Friday, March 1, 2013

Wotif takes a dive is probably the most successful Online Travel Agency (OTA) in the southern hemisphere.

After riding the wave as consumers shifted booking accommodation online and further boosting impressive growth with acquisitions, does recent trading results suggest that Wotif is now flat-lining?

Has the bubble finally burst?

After the departure of charismatic CEO Robbie Cooke that steered Wotif from private ownership to public listing resulting in formidable growth and profits, new CEO Scott Blume is attempting to appear upbeat about Wotif's recent pedestrian performance.

It's been reported that Wotif has performed positively in the Australian and Kiwi markets in a ''generally lackluster domestic retail environment". The strong Australian dollar has encouraged Australians that may have booked domestic travel on Wotif to travel overseas. Anecdotal evidence suggests that Kiwis that are still travelling may be mirroring this behavior, so how are Kiwi based OTAs fairing?

While Wotif has gained modest revenue gains from its core sites in Australia and New Zealand, its Asian business has underperformed. Further drags on performance have been blamed on increased costs from online marketing, web maintenance and staff.

As a player in a global market, Wotif is also facing increasing competition from offshore OTAs. The major threat that cannibalises potential online growth are OTAs dominciled in the northern hemisphere, where mega companies such as Expedia, Sabre, Orbitz, Priceline, etc are using larger economies of scale to elbow themselves in front of the global consumer.

In October last year, Wotif controversially announced to their suppliers increases in the 10 percent commission rate. From 1st January this year, commission was raised to 11 percent and on 1st January 2014, commission will be raised to 12 percent. Wotif qualified this increase by indicating that this will enable them to foot-it with their competitors that operate at "much higher commission levels" that "allow them to market themselves more aggressively".

Will this give Wotif additional fire-power to substantially increase marketing streams?

It will be interesting to track Wotif's performance over the next 12-months. Suppliers will be wondering if Wotif will consider returning to them again for further contribution if trade continues to flat-line...

Click the "Get Widget" link below to place this widget on your website or blog!