Hostelworld swings to first-half operating profit

Accommodation booking platform Hostelworld reported a robust first-half performance on Thursday, driven by record bookings in Asia and Central America and the continued success of its social network strategy.

The London-listed company recorded 3.7 million net bookings, marking a 9% year-on-year increase, despite a 10% decrease in net average booking value to €13.60, attributed to a higher proportion of bookings in Asia and an increase in solo travellers.

Net revenue for the period stood at €46.4m, reflecting modest 1% year-on-year growth.

However, the company’s strategic focus on direct marketing efficiencies and cost discipline resulted in significant margin improvements.

Direct marketing expenses dropped to 45% of revenue, down from 51% in the first six months of 2023, contributing to a 23% year-on-year growth in net margin.

Operating costs decreased 2% to €12.5m, leading to a substantial rise in operating profit to €4m, swinging from a loss of €1.7m in the same period last year.

Adjusted EBITDA saw a significant increase of 88% year-on-year, reaching €9.6m, with the adjusted EBITDA margin improving from 11% to 21%.

The firm said the proportion of bookings from social members rose to 80%, up from 66% in the first half of 2023, underscoring the success of Hostelworld’s social strategy in driving user engagement and repeat business.

Hostelworld said its balance sheet remained strong, as it reduced its net debt to €2.6m from €12.3m at the end of 2023.

The company repaid its AIB term loan facility and revolving credit facility early and in full, as the cash balance at the end of June reached €5m.

Looking ahead, Hostelworld said it was well-positioned for continued profitable growth.

The company said it was investing in its social network strategy and mobile app, which continued to drive marketing efficiencies and outpaces growth in web bookings.

Additionally, hostel supply grew 3% year-on-year, enhancing market coverage.

Hostelworld reiterated its full-year 2024 adjusted EBITDA guidance, in line with market expectations.

“I am very pleased to report strong growth in net bookings, and even stronger growth in net margins, primarily driven by our highly differentiated social strategy,” said chief executive officer Gary Morrison.

“This performance, coupled with operating cost discipline, has translated directly into strong operating cash flow enabling us to fully repay our residual debt facility with AIB, two years ahead of schedule.

“In parallel, I am also pleased to report that we made good progress during the first half on all aspects of our growth strategy.”

Morrison said the company continued to provide customers with enhanced social network product features, added more hostel inventory to its platform, and continued to upgrade the 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.”

At 1209 BST, shares in Hostelworld Group were down 1.91% at 137.33p.

Reporting by Josh White for Sharecast.com.