2023 was a year of improved financial performance and strategic development for Hostelworld. Our differentiated strategy enabled us to achieve record revenues, grow market share, and deliver adjusted EBITDA earnings ahead of market guidance. Our mission, to ‘help travellers find people to hang out with’, has resonated strongly with our customers, 61% of whom are young solo travellers (2022 59%), with our innovative ‘social’ strategy enabling them to make connections and build a community.
Demand was strong across all key markets and resulted in a year of record revenue growth. Following a prolonged period of travel restrictions, 2023 was a milestone year, particularly for Asia, with bookings into this region the largest in the history of the business. European demand was also particularly strong, with bookings up +14%, revenue up +21% and bed prices remaining high throughout the year.
We continued to evolve and enhance our social network product offering during the year. Initially launched in 2022, enhancements during 2023 focussed on the customer experience, with improvements to the sign-up process, richer user profiles, and messaging functionality. As a result, we saw increased engagement through the app, with 68% of 2023 bookings made by social network members (2022: 34%). Hostel hosted social events (‘Linkups’) were launched in Q2 2023, providing customers with a range of opportunities to connect with other like-minded travellers and share travel experiences.
We also continued to be disciplined and focussed on costs. I am particularly pleased to report that operating costs (which exclude paid marketing, exceptional items and share option charges) remain below 2019 levels (-10%) and have declined as a % of revenue from 35% in 2019 to 27% in 2023.
Sustainability
Ensuring a sustainable future is of paramount importance to all our stakeholders and is reflected in our company values. The Group welcomes the second publication of a research report by leading sustainability and compliance specialist, Bureau Veritas, which confirms that hostels emit significantly less Scope 1 and Scope 2 emissions (tCO2e) compared to a typical hotel chain, on a per bed-night basis. Further, the report also confirms that the average emissions of hostels have reduced year-on-year, whilst by contrast, hotel emissions have increased.
Hostelling clearly offers consumers a unique opportunity to travel responsibly and this affords Hostelworld, as the only OTA exclusively promoting hostels, a distinct competitive advantage. Given its leadership position in the industry, Hostelworld has a responsibility to promote the inherent sustainable features of the category and we are committed to fully supporting our hostel partners journey in recognising and embracing the importance of sustainability. To achieve this, we have partnered with the Global Sustainable Travel Council (“GSTC”) to develop a sustainability measurement and management system unique to the hostelling category, which went live in January 2024. This ‘Staircase to Sustainability’ framework is the first of its kind and is aligned to the GSTC’s sustainability criteria. The framework will allow hostels to showcase their sustainability credentials and will be of invaluable assistance to our customers who are looking to minimise their carbon footprint.
Working with our emission reduction advisors South Pole, the Group have been accredited with the ‘Funding Climate Action’ label for a third consecutive year. The label recognises the Group’s commitment to reducing and controlling its own emissions. Hostelworld had minimal scope 1 and 2 emissions of 7 tCO2e (well below the annual target set by the Group of 30 tCO2e) but is responsible for increasing scope 3 emissions due to an increase in purchased consumables relating to paid marketing costs and business travel linked to the growth in the Group’s booking volume.
Capital structure and dividend
Our principal objective is to deliver growth in long-term sustainable value for our shareholders. In May 2023 the Group re-financed a 5-year term loan facility drawn down with HPS Investment Partners LLC (or subsidiaries or affiliates thereof) in February 2021 and replaced it with a new 3-year facility with Allied Irish Banks, plc. This facility is comprised of a €10 million term loan, a €7.5 million revolving credit facility and an undrawn €2.5 million overdraft. The term loan and RCF each had an initial interest rate payable of 3.75% over EURIBOR, which subsequently reduced to 2.65% over EURIBOR as the ratio of net debt to adjusted EBITDA reduced to less than 1 times. Since drawdown in May we have repaid the RCF in full, €5.5m during 2023 and a further €2.0m in February 2024, and we have repaid €2.5m of the term loan, €1.7m in 2023 and a further €0.8m in 2024.
At 31 December 2023, the Group had warehoused payroll taxes owing to the Irish Revenue Commissioners of €9.6m, inclusive of interest accruing at 3% per annum. On 05 February 2024, the Irish Revenue Commissioners announced that the applicable interest rate would reduce to 0%. The Group continues to work closely with the Irish Revenue Commissioners to agree a schedule of repayments. At year-end, the Group agreed to make a repayment of 15% of the balance owed in May 2024, with monthly repayments of the remaining amounts due being made for the subsequent three-year period.
The Board continues to believe that the payment of dividends would not be in the best interests of the business for the foreseeable future.
Michael Cawley
Chairman
20 March 2024
