Safestay affected by political instability but confident about outlook

Safestay’s trading performance for 2016 was affected by political instability, low visitor numbers in London and terror attacks in France, but the hostel owner and operator remains confident about its outlook this year.

The AIM-listed company said that 2016 was a “difficult year” for the hospitality market as visitor numbers to London, in particular, were affected by the events in Paris and wider political instability which resulted in a challenging market environment.

This exacerbated the slow build-up in average bed rate and occupancy in the company's hostel in Holland Park which affected Safestay’s trading performance.

The company maintained that while it is “substantially ahead of last year it is slightly below market expectations for 2016”.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for last year is expected to be £2.2m, up from £600,000 the previous year and revenue is to be £7.4m, up from £4m.

Safestay, however, remained confident about the future as its growth outlook remains unchanged for 2017 and said that advance bookings, for which the company has received deposits, looked “strong” compared to this time last year.

The company has received planning consent to extend the Elephant & Castle site which will provide 80 further beds and is spending £200,000 to refurbish its Edinburgh site. It is expected to increase the average bed rate for summer.

Chairman Larry Lipman said: "2017 forward bookings provide a good outlook for the business and we are looking carefully at options to release capital from our property portfolio to support our ability to expand the number of Safestay hostels.

“Our brand proposition within our market continues to grow and strengthen and I believe that we are well set to have a successful year."

Shares in Safestay were down 6.67% to 42p at 1006 GMT.