Hostelworld significantly reduces marketing spend as social benefits materialise

Hostelworld significantly reduces marketing spend as social benefits materialise

Specialist OTA expects to end this year in a ‘moderately positive’ earnings position

Hostelworld expects to end the year “modestly earnings positive” after seeing a strong recovery in demand from the pandemic.

Net revenue in September reached 104% of pre-Covid 2019 levels with bookings hitting 83%.

This reflected sustained growth in average booking values (ABV) and normalisation of cancellation rates throughout the year.

The company cited continued recovery of the Asia and Oceania regions, now at 70% of 2019 levels, up from 43% in June.

In a trading update, Hostelworld said: “In summary, all geographies continue to see a strong recovery in demand. 

“Bookings and ABV are trending positively, cancellation rates are in line with expectations, and our marketing spend is significantly reduced as the benefits of our social features continues to materialise.”

It reported strong growth in the number of customers signing up to an App-based social platform when making a booking, which was introduced in April. 

Almost half of customers had signed up to the platform by the end of September. 

“This, along with strong net booking and ABV growth, has translated into increased revenues, lower marketing costs and improved margins,” the company added.

“Based on the current business performance and trajectory we now expect to be modestly ebitda [earnings] positive for the financial year 2022. 

“Given our continued momentum, the outlook for 2023 is encouraging and we expect our growth strategy to continue to deliver further significant benefits in 2023 and beyond.”

Further details of growth plans and a long-term outlook is to be given at a capital markets day on November 10.

Chief executive Gary Morrison said: “I am very encouraged by the clear financial and operational progress we have delivered year to date. In particular, I am very pleased with the positive trends we are seeing from our innovative ‘social’ strategy which is driving more customers to use our Apps, and reduced marketing as a percentage of net revenue.

 “In parallel, I am also pleased to welcome new research published by Bureau Veritas which confirms that hostels produce on average 75% less carbon than hotels. 

“We know travellers are increasingly environmentally conscious, constantly looking for ways to minimise their carbon footprint while visiting new destinations. This report confirms that hostels are the sustainable tourism choice.”

He added: “While recognising that wider macro-economic conditions are challenging and highly volatile, I remain very encouraged by the growth outlook for our business, underpinned by our highly differentiated social strategy, data driven marketing allocation and disciplined cost control.”