its content is only as good as Travelport's.

Hughes cites three disadvantages – that it will not have access to negotiated rates, important inventory types and special deals and promotions. (Read full article at
http://tims-boot.blogspot.com/2009/08/webjet-to-relaunch-hotels-with-gds.html )

Noon, who will be speaking at WIT, The Main Event, on Oct 20-21, said, "Hotel coverage can be debated endlessly. The key point is that we have flight customers, not drive, not weekend and the Travelport content adequately covers that.

"One of Travelport's absolute strengths is that it has the hotel direct connections and we think that this will become increasingly important as hotel chains flex their muscle to achieve 'last room' inventory control. Many of today's bed banks are tour wholesalers that had tour scale which is now being rapidly eroded as consumers unbundle air from land.

"There is a tipping point where increasingly hoteliers will stand up and say that the old model of handing out their rooms and rates no longer applies. We would much rather be on the side of a GDS that has and knows how to run the business of connection aggregation when (and if) this occurs."

He added, "We're aware other players like Expedia tend to enter markets via hotel sales first as air is generally much harder to establish. Once consumer traction is established on hotels, air is then reviewed. This is not our model; Stay and Pay is not an advance party, rather it's to capture the hotel purchases of our existing flight customers. It's to make buying within the booking path easier by removing the upfront payment block."

Having said that, Noon said he is aware of the challenges ahead. "There's a long way to go on the consumer interface side of things so we're under no illusions that we've embarked on a hotel development marathon. We have done that for air and again the breakthrough here is that we're only now dealing with one source of supply via Travelport as opposed to previously merging four hotel aggregators ourselves."

The announcement of Stay and Pay comes on the back of positive earnings results. For the year ended June 30, 2009, Webjet Limited announced a 15% increase in profits and a 22% growth in transactions numbers to a total of 657,000 and a 17% rise in total transactions value, indicating a 4% drop in unit prices.

It said "reduced demand, the likely reduction in the unit value of travel, the probability of consumers aggressively hunting bargains, and the probability of aggregation sites such as Webjet gaining market share, have proven to be accurate".

It said it does not expect to see a "sustained improvement in market conditions, certainly in the six months to December 2009 and, arguably, not until well into calendar year 2010."

On expansion plans, Noon said that having established itself as the clear number one online player in Australia, Webjet will work to elevate its status from number three in New Zealand as it expands its air product range. "We have said that we are working on a third market and will announce that during September. We think that's enough for right now."

Currently, he said, almost all bookings on Webjet originate from within Australia and New Zealand and tend to be restricted to travel within these two markets. We have this year seen a big mix change as more and more consumers are prepared to buy international travel online. As one example our Bali bookings have gone from 150 per month 6 months ago to now 600 plus per month.

Another new Webjet product, "consistent with consumers hunting for bargains", is Budget Breaker, designed to provide customers with the opportunity of selecting from a large range of automatically and dynamically presented product choices relative to a specified budget.

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com

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