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Webjet denies it is under threat from Google Flights

Webjet has hit back at claims it will struggle to compete with Google's Flights business, after its shares were smashed.

Webjet CEO John Guscic. Picture: Tim Carrafa
Webjet CEO John Guscic. Picture: Tim Carrafa

Webjet has hit back at claims that it will struggle to compete with Google's Flights business, after an analyst report sent the online travel booking company share price down 14 per cent on Tuesday.

Morgan Stanley on Tuesday slashed Webjet's outlook to an underweight rating, and said it expects Google's new travel-booking features to eat into Webjet's earnings, just as it has Expedia and TripAdvisor's.

Google rolled out its new travel features on January 8, merging features from its trips feature with its maps functionality.

Nearly two-thirds of Webjet's traffic is from organic search, the Morgan Stanley report said.

Webjet responded on Wednesday that there were "numerous inaccuracies" in the Morgan Stanley report.

It said the data in the report stating that 65 per cent of Webjet OTAs (online travel agency) traffic comes from search engines at a low cost is "incorrect and does not reflect the source channel mix or shopping intent of the Webjet OTA’s customer base".

"Regardless of source, traffic alone is not a proxy for Webjet OTAs’ bookings or earnings growth, and it has never been presented as such by the company," the company added.

“Conversion, booking channel, and attachment rate of ancillary products (as examples) all play a role in bookings and earnings growth, and traffic (and its cost to acquire), as a singular data point, is not the preliminary predictor of future performance.

“Google’s intentions, as interpreted in the report, do not present a material threat to the current traffic or bookings volumes due to the fact that the vast majority of bookings are generated through channels where the Webjet brand is the focus for the search, not destination, carrier or other flight related search term.”

Shares in Webjet were back up 4 per cent on Wednesday following the response.

Rod Cuthbert, the former CEO of online travel websites Viator and Rome2Rio, told The Australian that Google was abusing its status as a monopoly search engine, and that OTAs like Webjet were being increasingly squeezed.

He said his former company, Rome2Rio, had to significantly shake up its platform to respond to Google's market manoeuvres.

"Google is bleeding the OTAs of traffic and it's starting to hurt," he said.

"With Google diverting so much traffic to their own products, OTAs are increasingly looking to offline advertising to build brand awareness."

Google's monopoly status was a key issue in the ACCC's recent digital platforms inquiry, with the government subsequently announcing it would establish a specialised digital platforms branch within the competition watchdog to investigate issues of market power.

Additional reporting: David Rogers, AAP.

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Original URL: https://www.theaustralian.com.au/business/companies/webjet-denies-it-is-under-threat-from-google-flights/news-story/2d49b5d9640143d7739a10fc7f41d71b