Hostelworld today reported lower than expected peak summer bookings as it issued a profits warning.
The company revealed that full-year earnings would be below 2018 levels as it spends more on its core technology platform in the second half of the year.
The disclosure came as the online hostel booking platform revealed that it has taken $3 million minority stake in Australian hostel-focused technology firm Tipi.
Its technology enables guests to check-in and download a digital key prior to arrival to streamline the process.
Hostelworld also announced Yale Varty, previously at online fashion retailer ASOS, as chief marketing officer.
A beefed up senior management team will include a new chief product officer in addition to Jody Jordan joining from Kerry Group as chief human resources officer and Fabrizio Giulio appointed in April from Expedia as chief supply officer.
Hostelworld, which is improving its technology under a ‘roadmap for growth’ strategy, reported an overall decline in gross bookings of 3.8 million in the first half of the year, down by 200,000 on the same period in 2018.
Group revenue fell to €39.8 million from €42.6 million with earnings [ebitda] down by 15% to €8.9 million from €10.4 million.
Chief executive Gary Morrison said: “While we are pleased with overall progress made during H1, particularly with regards to our ‘roadmap for growth’ strategy, booking demand over the peak summer period has been somewhat lower than anticipated.
“The first half financial performance was also significantly impacted by higher than anticipated inflation in performance marketing channels and the effect of the full global roll out of the free cancellation product being included for the whole period for the first time.
“We have made good progress on our ‘roadmap for growth’ strategy during the first half of the year, including improving the core search experience and adding unique hostel content, in addition to initial steps to improve our connectivity with our hostel partners and suppliers.
“We have also announced a strategic investment in Tipi, an innovative hostel focussed technology company, which will enhance our product offering for both our customers and hostel partners.
“The market remains highly competitive and this continued into the peak summer period.
“Coupled with higher than anticipated inflation in performance marketing channels and the financial effect of increased investment in our ‘roadmap for growth’ during the second half of the year, means that ebitda for the full year is likely to be below 2018.”
He added: “We continue to operate in an attractive and growing market, and I remain confident about the opportunity to capitalise on the significant growth opportunities we have identified.
“I believe the operational and strategic improvements we have put in place in the first half, should enable us to return the business to volume growth during 2020 and we continue to assess opportunities, both organic and inorganic, which could enable us to accelerate that growth.”