Skift Take

CEO Gary Morrison has shaken things up since taking over at Hostelworld last year. His new strategy will take time to play out, but as a niche business, it seems sensible to try and do things differently from the big, generalist online travel agencies.

Hostelworld CEO Gary Morrison has only been in the job for a little over a year but he’s wasted little time in changing things up at the online accommodations company.

Gone are the eye-catching celebrity advertising campaigns with the business looking at ways it can instead go deeper with its young audience of travelers by improving the booking experience and providing more individual hostel content. And there are potentially bigger changes afoot.

Like many other travel brands, Hostelworld increasingly sees a future beyond just accommodation and thinks it might be able to offer more services to an engaged audience.

“Relative to where I saw the opportunity even a year ago, I think there’s even more opportunity now as we look forward. We can extend this core platform that we’ve got, beyond accommodation where we only sell eight hours of the day and we [can] think about how we’d use this platform to sell products for the other 16 hours of the day,” Morrison told analysts on Wednesday after the release of the company’s first-half results.

There are a number of ways Hostelworld do this. It could perhaps work with hostels to help them sell their own ancillary products, it could work with other businesses to help them reach its young audience and finally when it launches its new payment platform later this year it will have the opportunity to offer products like travel insurance.

Minority Investment

Hostelworld’s immediate plans for improving the guest experience took a step forward with the announcement on the same day as its interim results of its purchase of a minority stake in guest management technology company Tipi for around $3 million.

Tipi’s technology allows guests to check-in and access their rooms using their mobile phones and also gives users the opportunity to engage with fellow guests and find out what’s going on at the hostel (something Hostelworld had already been working on with its own noticeboard and chat products).

“When I look at the platform that Tipi has it is very easy and it makes a lot of sense for a hostel that has the Tipi system to be able to load up all of its events there and as a consequence of the agreement that we have with Tipi we would be able to take that content and put it through our own platform,” Morrison said.

Currently, 28 hostels in Australia and New Zealand use its guest management system.

First-Half Results

In the first-half of its current financial year Hostelworld saw its revenue fall 9 percent to $43.1 million (€38.8 million) with bookings on its main Hostelworld brand platform dropping 4 percent to 3.7 million. All this precipitated a slump in pre-tax profit — down 86 percent to $437,000 (€394,000).

In reality Hostelworld is still feeling the effect of giving consumers the option to cancel their bookings free of charge, a policy that brought it into line with other online travel agencies. The full global roll-out of the change came in July last year, so the numbers for the first half of 2019 were always going to be a challenge.

“Our competitors have had free cancelation products for a considerable period of time, so for my perspective as I look at rolling out the free cancelation product at Hostelworld, it was a competitive necessity to do so,” Morrison said.

Morrison will be hoping that the impact of the free cancelation initiative, which saw the number of cancelations increase from 0.09 million to 0.25 million this year, levels off in 2020, enabling the company to turn its attention to other areas.

Hostelworld said the investment in its new “Roadmap to Growth” strategy as well as a “highly competitive” market meant that its annual profit (EBITDA) would likely be below the 2018 total.

The company’s share price fell more than 9 percent following the results announcement.

Uncover the next wave of innovation in travel.
June 4 in New York City
See Who's Coming

Have a confidential tip for Skift? Get in touch

Tags: earnings, hostels, hostelworld

Photo credit: The roof terrace at Casa Gracia in Barcelona. Hostelworld sees a future beyond accommodation. Hostelworld

Up Next

Loading next stories