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Webjet (ASX:WEB) share price growth halted by QLD lockdown

Another QLD lockdown and the share price of Webjet Limited (ASX: WEB) has dipped a little. I don't think the Webjet share price drop is cause for concern - here's why. 

Upon news of another lockdown in Queensland, the share price of Webjet Limited (ASX: WEB) has dipped a little. I don’t think the Webjet share price drop is cause for concern – here’s why.

WEB

Source: Rask Media WEB 2-year share price chart

Prior to COVID-19, Webjet was the second-largest global B2B (business to business) digital travel booking provider.

Webjet business model is capital-light

Webjet earns a majority of its revenue through booking commissions whenever someone books flights or checks-in for hotel bookings. In FY20, booking commission revenue represented 84% of total revenue.

All these bookings are completed online, so no need for operating expenses associated with a branch. It is much more nimble than its competitor, Flight Centre Travel Group Ltd (ASX: FLT) who still have branches.

In light of the ongoing COVID-19 situation, Webjet has the upper hand as it looks to bolster its existing online platform.

As my colleague, Jaz Harrison covered in her article on Webjet’s strategy, the company is focused on refining technology and processes across the business.

This is reflected in Webjet’s gross margins. It still managed to record 58% in gross margins, nearly quadrupling Flight Centre (15.9%) for FY20 when both companies suffered a major downturn during the pandemic.

Webjet’s big network advantage

In the last few years, Webjet has acquired some market-leading B2B travel businesses across the globe.

The biggest acquisition occurred in August 2017 when Webjet acquired JacTravel, a European B2B travel business, which essentially catapulted the company to the number 2 B2B player across the globe and Europe.

Once borders re-open, the travel agents with the biggest networks will be best placed to capitalise on the uptick in travel.

Is Webjet a good recovery play?

Despite the significant adverse impact of COVID-19 on the travel industry, I think Webjet will become stronger than ever.

One key reason is Webjet’s focus on trying to become the leading digital B2B provider across the world. It has a solid track record of acquiring the right businesses to gain market share.

I also think COVID-19 will accelerate the already fast growth in booking travel online rather than physically attending a travel kiosk. Given COVID-19 is still around, people will likely prefer to book everything online.

If you are interested in other ASX share ideas, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.

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