Hostelworld CEO Sees Profit Rebound, Adoption of Traveler Chat Tool

For 25 years, Hostelworld has stood apart from other online travel agencies by connecting travelers with hostels. In 2022, it became the first agency to offer a chat tool that lets guests talk before staying at the same hostel. Earlier this month, the Dublin-based company reported its annual results.

Skift checked in with Hostelworld CEO Gary Morrison to get an update on the company. Here are some highlights:

• Hostelworld achieved an operating profit in 2023, recovering from pandemic losses.

• Its app social features have been popular, being used by about 80% of bookers, and are driving growth in reservations. That news will catch the eyes of other players in the online travel sector looking at how to boost engagement with users.

• Hostelworld is focusing on sustainability through a new partnership with hostels.

The interview with Morrison has been condensed for clarity and brevity.

And, for those planning a hostel trip, yes, there is a chance Morrison could be your bunkmate. He stays in hostels, too.

Greater Net Revenue Despite Lower Average Booking Value

Skift: Hostelworld’s annual report indicates net revenue grew, but the average booking value decreased in 2023. What’s the deal?

Most of the revenue growth has been powered by net bookings. They were up 37% actually. So net revenue’s up 34% (and) net bookings (are) up 37%. And the (average booking value)… that actually went down by 4%.

But if you then just scratch below the surface, what we see is there was bed price inflation again, but it was more than overcompensated (for) by a geographic mix, which is many, many more bookings in Asia: two and a half times. It’s the highest number of Asian bookings we’ve ever had. North Asia was up four times. Oceania was up double. You know, basically what we see is our customers are choosing to hostel in ever greater numbers, but they’re going to cheaper destinations.

Sustainability

Skift: How has it been collaborating with hostels on Hostelworld’s new Staircase to Sustainability initiative?

These are small owner-operated businesses, and they needed a mechanism to be able to show what they’re doing (for sustainability) in some recognizable way. And we partnered up with the (Global Sustainable Tourism Council) to create a unique bespoke framework for them to be able to do that.

We see more and more hostels that are loading in their credentials, and we show it to our consumers. It’s a bit early to see if it’s actually changing consumers’ purchasing decisions. It’d be interesting. I mean, when you look across the online travel landscape, what you generally see is, if you ask people to pay more for something because it’s green, that generally doesn’t work very well… But if you present two options, one is green and one is not, then you do see people changing their mind.

But so far, (we have) the combination of Staircase to Sustainability and partnering with Bureau Veritas to do external research to prove that if you stay for a night in a hostel, you will emit roughly 25% the amount of carbon that you do than if you stay in a hotel. So, if you really care about sustainability, you should be staying in hostels.

A lot of people who run hostels are ex-hostellers and generally would care a lot about sustainability. So it’s not “I care about sustainability because I think it’s commercially advantageous to do so.” It’s inherent in the person.

App Social Features

Skift: How receptive have Hostelworld users been to social features like chats and Hostel Hosted Linkups?

(Social members are) people who’ve come onto the platform and, while they’re making a booking, have opted in to use the social features and then downloaded the app. So it’s not a default opt-out. It’s an opt-in: It has terms and conditions. When you opt in, then you download the app and then you can use all of the social features.

Eighty percent of all of our bookings are made by social members now. Our app growth year over year in terms of bookings is 49%, whereas net bookings is 37%. So people are using it more for booking. We had passed the million mark in terms of social members in November last year. (It) just continues to grow.

In the old days, if you went to stay at a hostel and you wanted to know what was going on, usually there was a big blackboard behind check-in, and it would say “outdoor cinema with bar tonight.” And the challenge for hostels was they could only advertise that to the people who were staying there. And yet they really wanted to get more customers in for those events, whether it’s an excursion day trip or something they’re hosting themselves.

So we took it upon ourselves to build this additional (Linkups) platform that would allow them to load up all of their catalog of events. And we would then publish that through our apps to all of the customers that were staying in a city.

From a monetary perspective, it’s perfect for the hostels because it drives their revenues. And, from our perspective, it gives our customers many more opportunities to meet new people, which is what we’re all about.

Skift: Hostelworld offers city- and hostel-based chat rooms. How do they each perform?

You may remember the city-based chats actually have themes, like drinks and dancing, walking tours, pub crawls, and so on. Those three that I just mentioned are the ones that get a ton of activity. So people are looking, not only to pair up with people where they’re staying, but equally — and perhaps even more so — to pair up with people who are staying in the same city.

Traveler Traits and Needs

Skift: When you previously spoke to Skift, it sounded like Hostelworld was considering developing a brand focused on travelers with higher disposable income by 2025. What is Hostelworld’s focus at the moment?

For us, continuing to innovate in our current category — on the social features — continuing to do what we’re doing, and continuing to monetize social through growing market share is what we’re focused on for the next 18 months.

Now, that being said, we still think there are lots of communities of travelers who are, you know, perhaps 30, 45 year olds who, as I mentioned before, solo by circumstance (and) not by design, but they may have a passion: might be surfing, might be yoga, might be hiking. And we see opportunities to use our marketing community, our social features, our staff, to be able to serve those in the future. But it’s probably going to be in 2025 when you will see anything. We’ll do experiments this year, going into 2025. So we’re still committed to it. But there’s plenty of runway in the category that we’re in, and we’re all out to win that.

Clearly the big game changer for us was realizing that people (who) go off hostelling don’t go hostelling because it’s cheap. They use it as a means to meet other people. And the fact that that need is so powerful, it’s so prevalent, meant that if we started solving that with the social features, you know, our app’s business — because it’s only in the app — would skyrocket. It’s skyrocketed in net bookings and revenue and new customer growth (in) every single dimension.

Skift: Do you think this social need always existed? Has it grown?

It’s probably growing. There’s a couple of sort of secular trends out there.

One is, if you look at incidence of solo travel searches on Google, it has been growing strongly over the last few years. So, obviously, more people are thinking about it.

The second is, if I look at our own data, we can see there’s a distinct shift. Prepandemic… a bit less than 60% of our bookings were solo travelers. And now it’s a few percentage points over 60%. It’s just slowly growing and growing.

Hostels, by definition, are probably the lowest accommodation in terms of price that there is. But I think there’s a structural demand that we see, as evidenced by Google Trends. But there’s also post-Covid; there’s an awful lot of research out there, which is (about) general feelings of adult loneliness, and so on and so forth. We’re probably tapping into that a little bit, as well.

Skift: When I think of a hostel guest, I think of a post-grad backpacker. Is this stereotype changing, and how so?

We were very lucky to be hosted by Next House in Copenhagen for our hostel conference, I think it was last year. And it’s extraordinary when you look at it. It is so different from the type of place you would typically see a hostel to be. You know, it’s very, very modern, big communal spaces, big bar… (an) awful lot of families that are there. There are some dorm accommodation (and) an awful lot of private accommodation.

I just think the supply side is realizing that there is a strong demand for more community, communal-type accommodation and responding to that. And they’re doing that in such a way that the price points are still available to the hostelling public.