Profits at Hostelworld plunge €57.3m during Covid-19 pandemic

Hostel booking company Hostelworld plunged into the red last year as profits fell €57.3 million and revenues declined by 81 per cent due to the impact of the Covid-19 pandemic on travel and tourism.

In its full-year results for the year ended December 31st, 2020, published on Wednesday, the company said it suffered a loss of €48.9 million last year as against a profit of €8.4 million in 2019.

Revenue for the period was €15.4 million, which represented a decline of 81 per cent compared to 2019, when it stood at €80.7 million.

The company said the collapse reflected the detrimental impact Covid-19 has had on the business and the wider travel and leisure industry.

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Its adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) was a loss of €17.3 million, which was a decline of €37.8m from 2019. Adjusted Ebitda margin was -113 per cent compared to +25 per cent in 2019.

Despite a positive start to the year, following a return to net bookings growth during the final quarter of 2019, bookings significantly declined in the latter part of the first quarter of 2020 as extensive travel restrictions were put in place in response to Covid-19.

“We experienced a small uptick in bookings during the summer season, but trading deteriorated significantly from the end of August onwards as global lockdowns and travel restrictions came into force,” said chief financial officer Caroline Sherry.

The group’s net booking volumes declined by 79 per cent in 2020 compared with a 6 per cent decline the year before.

Cancellations for the year were €6.2 million, or 32 per cent of gross revenue, compared to €9.3 million in 2019, or 10 per cent of gross revenue.

Net average booking value – the average value paid by a customer for a net booking – declined by 22 per cent in 2020 as against 3 per cent growth in 2019, primarily due to the increase in cancellations and the impact of reduced bed prices across all markets.

Expenses

Throughout the pandemic total marketing spend was €9.3 million, as against €32.7 million the year before. In addition, the group initiated a 43 per cent reduction in total administrative expenses, from €63.4 million in 2019 to €36.1 million.

The group said it availed of the Irish Revenue tax warehousing scheme and deferred payment on all Irish employer taxes since February.

“We continue to monitor and comply with the appropriate revenue guidelines applicable to this scheme,” said Ms Sherry. “We also availed of assistance under the Coronavirus job retention scheme in the UK and the temporary Covid-19 wage subsidy scheme in Ireland.”

Basic loss per share for the group was 45.68 cent, as against a basic earnings per share of 8.64 cent in 2019.

In terms of outlook, the company said the near-term for the travel industry “remains challenging and highly uncertain”.

Travel guidance

“We continue to expect the pace of recovery to be driven by changes in travel guidance in individual markets, which we hope to see accelerate as vaccination programmes are rolled out across our key geographies,” it said.

“Given the continued uncertainty relating to the timing of the recovery, the group is unable to provide guidance for full-year 2021.

“The board does not expect to issue a dividend under its current policy in respect of the 2020 financial year.

“We remain convinced that when travel restrictions are lifted we will be well positioned to benefit from the recovery in demand driven by our improved platform and loyal customer base.”