With the number of Australian friends who seemed to be enjoying White Christmases (overseas holidays) this year, I wanted to briefly discuss an often touted criticism of Webjet’s business model.
Like many businesses, customers can easily search their website free of charge for what they are after (in the case for flights, room nights, holiday packages), but then purchase the product and bypassing the booking fees by going directly to the supplier – in this case Airlines, hotels, car rental agencies. This is the core reason Webjet’s business model was considered ‘unsustainable’.
So how is it that this company is able to generate excess returns? It is because people are willing to pay for Webjet’s core product – Convenience.
Webjet has entrenched itself in the online travel agency market because people know that they can go to the site to book their holidays, and it will be done quickly and easily. Given the amount of stress that arises during a holiday period, you can appreciate the value that people would place on using Webjet to manage their travel arrangements.
As an online aggregator of information and hence convenience, Webjet continues to benefit from travel. Investors in our funds also benefit knowing that Webjet is a core holding at current prices.