Why Webjet Limited is launching a blockchain initiative

Credit: Jaan

Online travel business Webjet Limited (ASX: WEB) has announced to the market this morning that it is expanding its blockchain initiative, Rezchain, to a carefully selected group of external organisations.

Webjet has previously developed a blockchain-based solution which enables participating travel companies to eliminate any discrepancies when reconciling accounts payable and accounts receivable data.

A similar problem exists in the hotel distribution chain where the industry estimates around 3%-5% of bookings are disputed in some form. Webjet believes its technology can fix the issue of disputed bookings which often prove costly and can take months to resolve.

Webjet has stated that Rezchain will be the hotel distribution industry’s first functional blockchain enabled technology platform. Participating companies will be able to share data on the chain which will enable them to address any data anomalies in real time, thus removing the possibility of disputes at the time of invoicing.

Webjet’s own Business-to-Business companies have proven the effectiveness of the solution in testing. Rezchain agreements with Thomas Cook (Europe), DidaTravel (China), Mitra Global (Indonesia) and hotel chain, Far East Hospitality have now been signed. Participating companies will receive the “blockchain as a service” and over time it is expected that larger organisations will start running their own mining nodes.

Foolish takeaway 

The use of blockchain technology in the hotel distribution industry will be interesting to follow over the coming years. Despite today’s announcement, Webjet’s share price is down 1.95% to $9.55 at the time of writing, hovering above the 52-week low of $9.13 made in early December.

Short interest currently stands at a high 5.90%, which has risen sharply over the last couple of months after the company’s earnings outlook in November fell short of market expectations.

All eyes will now focus on February 22, when Webjet reports its half yearly earnings for the December period. At current prices, the market is pricing in a large amount of bearishness given the growth prospects of the business.

This also means I think that Webjet trades at a far more compelling valuation than some of its rivals such as Flight Centre Travel Group Ltd (ASX: FLT)  and Corporate Travel Management Ltd (ASX: CTD).

If Webjet can deliver a result above expectations with a more bullish outlook for the second half we could see a short squeeze play out.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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