Hostelworld revenue falls as summer bookings disappoint

Online accommodation booking platform Hostelworld saw revenue fall as booking demand over the peak summer period failed to live up to expectations.

But average bookings values rose 6 per cent and the company said its “roadmap for growth” strategy was proceeding well.

The company said revenue fell from €42.6 million in the first half of 2018 to €38.8 million in the first six months of 2019. Some €4.4 million of revenue generated during the period from Hostelworld’s free cancellation bookings will be deferred to a later period.

Excluding the impact of the free cancellations, a product that was introduced in 2018, group revenue was €43.2 million for the period. This is the first time the full global rollout of the free cancellation offer has been included for the whole period.

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The platform said Hostelworld brand gross bookings were 3.7 million in the first half of the year, down from 3.8 million in 2018. Total gross bookings amounted to 3.8 million.

Average booking value was €12.80, a 6 per cent rise on the €12.20 seen in the first half of 2018. The app also continued to perform well for the company, with a 7 per cent rise in net bookings that now sees the mobile platform account for 43 per cent of the bookings for the period.

Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) were €8.9 million, down from €10.4 million in the prior year. Adjusted earnings per share for the period came to 6.44 cent, compared with 7.93 cent in 2018.

Inflation

Chief executive Gary Morrison said the company was pleased with its overall performance, but noted the lower booking demand and the impact of higher-than-expected inflation in performance marketing channels.

“It’s a little behind expectations of where I thought we would be,” said Mr Morrison. However, he pointed to last year’s update, when the company identified competitive gaps from a product perspective.

“It takes time,” he said. “When I look at the core Hostelworld brand, it is a little behind on the bookings perspective. We’re still in the process of closing out those gaps. Some of it is genuine travel market slowness.”

He said the company had made good progress on its ‘roadmap for growth’ strategy during the first half of the year, improving the core search experience and adding unique hostel content, improving its connectivity with hostel partners and suppliers, and strengthening its management team with a number of key hires.

“The market remains highly competitive and as noted in our AGM statement, this continued into the peak summer period. Coupled with higher-than-anticipated inflation in performance marketing channels and the financial effect of increased investment in our ‘roadmap for growth’ during the second half of the year, it means that ebitda for the full year is likely to be below 2018,” he said.

However, Mr Morrison said the operational and strategic improvements put in place in the first half should see the business return to volume growth during 2020.

Investment in Tipi

Mr Morrison pointed to Hostelworld’s strategic investment in Tipi, a hostel-focused technology company that enables hostels to communicate with guests and grant them virtual keys to their accommodation through the app.

“It is compelling from a traveller and hostel perspective – the consumer app is the mechanism by which the hostel operator can send messages to guests,” Mr Morrison said. “It’s the customer service channel.”

He said this was the first steps in exploring technology solutions built for hostels rather than hotels.

Hostelworld announced an interim dividend per share of 4.2 cent, in line with expectations.