Hostelworld Share Discussion Threads

[johnv] 15/10/2019 12:19

Capital group from LA from 10% to 0%.

[masurenguy] 15/10/2019 11:41

I topped up again @112p this morning.

[thomshrike] 15/10/2019 09:57

I spoke too soon. It was The Capital Group who exited.

[thomshrike] 15/10/2019 09:55

As the huge rotation of shares continues on Hostelworld, unsurprisingly Miton reported a large increase of their holdings. LHC, the australian fund manager, also just reported a doubling of its stake to 7.5%. No news about who sold yet.

[woozle1] 11/10/2019 15:30

Judging by the lack of price movement there are still more shares for sale.
w1

[elsa7878] 11/10/2019 14:12

I think the dividend is excessive and when you get to this level usually just highlights an underlying problem. Should be cut and a buyback started. With a buyback the company could have cleared this seller out and boosted the eps cheaply.

[elsa7878] 11/10/2019 14:08

I think it is several investors exiting though clearly the 5.94 trade was one seller. Shame to see it broken up and passed on in relatively small lots.
There has been plenty of trades in the 250,000 to 1 million + bracket over the last 3 weeks so a real clean out and refresh of institutional investors.

[masurenguy] 11/10/2019 14:01

We should know who the buyer is on Monday. I added @112p not long after in order to average down which means that I'm now just over 20% underwater. However, if they maintain the dividend at 12.5% below last year then my overall yield will be around 7.5%.

[thomshrike] 11/10/2019 13:51

Agree, Miton is the prime candidate for a large increase, but it would be nice if other well-known names had joined the bid. I'm curious. On the offer side, I'm also curious about who exited, between Capital Group, Burgundy or Standard Life Aberdeen.

[elsa7878] 11/10/2019 13:48

5.94 m was the dump by someone. But over the last month volume is close to 40 million so will be interesting to see who was dumping and accumulating. Shame we couldn't get in at 105 too...boohoo.

[masurenguy] 11/10/2019 13:41

Well 14.75m shares were traded in just over 30 minutes @105p between 13.00 and 13.15. That volume constitutes 15.4% of the total shares in issue so it looks as though a couple of institutional shareholders may have reduced/bailed. Interesting to discover who has picked them up. Miton doubled their stake to 10% only 8 weeks ago so they may be the prime candidate. Anyway an RNS should soon appear to reveal who the sellers and buyers were.

Clearly this was a major overhang which has seen the shareprice more than halve over the past 6 months and now that this has been cleared we should hopefully see a significant move north !

[thomshrike] 11/10/2019 13:24

11.7mn shares trades so far today (!). That's more than 10% of the share capital. Including a 5.94mn shares block. Was this the clean-up trade?

[woozle1] 07/10/2019 16:41

Hi Thom, just to say thanks for your informative responses. w1

[thomshrike] 07/10/2019 16:24

Hi, HSW�s marketing strategy has been on investor spotlight, after the significant bookings decline in H1. Some investors believe that their marketing team suffered with too much staff turnover after new management stepped in, and this led to mis-calibrated day-to-day marketing decisions and ultimately contributed to numbers being so poor. That said, a new CMO finally joined a couple of months ago (also coming from Expedia, like the CEO) and hopefully the situation will improve.

Under current management the main tenet of their strategy is to effectively reach the �serial travelers�, i.e. people that are doing repeated bookings, be it because they are taking their gap year or because they are doing a long trip or because they just are frequent travelers. This cohort is very specific to hostels, also given the last-minute nature of hostel bookings, and management believes it represents the most efficient target on a customer lifetime value perspective. To your point on using online data, management believes they now have the tools to effectively find and reach that cohort. (for clarity: this is not dependent on the overhaul of their core IT platform).

[woozle1] 07/10/2019 14:52

Hi Thom, thanks for that. what's your view on the shift in marketing spend? I've been a long term investor in Games Workshop and the internet has enabled the company to reach customers directly, whereas as previously they'd relied on word of mouth and luck. The similarities with HSW are that it too has a difficult to reach customer and that the internet really helps.

w1

[thomshrike] 07/10/2019 14:18

Hi Woozle1, the main reasons for lack of growth were: loss of market share to other OTAs, such as booking.com (key investment point at the moment, more on that below); phase out of legacy brands since the time of the IPO (essentially completed now); impact of the introduction of the free cancellation option (but part of the impact is accounting-related only).

