Hostelworld agrees with Revenue to repay €9.6m warehoused taxes over three years

Hostelworld, the hostel-booking group that targets millennial and Gen-Z backpackers, has agreed to repay €9.6 million of warehoused taxes, racked up during the Covid-19 pandemic, over the next three years, the company disclosed as it reported annual results.

The company said it has agreed a 15 per cent down payment in May, the deadline for companies that availed of the relief scheme to either pay the debt in full or engage with Revenue on how to address with the liability. Hostelworld will subsequently make regular monthly payments over a three-year period.

The agreement follows Hostelworld posting earnings before tax, interest, depreciation and amortisation of €18.4 million, marginally above the €18.3 million figure indicated at the start of the year.

The result compared to earnings of €1.3 million in 2022 when the travel industry was recovering from the pandemic and a forecast range of €17.5 million to €18 million that Hostelworld set out in October when it upgraded prior guidance.

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Net revenues, mainly generated by charging 15 per cent commission on hostel bookings, rose by 34 per cent to a record €93.3 million as net bednights booked through the company rose by 30 per cent amid strong growth across all regions globally.

“Over 2023 we grew market share, delivered record revenues, and increased operating leverage through a combination of reduced marketing spend – as a percentage of revenue – and continued operating cost discipline,” said chief executive Gary Morrison.

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“We have started 2024 with strong momentum, and I feel confident that we will continue our track record of profitable growth and value-creation for our shareholders.”

Hostelworld has been winning back hostel bookings market share that had been ceded to general online travel agents such as Booking.com before the pandemic, helped by the introduction of a pioneering social network that invites customers into city and hostel chat groups before checking in. Over half of the company’s bookings are now coming from social members, which has helped reduce marketing spend as a percentage of revenue.

The number of social members surpassed the one million mark late last year, it said.

Hostelworld reached an important milestone last May when it repaid €28.8 million of high-cost loans drawn down from US specialist lender HPS Investments three years ahead of schedule with the help of €17.4 million of much cheaper loans from AIB, some of which has since been paid back.

At the end of December the group had net debt of €12.3 million, down from €21.6 million a year earlier, and a closing cash position of €7.5 million.

“The outlook remains encouraging, with management stating a strong start to 2024 with positive trends continuing. Our forecasts model circa 10 per cent revenue growth (as the group begins to face tougher year-on-year comparisons), driven by a strong underlying market backdrop and share gain potential,” said Katie Cousins, an analyst with Shore Capital in the UK.

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