Wotif sees surging demand for overseas holidays

Australians like someone to hold their hand when travelling overseas, hesitating to book overseas holidays online themselves.

For international holidays, people have tended to go back to travel agents to purchase package holidays, according to Holdings’ (ASX: WTF) chief executive, Robbie Cooke. That’s a strong endorsement of rival, Flight Centre Limited’s (ASX: FLT) model of combined traditional bricks-and-mortar travel agents and online booking facilities. Mr Cooke has said that he sees that trend continuing.

He added that surging demand for overseas trips was a challenge for online hotel booking sites. According to the Australian Bureau of Statistics (ABS) in the 2012 financial year, Australians took a record 8 million trips overseas, an 8% increase over last year – and more than double the level of travel just 8 years ago.

Despite the threat from traditional travel agents, Wotif continues to revamp its business. It has recently expanded into holiday home rentals, competing against Fairfax Media’s (ASX: FXJ) Stayz brand, and added domestic and international flight bookings to its original accommodation offerings.

The company has also embraced the mobile consumer, offering apps for iPhones and mobile versions of its websites, while expanding its offering in Asia. All of the company’s Asian sites are now multi-lingual, hotels available in Asia have increased from 5,900 to 8,200, and the region now contributes 12% of total room night sales.

Wotif plans to offer a holiday package service in future and sees corporate travel bookings as another opportunity – which would possibly see it encroach on Flight Centre and Corporate Travel Management’s (ASX: CTD) turf.

The Foolish bottom line

Whether these moves will be successful, remains to be seen. Despite the surge in overseas travel, and the strong Australian dollar, Wotif expects to report a flat profit for the first half of the 2013 financial year compared to the same period last year.

By comparison, competitors Flight Centre and Corporate Travel Management recently announced forecasts of strong growth in the year ahead, although that may be more of an indication of the differences between the three companies, than any fall in Wotif’s performance.

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Motley Fool writer/analyst Mike King owns shares in Flight Centre. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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