Shares in hostel booking platform Hostelworld (HSW) slip 2.4% to 202.3p after the £198 million cap reports overall bookings growth of just 1% in 2015.
The group, which floated at the end of October, is being weighed down by its underperforming non-core brands, namely Hostelbookers and Hostels.com.
Bookings for the flagship Hostelworld brand rose by an encouraging 17% in 2015 and by 21% in the second half.
This is a good result given the negative impact on leisure travel from the Paris atrocities and other terrorist attacks.
Forecasts from Davy anticipate a 31% decline in non-core brands in 2015. This trend is expected to continue into 2016, with a further 19% drop in non-core brand bookings offset by 16% growth in Hostelworld bookings.
The launch of Hostelbookers’ new website and the accompanying re-branding should help. The new site includes the Elevate dynamic pricing functionality and a larger set of properties, which is expected to slow the decline over time.
Davy forecasts adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of €22.9 million for 2015 and €25.9 million for 2016.
Hostelworld will announce its first dividend in April, with the yield forecast at 5.8%.
‘We believe that upside remains in the stock’s valuation as it continues to communicate with the market through robust statements (such as that released this morning) and as the market familiarises itself with the company,’ says Davy analyst Ross Harvey.
We wrote an in-depth piece on Hostelworld in the 17 December issue of Shares. You can read it online here.
