Background: Webjet is a Melbourne-based online travel business that has been helping Australians book holidays since 1998. Its platform allows users to compare and book everything from flights and accommodation to travel insurance and car hire. In 2024, the company also spun off its hotel business, WebBeds, into a separately listed company.  

What happened: Webjet has warned that its EBITDA has fallen to just over $28 million for the year ending March 31. That's down 20% from $35 million a year earlier. And things only got worse in recent weeks for two main reasons:

1. The Middle East conflict has caused a dip in travel demand
2. Virgin Australia has cut its commissions paid to Webjet as it pushes customers toward its own holiday packages business

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What else: In fact, Webjet warned that if the commission changes were in place for the year to March 31, its underlying earnings would have been $3 million lower. Investors didn't love this... sending Webjet shares down more than 11% to record lows. It's a warning sign of a much bigger existential threat to online travel agents.

What's the key learning?

💡 When the intermediary is no longer needed, it threatens more than Webjet's revenue... it threatens its relevance. Webjet earns money through booking fees and commissions from airlines, hotels and travel providers. So its business model depends on remaining a valuable intermediary.

💡 Intermediaries need a clear reason for customers to keep using them. Whether it's exclusive inventory, loyalty programs or a totally differentiated experience. When businesses that don't offer something unique, they risk becoming easier to replace. And right now, Webjet isn’t clearly differentiating.

💡 It's not just Webjet suffering from its Virgin commission-cut, it's happening right across the travel industry. Hotel chains like Marriott International, Hilton, and Wyndham Hotels & Resorts have all pushed direct booking channels to avoid commission costs with online travel agents.