CEO’s Review

Our growth has been delivered through continued investment in our core technology platform and in an expanding array of differentiated product features, which aim to address a larger community of hostel guests and increase our revenue per customer. We do this through continued investment in technology (in particular mobile), brand marketing, and geographic diversification supported by a range of pricing initiatives.

Growth

Bookings for the Group’s primary Hostelworld brand, which contribute 93% of total Group bookings, grew by 13% in the year (2016: 18%). Total Group bookings and revenues for the year increased by 6% and 8% (€6.2m) respectively (2016: 1% decline and 4% decline) as we successfully focused on driving bookings growth in our flagship brand, and proactively managed the decline in our supporting brands.

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Technology and Mobile

2017 was a transformational year for Hostelworld. Alongside our continuous delivery of mobile and website products, we also commissioned and set up a new software development office in Porto, where we had 24 people employed at 31 December 2017. We expect to further expand this new software delivery centre, which will play a significant role in Hostelworld’s future success. In addition to investing in new capacity, we also placed considerable focus on training and upskilling to ensure an agile and delivery focused culture which will increase future efficiency, morale and knowledge retention across the entire technology division.

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Brand marketing

Strong performance in Hostelworld brand bookings (+13%) and bookings growth from direct channels are encouraging signs that Hostelworld’s brand activity is having a positive effect for the business. The focus for brand activity has been driving reach and penetration in more markets globally, whilst also being present in those markets more frequently. Hostelworld is seeing signs across many of the brand channels that this strategy is paying off, including through healthy growth in app downloads (up 49% to 2.2m downloads in 2017).

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Pricing and yield management

The year saw encouraging growth in our Elevate programme, with 34% of 2017 Group bookings delivered to properties participating in Elevate, an increase from 30% in 2016.

The Elevate programme gives accommodation providers the opportunity to increase their prominence in search lists dynamically in exchange for a higher commission rate of up to 10% above the relevant base commission rate. We also offer a premium listing feature, which enables accommodation providers to purchase fixed slots at the top of Hostelworld’s and our other brands’ results on a monthly cycle. In 2017, we continued to expand the offering of revenue management services to our properties so as to assist them in improving their yield per bednight.

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Outlook

In recognition of the importance of technology in our business, we invested in a new development centre in Porto in 2017 and plan to substantially expand our commitment there in 2018 in order to increase the pace and volume of new product features and functionality for our customers and hostel partners.

Market conditions, particularly in Europe, remain uncertain and while volume bookings in the first quarter of 2018 are in line with expectations, weaker exchange rates, particularly for the US dollar, remain a significant headwind.

We continued our program of pricing initiatives in Q1 2018, with changes to base rate commissions making a positive contribution to ABV.

In addition, the pilot launch of our new free cancellation booking option in February 2018, resulted in a noticeable increase in conversion and booking levels. We therefore plan to introduce this model more widely, which we see as a key strategic move for the business. We anticipate this product to be earnings enhancing in the medium term but will result in a deferral of revenue recognition which will impact reported earnings in 2018, its first year, but will not impact on cash receipts.

This new product together with increased technology investment will substantially improve our offering to customers and our competitive position and underpins the Board’s confidence that we will see bookings growth in 2018 and beyond.

Feargal Mooney
Chief Executive
9 April 2018