Loss of market share to other OTAs is related to HSW's tech debt, ie: due to previous ownership's under-investment, its core IT platform cannot provide some key functionalities that other OTAs can, leading to a worse user experience and lower conversion. Management addressed that with an ambitious IT investment plan that is supposed to yield results (ie bookings growth) from 2020 onwards. Whether that will come true is every investor's question mark.

Note that current FCF yield calculations (16% using broker estimates) already include the cost of those investments.

[thomshrike] 06/10/2019 09:05

Hi m_kerr, direct booking is always a risk for the business of OTAs. However data shows that in the hostel business OTAs are in fact gaining market share vis-a-vis direct booking (eg see slide 16 of HSW’s November 2018 CMD presentation, available on HSW’s website).
The problem for HSW has been instead to lose share to other OTAs, such as booking.com. The main reason for that - fewer functionalities on HSW’s online booking system - is also a reason why hostel direct booking is losing market share overall: the fragmented hostel industry does not have the resources to invest on a competitive online booking user experience.

[m_kerr] 05/10/2019 20:48

as a private equity company, and then marketing themselves as a dividend payer, the problem has been a lack of investment and long term thinking. they started at 12% commission, and are now at about 16%. so they have pricing power, which is good, but they aren't growing by more volume. but the biggest issue for me is the lack of a robust business model. by which i mean their platform is easily bypassed. it's well known by customers that they can search hostels using the HW platform, and then they can save money by going direct to hostels. the cheaper the stock gets, and the higher the FCF yield gets, the lower the risk, but that's a considerable problem i see.

[hiraniha] 01/10/2019 08:25

I bought in at 117 last week.Happy to get in at this price.

[elsa7878] 30/9/2019 21:39

Thanks - so it's poor execution and nothing else. See the market is expected to grow by 5% pa so no excuse. Sadly looks like a company dressed up to bring to the market masking serial underinvestment. Old management leave with their pockets full and now the new team has to sort it out.
Agree it must be attractive to someone....all depends on how long this reduction in sales continues for. First improvements in booking / payments functionality in Q1 2020, so might take time..though the improved search function should be due soon.

[thomshrike] 30/9/2019 21:21

Also: in my opinion the natural buyer would be Expedia. Synergies are obvious. Also great to get young clients at the beginning of their lifetime value. And of course HSW’s CEO joined from Expedia.

[thomshrike] 30/9/2019 21:18

Elsa7878, here is my view:
- they focus on a niche that grows more than the average accommodation industry, so the company should be growing. It is not.
- the competitive environment has always been fierce but none of the large OTAs puts too much emphasis on the hostel niche (low revenue per booking).
- but HSW’s IT platform is outdated and cannot provide functionalities that others can. Hence, roughly speaking, many users “choose their hostel at the HSW website but then convert at booking.com or others”.
- management has defined a roadmap to catch up on their core IT platform until 2020. The market was on standby.
- but H1 numbers showed further bookings decline. The jury’s out there for the reasons behind that. My guess is that there was a lot of turnover on the marketing team and daily decisions were sometimes not effective. New CMO hired last month.
- that said, even with downgraded numbers, the stock is trading at 16% FCF yield. Net cash already equates to more than 20% of the market cap and more than 1mn is generated each month. There is no significant shareholder, hence it is a sitting duck.

[topvest] 30/9/2019 20:52

Phew - pleased that i kept clear of this. Looks like the wheels are falling off and its a value trap.

[elsa7878] 30/9/2019 20:17

Seems like we are not there yet. Lots of medium sized trades in round numbers do not indicate a bottom. Need one large trade to shows us that they are finally cleared.

Does anyone know why they have seen a downturn in revenues. I appreciate the free cancellation and the effect that has had, but the more general downturn in an industry that is growing shows some specific company issues. They do mention problems with their booking service but aside from that not much. Any ideas? Thanks.

Do they compete directly with the likes of Hotels.com, Booking.com - are these guys muscling in? If so they are not natural acquirers as they can just add hostels themselves or is it too distinct a market for the large hotel players? If so assume therefore that a private equity buyer is more likely....

Appreciate any insights.