Travo Summit 2020: How Hostelworld came out swinging during the COVID-19 pandemic

Chief executive of the niche OTA Gary Morrison said the firm prioritised product and tech investment

Niche accommodation OTA Hostelworld used the COVID-19 lockdown to invest in technology and “take some big swings” in modernising its tech stack, its chief executive told the Travolution Summit.

Gary Morrison, said the brand had successfully returned to growth after years of under-investment prior to the pandemic and was about to embark on year two of its plan for growth.

In August it reported an €8.3 million half year loss as bookings more than halved and a shoring up of finances with a €15.2 million share listing and new borrowing worth €7 million.

Morrison said after the pandemic struck in March difficult decisions had to be taken and future plans re-appraised, but the two areas Hostelworld decided not to cut back in was technology and product.

“As we went through the painful process of making changes to our workforce the two areas that we kept largely intact were product and technology, our engineers,” he said.

“We took the view that there were actually quite a lot of big things that we still wanted to do in that second year.

“In the ordinary course of business, if you want to do those big things you’re always chasing year over year growth every week, every day, every month.

“And those are quite risky things to do, but obviously if there’s no demand you can take much bigger swings, and indeed we did.

“We migrated our website to a progressive web app, we took out our payment system and replaced it with Stripe and we consolidated our tracking, measurement and attribution into Google.

“These were some really big, what I would describe as hairy, projects but, of course, we could take those risks because there was no demand.”

Morrison said IT projects carried out during the stop to travel were not necessarily more efficient, but they were more effective.

“It was more effective because you could afford to take bigger risks meaning you could put something out there and if something broke for a few days it wouldn’t matter.

“It was taking advantage of the situation, which sounds like an awful thing to say given the decimation in the industry, to bring work we would have done next year forward and get it done.”

Morrison said planned growth through M&A activity is currently off the table until more stability returns to the travel sector, but that Hostelworld is eyeing up organic growth.

He said the brand has had to look at how it pivots to changing demand with its millennial audience still keen to travel, but limited by government restrictions.

The traditional multi-destination gap-year is currently not possible, so Hostelworld is looking at how it provides the hostelling experience closer to home for its customers in their home towns and cities.

And while surveys have suggested reduced demand for communal accommodation and more interest in private rooms, Morrison said this is not being reflected in bookings.

“We were worried that the sort of proposition we offer was somehow going to change,” Morrison said.

“What was interesting when we looked at the survey data, there appeared to be a sentiment which said the classic private rooms would be far more sought after.

“But when you actually looked at the bookings that’s not the case, there’s actually a very slight shift towards privates but, in essence, a significant majority of our bookings are still through dorms.

Morrison added: “There’s a lot of pent-up demand, and those people who can’t travel are currently sitting at home, but they still like to do experiences and to meet other people.

“Whereas our proposition is very much multi destination on the go, the question we asked was can we think of a way of catering to that demand now?

“An analogy would be a lot of us will have seen many businesses translate offline experiences to online experiences.

“We were thinking of the problem of more that we have these real-world experiences that we’re planning on offering to people on the go.

“Are those real-world experiences actually valid for people if they’re still in their hometown? We are investing a lot of effort around that and should have some exciting things to say by year end.

“So that’s how we thought about [our reaction to COVID-19]. One we needed to batten down the hatches and conserve cash as much as possible.

“The second part was pivot to the new customer paradigm. It’s not the same, it’s much more domestic, it’s much more short-haul Europe.”