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Jetset steps up challenge to Flight Centre, Wotif and Webjet

Travel agency Jetset Travelworld (ASX: JET), has announced the signing of a 10-year strategic alliance, with US-based Orbitz. This is to utilise its global technology platform to support its new online travel offering helloworld.com.au. The website is part of Jetset’s renewed market positioning, which will see the helloworld brand expanded to both its retail and corporate franchisees as well as online.

The helloworld website is expected to launch by the end of calendar year 2013 and will provide a comprehensive range of air, land, cruise and car options with travel insurance and travel packages to follow shortly afterwards.

Jetset’s renewed image is aimed at improving its competitive position against both traditional ‘bricks and mortar’ travel agents, including Flight Centre (ASX: FLT) and Corporate Travel Management (ASX: CTD), as well as the online travel agents such as Wotif.com (ASX: WTF) and Webjet (ASX: WEB).

There has certainly been a distinction in the performance of the ‘offline’ versus the ‘online’ travel agents in the past 12 months. Corporate Travel Management and Flight Centre’s shares have soared 62% and 79% respectively, while Wotif and Webjet have struggled, resulting in share price falls of 9% and 28% respectively. Meanwhile Jetset, which has been in a ‘turnaround phase’, has seen its share price remain essentially flat for the past year.

Foolish takeaway

The continuing increase in the number of consumers conducting commerce online, is a theme likely to continue for many years. The high level of profitability of early movers in certain sectors including those in online travel, online real estate and online employment is naturally going to entice competition. These competitors won’t just be domestic, but will likely include major oversees players such as Orbitz and even Google.

Pressure from competitors will force businesses to spend increasing amounts of money to defend their market share. While this could potentially negatively affect margins, there is still significant opportunity to grow revenues given the shift from offline to online. As a result, the recent relative underperformance of Jetset, Wotif and Webjet will undoubtedly be attracting the attention of some value investors.

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Motley Fool contributor Tim McArthur owns shares in Jetset Travelworld.

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