Leisure travel no longer a ‘discretionary expense’ says Webjet MD John Guscic

Hotel rooms rather than flights have powered a $150m turnaround in Webjet’s earnings for the year to March 31.

Webjet managing director John Guscic says leisure travel is no longer a “discretionary expense” for consumers as strong bookings defy cost-of-living woes.

Delivering his company’s full-year results for the 12 months to March 31, Mr Guscic said the current uptake of travel would continue for the foreseeable future, aided by greater airline capacity and lower airfares.

“There is no bubble. Leisure travel is not a discretionary expense,” he told The Australian.

“Leisure travel irrespective of what’s happening in macro environments will continue to plough ahead and that’s why the leisure travel market globally has recovered to circa 100 per cent of its pre-pandemic level.”

To underline his point, Mr Guscic said bookings, revenue and earnings across Webjet had exceeded 2019 figures in the second half of the 2023 financial year, to deliver a $14.5m net profit, up from the previous year’s $81.6m loss.

Accommodation service Webbeds was the standout performer for the company, with a 36 per cent leap in bookings compared to 2019, and a 22 per cent jump in earnings.

Webjet chief executive John Guscic.

In contrast Webjet OTA failed to match 2019 volumes for the year due to airline capacity constraints, and the omission of bookings made with travel credits. But high airfares meant there was an increase in the average booking value of flights, from $890 to $1024.

The third brand in the group, GoSee, a car and motorhome rental platform, fell short of pre-pandemic levels due to the lack of inbound tourism into Australia and New Zealand.

Mr Guscic said all three businesses were now ahead of where they were pre-pandemic, and the company as a whole was 50 per cent more efficient.

“We’ve been able to do that in a market that’s not fully recovered, and deliver $30m more in earnings this half than we did in the same half of 2019,” he said. “That’s been the most pleasing for me.”

He said the strength of Webbeds was aided by domestic demand in key markets, with one or two-night bookings bolstering longer bookings made by international travellers.

As a result, Webbeds’ revenue jumped to $236.7m, well ahead of Webjet OTA with $107.8m, and GoSee’s $19.5m.

“Webbeds is the business that 10 years ago when we set it up, we thought we would have an opportunity for it to be substantially bigger and the major contributor to the broad Webjet enterprise, primarily because it operates on a global scale,” Mr Guscic said.

“Webjet OTA is a great business, and the market-leading OTA in Australia and New Zealand, but because we only operate in Australia and New Zealand we always knew we were landlocked with that opportunity.”

Looking ahead, Mr Guscic said there was no reason to think the current upward trajectory would not continue, as Chinese airlines added capacity and travel demand showed no sign of slowing.

“I don’t think we’re seeing a surge (in travel demand post-Covid),” he said.

“What we’re seeing is a reversion to normal behaviour. It’s a surge that suggests this is the new normal going forward.” Webjet’s share price climbed on the back of the results announcement, rising 4.4 per cent to $7.62.

Analysts also acknowledged Webjet’s “strong result” and estimated that current trading was about 10 per cent higher than what was expected for the first half of the 2024 financial year.

“Looking forward the macro will get more difficult with prices and leisure coming off,” Citi ­Research analyst Samuel Seow said.

“However we note current trading in Webbeds shows total transactional value (TTV) now growing at a faster rate than bookings, implying average room night per booking may be increasing.”