Hostelworld said that it had seen a “modest” increase in bookings in recent weeks as travel restrictions were eased.
The company said that it planned to broaden the catalogue of experiences and social features it offered its customers, beyond hostel accommodation.
The platform described the short-term impact of the travel industry as “extremely challenging”.
CEO Gary Morrison said that the group was tracking slightly ahead of its base case scenario. The recovery started with what was described as “very modest growth” in domestic bookings in June, and more recently has progressed to very modest growth in domestic and short-haul bookings into Europe.
The CEO said: “Overall, we expect the pace of recovery to mirror changes in travel guidance in individual markets over the coming months, both positive and negative. Elsewhere, source markets in the Americas, Asia and Oceania continue to remain very depressed.”
As the recovery has progressed, the platform has seen a “steady reduction” in cancellation rates, and an increase in conversion rates as consumer’s certainty with respect to their travel plans has improved, compared to “significantly stressed levels” during the second quarter. The group said that it had seen only a modest reduction in the number of hostels on its platform.
Morrison said: “Overall, we are encouraged that our travellers are continuing to book dorms in the majority of cases – with only a slight shift to date in accommodation mix towards private rooms versus dorm accommodation across markets.”
Hostelworld forecast that the recovery would improve further in the third and fourth quarters, albeit with net bookings at “significantly reduced levels” on the year.
For the first half, the group reported net revenue of €12.0m, a decline of 69% on the year, with a total group net bookings decline of 67%. The company delivered a Ebitda loss of €8.3m, against Ebitda of €8.9m. Net booking volume declined from 3.5 million to 1.1 million. The platform had a closing cash position €32.9m, including cash on hand of €29.4m and a €3.5m short-term financing facility.
Morrison said: “Given the current trading backdrop, we remain focused on organic initiatives in the near term, until a resumption of normal trading. While the short-term outlook for the travel industry remains extremely challenging, I remain confident that Hostelworld will emerge from the Covid-19 crisis stronger than before.”
Analysts at Shore Capital described the hostel market as “adaptable”. In a note they said: “Often owners can face several periods of low/no trade but still return robust on the other side. Going forward, we expect the booking trends to continue to mirror green light countries and wider travel patterns.
“Many challenges lie ahead and Covid-19 still presents a high level of uncertainty for H2 FY20 forecasts (so) despite a likely improvement in Q3 and in Q4, net bookings will be well below FY19 levels.”
Insight: Hostels have been the mysterious light at the end of the tunnel for the hospitality sector, as piling ‘em high and selling ‘em cheap may feel light a pandemic disaster in the making, but seems not. Investors continue to clamour around them and The Youth which make up their core guests are thought to be resilient to both the worse ravages of the virus and the nervousness that comes with travelling during a pandemic.
One could speculate how much longer this is likely to continue - The Youth are now being blamed for spikes seen hither and yon, possibly caused by their lax ways - but hostels offer one thing which cannot be denied during this global downturn; the possibility of cheap travel. That and atmosphere, even if that atmosphere is best sampled outside on a breezy day.
At Hostelworld, the platform has around 18,000 listings, which none of the generalist OTAs can touch in terms of specialisation. That said, it is expanding its offering into experience and social, aware that you can’t rest on your laurels. The reassuring news is that, however much consolidation hostels see - and it’s on the way - it is still too fragmented to be able to form a negotiating bloc to threaten it. Time to bunk up.