Hostelworld Group PLC is a ground-breaking social network-powered Online Travel Agent (“OTA”) focused on the hostelling category. Founded in 1999 and headquartered in Ireland, Hostelworld is a well-known brand with almost 230 employees, hostel partners in over 180 countries, and a long-standing commitment to building a better world.
Hostelworld – What They Offer
Through a series of social features on the company’s platform, they connect travellers in hostels and cities based on their booking data. The strategy has been very successful, generating significant word-of-mouth recommendations from customers and strong
endorsements from hostel partners.
Improving the Sustainability of the Hostelling Industry
Their focus over the last few years has been on improving the sustainability of the hostelling industry. In particular, over the last two years, they have commissioned independent research to validate the category’s sustainability credentials, and recently introduced a hostel specific sustainability framework which encourages their hostel partners to move to even more
sustainable operations and also provides the data points for their customers to make more informed decisions about where they stay. In addition, their customers are now able to offset their trip’s carbon emissions should they wish to do so, and they have maintained our ‘Funding Climate Action’ label awarded by South Pole.
Performance & Profitablity
Hostelworld published an update on trading for the first half of 2024, up to 30 June. Strong financial delivery continued with further growth in net bookings exhibiting a record half-year for Asia and Central America. Hostelworld advised it is well positioned for further profitable growth based on:
- Continued investment in their social network strategy driving growth in penetration & usage
- App bookings growth continuing to outpace Web, delivering marketing efficiencies to fuel future growth
- Growing hostel supply, with market coverage increasing 3% year on year
- Reiterating FY 2024 Adjusted EBITDA guidance in line with market consensus2
Gary Morrison, CEO, commented:
“I am very pleased to report strong growth in net bookings (+9% YoY) and even stronger growth in net margins (+23%), primarily driven by our highly differentiated social strategy…
In parallel, I am also pleased to report that we made good progress during H1 on all aspects of our growth strategy. We have continued to provide our customers with enhanced social network product features, added more hostel inventory to our platform, and have continued to upgrade our platform towards a fully cloud native architecture. In respect of delivering on our key sustainability strategic goals, we launched our ‘Staircase to Sustainability’ platform to deliver ongoing sustainability improvements in the hostel industry.”
Trading Update Statement – H1 2024
“During the first 6 months of the year, net bookings grew +9% YoY driven by strong consumer demand for low-cost destinations. This trend was driven primarily by strong growth in net bookings made by UK customers and European customers, travelling to lower cost destinations in Asia and resulted in significant growth in lower ABV net bookings. Consequently, higher cost ABV net bookings to destinations in Europe reduced YoY.
Strong consumer demand for lower cost destinations for the half year overall has resulted in ABVs contracting by 10% YoY (H1 2024: €13.60); driven by the reduction in average bed prices on a booked basis. Over the balance of the year, we expect to continue to see strong customer demand for lower cost destinations in Asia and other regions resulting in lower ABVs YoY and revenue growth lower than net bookings growth on a full year basis.
We are pleased to report that marketing cost as a percentage of revenue1 has also reduced from 51% in H1 2023 to 45% in H1 2024, primarily driven by our social strategy. This highly differentiated strategy drives new and existing customers to use our mobile native app. This has resulted in a greater mix of low-cost bookings overall, which in turn has delivered a 23% increase in net margin YoY. On a full year basis, we expect direct marketing costs as a percentage of revenue1 will remain in the 45% to 50% range as we continue to optimise marketing investments for long term growth in new customers and direct margin.
Finally, we have seen continued robust momentum in operating cash performance, with cash generation of €12.4m in H1 2024 (H1 2023: €10.8m), driven by the strong cash conversion characteristics of our business model. This strong performance has enabled the early repayment of the remaining AIB debt facility, well ahead of schedule, which represents another positive milestone for the business. Furthermore, we continue to deleverage the balance sheet having commenced the repayment of warehoused payroll taxes to the Irish Revenue Commissioners. Our financial position has been significantly strengthened as a result, with a reduction in our net debt4 from €12.3m as at 31 December 2023 to €2.6m as at 30 June 2024.”
Financial highlights:
- Net bookings of 3.7m (+9% year on year (“YOY”)) driven by record performances in Asia and Central America
- Net average booking value of €13.60 (-10% YOY) driven by a greater proportion of Asian destination bookings and a slight increase in the proportion of solo customers
- Net revenue of €46.4m (+1% YOY) reflecting the drivers above
- Direct marketing as a percentage of revenue1 totalled 45% (versus 51% in H1 2023) driving net margin growth of +23% YOY.
- Proportion of bookings from social members increased to 80% (66% in H1 2023)
- Operating costs3 of €12.5m, (-2% YOY)
- Operating profit for the period €4.0m compared to a loss of €1.7m in H1 2023 (+335% YOY)
- H1 2024 adjusted EBITDA €9.6m versus €5.1m in H1 2023, (+88% YOY), an increase in adjusted EBITDA margin from 11% to 21%
Balance sheet and cash flow:
- 30 June 2024 cash balance of €5.0m (31 Dec 2023: €7.5m)
- Net debt4 position of €2.6m (31 Dec 2023: €12.3m)
- Commenced repayment of warehoused payroll taxes to Irish Revenue, €7.6m outstanding (31 Dec 2023: €9.6m)
- Net asset position of €62.6m (31 Dec 2023: €59.2m)
1Revenue is generated revenue: gross revenue less cancellations, excludes impact of deferred revenue
2Company compiled market consensus FY 2024 adj. EBITDA is €21.4M as of 07 Aug 2024
3Operating costs exclude paid marketing costs, credit card fees, exceptional costs, share option charges, depreciation and amoritisation
4Net debt is cash less outstanding debt, including term loan, RCF & warehoused payroll taxes
