The Webjet (ASX:WEB) share price is edging higher after the company advised it is focusing on initiatives to reduce costs and drive margins.
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Webjet Limited (ASX: WEB) shares are edging higher today after the company released a transformation strategy update. At the time of writing, the Webjet share price is trading 0.65% higher at $6.22. In comparison, the S&P/ASX 200 Index (ASX: XJO) is currently trading 0.32% lower.
Let’s take a look at what the travel company reported.
The road to recovery for the Webjet share price?
The Webjet share price is in the green as the company’s transformation strategy update puts the spotlight on its WebBeds business in a post-COVID-19 world. The company highlighted the significant global opportunity, stating that the pre-COVID global accommodation market had a value of more than $800 billion in total transaction value (TTV). Of this, WebBeds has captured some ~4% market share.
Post pandemic, Webjet believes this remains a critical distribution channel supporting the travel industry’s recovery. As the travel industry picks up, the company aims to take advantage of changing travel patterns, expand into new regions and emerge as the #1 global B2B provider.
New revenue opportunities
North America is a historically underrepresented region for Webjet’s WebBeds business despite being the largest destination within its network. With only 1% market penetration in the Americas, the company is focused on leveraging new opportunities such as targeting new market segments and expanding contracted inventory in key cities.
Europe also represents an important region for the business given the significant number of independent hotels. Webjet aims to increase its footprint across Eastern Europe to leverage the $26 billion B2B market opportunity.
The APAC region was on track to be the largest region by booking volume for Webjet pre-COVID. The company believes this region has the potential to deliver the most significant growth post COVID. According to the company, the pandemic will likely bring about new opportunities in the region, with entry into areas of the domestic market that were once impenetrable.
Webjet’s transformation strategy update did not provide an update regarding earnings but instead focused on its cost efficiencies and margin improvements.
Delivery of the company’s cost efficiencies are on track with its 1H21 costs down 42% over 1H20. This should help Webjet achieve its 8/3/5 target which represents 8% revenue/TTV, and 3% costs/TTV to drive 5% of earnings before interest, taxes, depreciation, and amortisation (EBITDA)/TTV.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.