S8 sells Webjet shares and then forms travel marketing alliance
Just one day after divesting its hold over 17.4% of shares Webjet, ever expanding travel group S8 has cut a deal with Webjet to promote its Queensland resort properties.
The alliance announced on Friday should benefit both parties as Webjet has been looking to increase its market share for online accommodation bookings, which pay higher commissions than its core online airline booking business and S8 will gain another platform to promote the thousands of holiday apartments it owns on the Gold Coast.
On Thursday, S8 exercised and sold all of the options in Webjet it had acquired when it purchased Harvey World Travel last year.
S8’s stake in Webjet was placed with institutional and professional investors, following S8’s decision to divest Harvey World’s 15% shareholding in Webjet earlier this year.
Webjet managing director David Clarke said the deal announced on Friday indicated his company would maintain a good working relationship with Webjet, despite the share sales.
He added that Webjet’s website outranked Harvey World Travel as one of the top destinations for booking air travel on the internet and could provide new customers for S8’s resorts.
“We believe accommodation sales on the internet are a very logical extension of our air sales,” he said. “Those people that are flying need to stay somewhere.”
Research cited in the prospectus for the recent listing of accommodation website Wotif.com said Australians booked only 8% of hotel rooms online, compared with 22% to 28% in the US, meaning there was a lot of room for growth.
Mr Clarke said that Webjet bookings had more than doubled in the past year.
While Webjet has been growing online, S8 has rapidly expanded to become the largest travel agency group in Australia through the purchase of Harvey World, Transonic and Travelscene.
It is also growing overseas, through its $200 million bid for New Zealand’s Gullivers Travel and an alliance with Virgin Group in Britain.
In a report to clients on Friday, UBS said S8 would be well-placed to extract cost savings and fill its resort properties after its string of acquisitions.
The company has not released an earnings guidance for 2007 but the investment bank estimated its profits could more than double to $47 million next year.
Webjet shares closed 2.5c lower at 31.5c on Friday, while S8 shares fell 7c to $3.86.
Report by The Mole
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