Safestay used its half-year results to comment on increasing expansion into Europe, having acquired an additional site in Spain.
Meininger has also outlined its ambitions in Europe, as the branded hostels continued to encroach on the territory of traditional hotels.
The company acquired six European hostels over the past year, most-recently a 351-bed hostel in Barcelona. The group said that the Lisbon and Prague markets had “proved very strong and the Spanish properties have maintained occupancy levels in excess of 75% despite a challenging economic and political backdrop”.
Safestay said that there were “good prospects for further complementary acquisitions”. It was also focused on organic growth, with an 80-bed extension in Elephant & Castle due to be completed in December and construction of 226-bed Paris hostel by the end of 2019
The group said that mainland Europe now represented 43% of Safestay’s bed stock and 43% of the total turnover in the first six months of 2018. It added that operational efficiencies achieved in the UK were to be extended into the European portfolio.
Larry Lipman, chairman, said that, looking forward, the second half of the year had begun “well, continuing on from the solid performance recorded across the portfolio in the first half”. He added: “The group will benefit from a full six months contribution from the strongly performing Barcelona Passeig de Gracia Hostel acquired in March 2018, improvements made to our online guest booking experience to support the growing proportion of direct and return bookings and the overall ongoing growth in the hostel sector.”
The comments came as it reported a 60% increase in total revenues on the year to GBP6.5m, with roup occupancy increasing from 71.6% to 76.1% and a 50% rise in hostels Ebitda to GBP2.4m.
The hostel market has continued to expand, with Cox & Kings reporting first-quarter revenue growth of 23% on the year and 9% growth in Ebitda for its Meininger brand. The group said that Ebitda growth was lower than that of revenue growth because of upfront costs incurred on the expected 3,000 new bed expansion in the next three to four months.
Cox & Kings’ annual report described Meininger as being on a “rapid expansion spree” having added 2,110 beds in FY 2017-18 and was set to add ~4,000 beds in FY 2018-19, charting an increase of over 35%. Yet, it said, the average bed occupancy had remained relatively stable.
Peter Kerkar, group CEO, said: “We are seizing the opportunity that Europe presents as a leading tourist region to our Hybrid hotels business. In Meininger, the pace of expansion accelerated. I think Meininger has strong legs and will cover a long distance in the next few years.
“Meininger continued to strengthen its brand appeal in the hybrid hotels segment. It is not only disrupting the traditional hotel industry in Europe with its innovative offerings but is also posing a challenge to the home sharing and the hostels segment. The concept of offering a clean, safe and affordable accommodation is being well appreciated by the market and the demand is quite buoyant for such a product.
“As it expands its footprint and open new hotels the network effect which drives high repeat customers for the new hotels improves the start-up occupancy levels. Meininger hotels targets families, school groups, affluent backpackers and business people.
“Meininger follows a very diligent and elaborate process of evaluating sites for future expansion. The reason Meininger is able to achieve high occupancy even in new hotels within a short time of launching is the process it follows for signing up a site. Thus, while a typical hotel takes three to five years to achieve occupancy of 60% to 65%, Meininger manages to reach those levels in less than half that time.”
“According to Savills, the hostel market remains underserved and full of opportunity, with hostels accounting for 1.41% of room supply and 0.23% of the active pipeline in the UK. By 2020 the hostel market globally was projected to grow by 7% to 8% year-on-year on a current value of USD5.2bn in bed revenue.”
HA Perspective [by Katherine Doggrell]: That which is or is not a hostel is up for debate in the sector, with soon-to-be rebranded Meininger describing itself as a hybrid, Generator dropping the “hostel” part of its name in the US and Accor’s Jo&Joe describing itself as having the “animation” of hostels.
For the sake of clarity, we’ll take a hostel as anywhere where, should you wake in the night and see a dark lump in a neighbouring bed/hammock, you’re not totally sure what their first name might be.
But there is money in them there lumps and the rising stars of the hostel sector have looked to bring the reassurance of a brand to what has, in the past, been a mixed bag. And in doing so, focused heavily on the experiences you might have on its properties as opposed to the experience of sharing with the many, rather than the few.
Hostels are no longer seen as an extension of Communism – Generator counts business guests amongst its consumers and offers meeting rooms to go along with it. The growth of such brands alongside Airbnb means that the road warrior now has more to choose from than a lonely Club sandwich of an evening and hotels would do well to think of the isolated souls it is accommodating on a Wednesday night before these souls up and do something less boring instead.