WebBeds on Shopping Spree for Bedbanks: Should Hotelbeds Be Worried?

Granted, WebBeds has done very well in just five years of operation. Last week it trumpeted its position as the number two wholesale bedbank player with the acquisition of Dubai-based Destinations of the World.

But being number two when the number one is so much higher up on the ladder means there’s still a lot of climbing that WebBeds must do. It also reflects just how fragmented the business is, in which these companies operate behind the scenes connecting up travel agencies and tour operators with hotels across the globe.

Hotelbeds remains far bigger than WebBeds, according to Manuel Ferrer, founding partner and chairman of Olea Consultancy and a former Hotelbeds Asia-Pacific executive director.

Hotelbeds has over 170,000 hotels, the majority if not all are its own direct contracts. By contrast, WebBeds has 28,500 direct contracts. This includes 5,600 it picked up with $173 million acquisition of Destinations of the World from asset management firm Gulf Capital.

Direct contracts are key, for one, because margins are higher compared with bookings drawn from third-party players. What’s more, the majority of the new contracts from Destinations of the World (56 percent) is from Asia-Pacific, which is a key strategic focus of WebBeds.

“From the distribution [or demand] perspective, the acquisition ensures we are in a much stronger position to present a broader and deeper range of products to our partners,” said Daryl Lee, WebBeds Asia-Pacific CEO, based in Singapore. “On the other hand, our esteemed hotel partners will also be able to leverage on the immediate increase of the widened network, including one of the leading B2B travel wholesalers in South Korea, BICO Trip.”

Aside from South Korea, Destinations of the World has a strong distribution in Japan, China, Hong Kong, Taiwan and Thailand, complementing WebBeds’ strengths in the region, in particular in Southeast Asia, he said.

Following the acquisition, WebBeds, part of Australia-based Webjet, will have more than 2,100 employees with offices in 36 locations globally, a company statement said.

Unifying the Brands, Just As Hotelbeds Has Done

All the brands that make up WebBeds, which Webjet acquired or started in the past five years – Lots of Hotels (2013), Sunhotels (2014), FIT Ruums Asia (2016), JacTravel (2017) and now Destinations of the World – will all be streamlined by WebBeds in the long run, said Lee, as Hotelbeds has done by axing GTA and Tourico.

The process has started. “In Asia-Pacific, integration is largely complete for both FIT Ruums and JacTravel businesses. In fact, cross-platform inventory access, processes and communication with our partners have been streamlined as one business, which is WebBeds. Destinations of the World is a pure B2B global accommodation providers, hence we are planning a similar integration to begin immediately following completion of the sale. This will allow WebBeds to streamline business partnerships and focus on the efficiency and growth,” he said.

A unified brand will put WebBeds in a better position to compete with Hotelbeds, and Webjet’s managing director, John Guscic, is on the prowl for more acquisitions to achieve scale benefits such as gaining better rates with hotels.

The problem is to find a sizable enough bedbank with a good fit and preferably familiarity from having worked together, like Destinations of the World is, is not so easy. The market may be big — WebBeds says it has a Total Transaction Value of more than $50 billion, with Europe as the largest market ($20 billion), followed by the Americas ($15 billion), Asia ($18 billion) and Middle East/Africa ($3 billion)—but it is complex and fragmented, comprising small and medium-size players.

WebBeds has familiarity with Destinations of the World. Though parent WebJet is an Australian listed company, WebBeds is registered in Dubai, as it started in 2013 with the establishment of Lots of Hotels in Dubai. Destinations of the World has also been a long-standing partner of WebBeds as both a client and supplier.

“Destinations of the World is a company we have worked with for many years, and we have the greatest amount of respect for their business. We look forward to working with the DOTW team in the weeks and months ahead as we integrate our businesses and develop the best possible outcomes for all of our partners and clients,” Guscic said.

But having built up the business this far, it won’t be beyond WebBeds to find ways to grow further, either organically or through acquisitions.

The people managing it were virtually all ex-GTA executives, including Guscic, who was GTA’s managing director Asia-Pacific, and Lee, previously GTA’s regional vice president sales marketing Asia-Pacific, the Middle East and Africa.

Last August, WebBeds recruited three senior executives, all based in Sydney, to lead operations in the Pacific region, and all three – Pacific president John Stucci, Pacific head of commercial Pacific Grant Sumich, and Pacific hotel procurement manager Anthony Rumpel  – were formerly with GTA.

So while Hotelbeds has axed the GTA brand, it has not quite been able to get rid of the spirit. And that’s why while it can still sleep soundly at night, it should keep watch on a very driven number two.