Revenues rise by 5% to €83.5m at Hostelworld

Sales at Irish travel website Hostelworld

rose 5 per cent in 2015, according to its first set of financial results as a public company. The firm has focused on rejuvenating its flagship brand and benefited from increased commission from its Elevate product.

Hostelworld, which also operates the Hostelbookers and Hostels.com brands, raised €180 million when it listed on the Irish and London stock exchanges in November.

In the 12 months to December 31st, 2015, group revenues rose 5 per cent to €83.5 million, with the average booking value also up 5 per cent to €12.1 per booking.

Earnings (ebitda) for the year fell back to €23.6 million, “reflecting marketing investment”, while profits before tax rose 4.5 per cent to €80.5 million.

Earnings per share fell back to €0.22 from €0.27 previously, as Hostelworld said it would pay a maiden dividend of 2.75 cent per share.

Hostelworld chief executive Feargal Mooney said he was "very pleased" with the company's performance, which came out marginally ahead of expectations. He said he was encouraged by the strong growth in the company's Hostelworld brand.

Expectations

“The new financial year has started well and in line with our expectations,” Mr Mooney added. “The strength of our brand and technology, together with healthy booking numbers and continued pricing improvements, underpinned by a growing marketplace, gives the board confidence in the group’s future prospects.”

Pricing is one of the company’s four growth pillars and Mr Mooney said growth in the company’s Elevate product was an important aspect of this.

In 2015, some 21 per cent of Hostelworld-only bookings were associated with the Elevate, up from 15 per cent in 2014.

Similar to Google Adwords, Elevate allows hostels to claim a better position on the group’s webpages by paying a higher rate of commission, although Mr Mooney noted that hostels “can’t buy their way to the top”.

“The primary driver of position on the page is quality”.

Mobile now accounts for about 40 per cent of all bookings, up from 31 per cent in 2014, and Mr Mooney expects this to grow to about 50 per cent over this year.

The company has made good progress in Asia, which is the fastest-growing destination region (plus 10 per cent), while South Korea is now the seventh highest nationality for Hostelworld brand bookings.

Key markets

Looking to this year, the group said it would expand its digital marketing campaign to other key markets, and “to continue to realise efficiencies in its booking mix and management of cost per click and cost per booking”.

It will also enhance its iOS and android apps, increase the penetration of Elevate bookings among accommodation providers and seek to capitalise on consumer growth in South Korea.

Davy Stockbrokers said it was an “encouraging statement” from the travel group.

It is forecasting growth of 10 per cent for this year, with net revenue expected to be in the mid-to-high € 90 million range and adjusted ebitda of €25.9 million.

Hostelworld was founded by businessman Ray Nolan who sold the business to Hellman and Friedman in 2009 for €202.5 million, in a deal which netted Mr Nolan €100 million.

The company specialises in offering online booking services and maintains a database with more than 12,600 hostels in 170 countries.