Business World

Thursday 19 September 2019

Hostelworld earnings fall amid 'year of transition'

Hostelworld boss Gary Morrison says it is working to address ‘competitive gaps’
Hostelworld boss Gary Morrison says it is working to address ‘competitive gaps’
Ellie Donnelly

Ellie Donnelly

Shares in Hostelworld tumbled more than 4pc in London yesterday after the group reported a sharp drop in income.

Analysts were quick to revise down like-for-like growth forecasts by around 11-15pc for the year, as adjusted earnings fell 15pc to €8.9m in the six months to June 30.

The performance, which saw revenue fall to €38.8m from €42.6m in the prior year, was impacted by "lower than anticipated" booking demand over the peak summer period.

In addition, chief executive Gary Morrison said that in the group's "year of transition", it had identified "a range of competitive gaps on the platform, [including] not being able to handle things like Google Pay [or] Apple Pay".

"We have been laser-focused on fixing those," Mr Morrison said.

"I think we have done a pretty good job in terms of progress to date, but a lot will go into 2020, because they are bigger things."

Former Expedia executive Mr Morrison, who took the reins of Hostelworld in June last year, added that there was "a bit of market sluggishness out there", but he would not elaborate on how much of the company's performance was due to this, versus the transition year of fixing the booking platform.

The group said it was seeing an overall decline in the European market including the UK, which it said was reflective of Brexit concerns and general consumer softness in the wider EU market.

However, again it would not be drawn on how much this had impacted upon the group's performance. During the first half of 2019, Hostelworld had 3.5 million bookings on the site, down from 3.9 million in the corresponding period of last year, according to interim results from the group.

The average booking value of €12.8 marked a 6pc increase on the first half of 2018, and a 2pc increase on a constant currency basis.

Elsewhere, Hostelworld has invested $3m (€2.7m) in a 49pc stake in Tipi, an Australian group which develops a guest management system for hostels.

Hostelworld has the option to take a majority share in the company after three years.

The group does not expect the investment to have a material impact on earnings this year or next year, "but there is a strategical, compelling rational to want to go into this space", Mr Morrison said.

Looking forward, the company expects that the changes put in place this year should enable it to return to volume growth next year.

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