Stockhead: Bailador likes Siteminder’s strategy to take advantage of ‘Swiftflation’ events
- Bailador confident hotels booking platform SiteMinder will grow enormously as it rolls out new functionality
- Dynamic Revenue Plus to help hotels take advantage of key events like a Taylor Swift concert
- SiteMinder forecasting to be underlying EBITDA and underlying free cash flow positive in H2 FY24
Special Report: Bailador Technology Investments reckons the largest position in its portfolio, SiteMinder, is poised to unlock huge potential upside by adding key functionality for hotels to increase their revenue.
Tech-focused capital fund Bailador Technology Investments (ASX:BTI) first bought into SiteMinder (ASX:SDR) in 2012, chipping in $5 million and was instrumental in its listing on ASX in 2021.
BTI co-founder and Managing Partner Paul Wilson says it has already realised $30 million in cash, with its remaining position in SDR valued at $70 million, with the stock price up ~54% YTD.
SDR has grown to become one of the world’s leading and most well known software-as-a-service (SaaS) businesses for connecting hotels to digital distribution channels.
“In the industry they’re known as online travel agents or OTAs… names like Booking.com and Expedia,” he says.
“If a hotel is on the SiteMinder platform they only have to load up their hotel room inventory and it can be distributed to all those OTAs.”
SDR sells into more than 100 countries, with 40,000 hotel customers paying a monthly fee for access to the platform.
“They’re the world leader in their space but there are still hundreds of thousands of hotels using old school technology so it has room to grow by doing what they’re doing and adding more hotels,” he says.
Dynamic Revenue Plus to take advantage of Swiftflation-like events
Wilson says SiteMinder is working to roll out key functionality, capitalising on its growing hotel customer base and platform with significant amounts of data plus enormous amounts of bookings annually.
He says the Dynamic Revenue Plus (DRP) model has revenue management combined with advanced market and business intelligence.
DRP essentially has functionality to boost hoteliers’ booking revenue and in turn SDR will take a percentage, also boosting their bottom line.
“There were $60 billion worth of bookings coming through the SiteMinder platform last year and it is developing features hoteliers want and will share in some of that value,” Wilson says.
“Even if SiteMinder gets 1% of the booking value paid to them that would be $600 million, triple its current revenue base so that’s the sort of scope of the prize you’re talking about.”
Wilson says Dynamic Revenue Plus will recognise that hotel bookings are higher than normal for a certain period, know when a big event is in town and recommend a hotelier put up their price by a certain amount accordingly.
“Scenario one is when a Taylor Swift concert comes to town and a hotelier might by flying blind not realising the timing of that and a bunch of people book up all rooms,” he says.
“The hotelier is happy he’s sold all his rooms, but they could have sold them for twice as much.
“Another is a big wedding, where a whole hotel has been booked out and SDR can let a neighbouring hotel know there is a situation where you have an opportunity to charge more for your rooms.”
Channels Plus
Wilson says the second functionality is called Channels Plus, which is a new low effort connectivity initiative allowing hoteliers to connect directly with more distribution channels.
“At the moment the hotels must have their own commercial agreements with each one of the online travel agents and what SiteMinder provides is a behind the curtain connectivity,” he says.
Wilson says with Channel Plus SDR would have pre-agreed arrangements with all the significant online travel agents.
“SiteMinder would offer an option for a hotel to take advantage of all the agreements they’ve negotiated for, say, 20 different online travel agents,” he says.
“For x percent of the additional revenue, the hotels can get access to commercial agreements with a suite of partners without having to do it themselves.”
“Essentially it makes it easier for a hotel to get immediate distribution.”
SiteMinder forecasts cash flow positive in H2 FY24
SDR recently released its Q1 FY24 trading update with highlights including a 32.1% YoY increase in annualised recurring revenue (ARR) to $191.6 million and underlying operating cash flow of $600k for the quarter.
The company reiterated guidance for organic revenue growth of 30% in the medium term and to be underlying EBITDA and underlying free cash flow positive in H2 FY24.
“SiteMinder has given guidance it will be profitable in the second half of the year which is great, but even more exciting is it has set itself up for long-term success with new product developments,” Wilson says.
“We’re confident that SiteMinder is going to grow enormously off the back of additional features and functionality for its existing hotel customer base.
“With SiteMinder as BTI’s largest holding and BTI trading at a discount to NTA, it’s an effective way to get access to SiteMinder at an attractive price”.