On the Beach (OTB) – Assessing the moat

On the Beach (OTB) – Assessing the moat

On the Beach (OTB) is an online travel agent (OTA) focused on beach package holidays in Europe. The company’s track record is impressive with revenue more than doubling from 2013 to 2017. The longer-term question is whether On the Beach has a sustainable competitive moat.

It is easy to find high quality businesses. You just need to run a screen for the operating margin and the return on capital employed.

It’s much harder to determine if a business will remain high quality, because high profit margins will inevitably attract competitors. Amazon founder Jeff Bezos famously said: “your margin is my opportunity.” To keep the competition at bay, a company needs to have a sustainable competitive advantage.

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