Hostelworld seeks higher margins ahead of investor day

Hostelworld is aiming for to boost margins and revenue, as it revised its targets for the next three years ahead of a capital markets day later on Wednesday .

The company said it aims to grow its revenue as well as gross merchandise value of bookings net of cancellations by about a fifth next year, and then achieve compound annual growth of about 15 per cent in 2025 compared to 2022.

Marketing will account for between 50 per cent and 55 per cent of revenue next year, falling to between 45 per cent and 55 per cent by 2025. Adjusted Ebitda margin should rise from “mid to high teens” in percentage terms next year to about 20 per cent by 2025.

The updated targets confirm a “somewhat stunning” turnaround in the second half of 2022, Davy analysts including David Reynolds said in a research note. “The combination of a broad-based travel recovery, disciplined operational execution and innovative product development and deployment has elevated [Hostelworld’s] FY22 expectations as the year has progressed.”

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Hostelworld published the new targets ahead of a capital markets day on Wednesday,. which will see chief executive Gary Morrison, chief financial officer Caroline Sherry and chief product officer Johnny Quach brief investors on their plans for the future. the presentation “will lift the profile of this differentiated business with investors,” Davy’s Reynolds said.

The firm reiterated it sees “strong booking and revenue momentum, enabled by our innovative and differentiated social network strategy.”

“October net revenues reached 106 per cent of 2019 levels and in November we expect net revenue recovery to improve,” it said.

The company still expects to post net revenue of about €70 million and adjusted Ebitda of about €1 million in 2022.