Safestay beats market expectations as travel normality returns
The company reported revenues ahead of market expectations, previously expected to be £19.0 million, and up from £6.4 million in 2021. Ebitda is expected to be in line with market expectations of £5.9 million, following a loss of £1.0 million in 2021.
The results illustrate a return to a near-normal premium hostel market, with further upside anticipated. A key driver behind the growth has been the improvement in the average bed rate, which increased from £19.70 in 2021 to £23.70 in 2022. The company commented that this 20% uplift should be sustainable, and if combined with a continued increase in occupancy provides a firm platform for a strong performance throughout this year.
Occupancy also increased significantly to 63%, versus 35% in 2021. However, Safestay noted that occupancy still remains well below historic market levels with significant opportunity for continuing improvement.
Larry Lipman, Chairman of Safestay, said, "The pandemic enforced fundamental change on our business. It required we re-finance the Group and strip back the operational structure to a bare minimum. As part of re-starting the business, we have been able to use our accumulated knowledge to build the business back up more efficiently and the Group is perhaps the stronger for it. Certainly, our performance in 2022 was pleasing and we are now focused on continuing the- growth in 2023."
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Safestay’s trading report for 2022 demonstrates that, like most other businesses in the travel industry, it's beginning to recover from the hit of the pandemic. Arguably, hostels suffered the most within the hotel industry at this time, as even when travel restrictions did begin to lift throughout 2021, travelers often opted for accommodation that wasn’t centered on sharing a communal space, with roommates changing day-to-day in a hostel.
However, the industry continues to show strong recovery moving into 2023, with the global hostels market size predicted to grow from $6.04 billion in 2022 to $6.35 billion in 2023 at a CAGR of 5.2%. Furthermore, the market size is expected to grow from $7.65 billion in 2027 at a CAGR of 4.8%. The growth of the hostel market can be attributed in part to the increasing popularity of solo travel. Hostels offer affordable, value-driven accommodations that can offer unique experiences, convenient locations, and opportunities to meet other travelers, making them an attractive option for solo adventurers.
Upon the news of Safestay’s trading update, shares soared 10% in early trading. Safestay is set to show further signs of progress in 2023, as the company notes that there are positive signs that bookings by schools and colleges (a large driver for occupancy rates) will return in significant numbers this year.
Following the news of Rolls Royce’s trading update last week, the news from Safestay today serves as yet another example that the travel industry is very nearly back on its feet post-pandemic.
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