Since closing 66% above the IPO price in its debut in early June, Wotif.com's sp has continued to rise. Today's close of $4.33 means that investors who were lucky enough to get some shares in the float are up 117% - in just 6 months!
As the leading provider of online accommodation booking services in Australasia, the per annum total online accommodation sales in Australia figure is very important for Wotif – which takes a commission on the value of the accommodation booked. The calendar year 2005 value was A$789 million, with the compound annual growth rate at 42%. I think there is no reason why high growth won’t continue in this sector. The following is from their 2006 annual report:
Wotif.com believes that the online channel will continue to experience strong growth by attracting customers away from traditional sales channels. It is considered that the convenience, product range, transparency and value provided by the online channel are driving a structural change in consumer behaviour in the sector.
Furthermore, online penetration in Australia stands at 8.5% of total accommodation turnover, compared with (separate) estimates of 22% and 28% for the United States, which suggests that Australians have been slower to embrace such online facilities.
I think Wotif must at least maintain or improve its market dominant position (36% of the Australian accommodation online-booking market) to ensure competitors do not gain negotiating power with regards to inventory. Also, competitors have already mimicked Wotif’s superior site layout. So if Wotif is complacent, they could lose market share – which is why focus on brand recognition will be vital for the company.
I'm interested in others' experiences and thoughts on this company. Who’s been accumulating? Is Wotif to pricey at the moment? Thoughts on organic growth, entering new markets?