Hostelworld Group (LON:HSW) reported first-half 2026 net revenue growth of 12% to €52.2 million, supported by higher revenue per transaction and improved marketing efficiency, while the company said the Middle East conflict constrained booking volumes in longer-haul markets.
Reported net transactions rose 1% year over year to 3.8 million. Management estimated that transaction growth would have been about 4% without the impact of the conflict, which particularly affected travel into Asia and Oceania. Net average transaction value increased 11% to €14.91, driven principally by the continued uptake of its Elevate marketplace monetization product.
Revenue growth driven by higher commission rates
The company said Elevate increased its effective commission rate to 17.7%, from 15.8% in the first half of 2025 and 16.7% in the second half of 2025. Management expects the 17.7% rate to remain the planning assumption through the remainder of 2026.
Generated revenue, defined as gross revenue less cancellations, rose 13%. Revenue growth outpaced transaction growth in several regions, including Western Europe, where revenue increased 10% against transaction growth of 3%, and Eastern Europe, where revenue rose 28% while transactions increased 15%.
Caroline Sherry, chief financial officer, said revenue per transaction also benefited from geographic mix, modest bed-price inflation and increased Featured Listings advertising revenue. South Asia generated revenue growth of 18% despite softer booking demand, while Latin America posted a 17% increase in revenue, which Sherry said was a record for the region.
North American customers were the strongest source-market growth segment, with transactions from the U.S. and Canada rising 10%. European source customers grew 1%, with travelers favoring shorter-haul European trips. On a destination basis, management estimated combined European demand grew 6%, including growth in Spain, France, the Czech Republic and Hungary.
Margins and cash position improve
Marketing expense declined to 49% of revenue from 51% a year earlier, within the company’s guidance range of 45% to 50%. The lower ratio contributed an €800,000 benefit to margin, according to Sherry.
Net margin increased 16% to €22.9 million. Adjusted EBITDA rose 11% to €8.2 million from €7.4 million in the prior-year period, while the adjusted EBITDA margin remained flat at 16%.
The company said operating costs increased by €2.3 million as it invested in product, marketing, technology and development resources. Headcount rose to 276 employees at June 2026 from 267 a year earlier. Contractor and platform costs also increased as Hostelworld developed Social Pass, third-party budget accommodation inventory and the integration of OccasionGenius, its events discovery platform acquisition.
First-half results included a deferred revenue movement associated with free-cancellation bookings that reduced first-half margin by €800,000. Sherry said €3.2 million of first-half revenue has been deferred and is expected to unwind as revenue and profit in the second half.
Cash from operating activities totaled €7.6 million, and adjusted free-cash-flow conversion improved to 74% from 65%. The company ended the period with €15 million in cash and a net cash position of €2.5 million, compared with net debt of €1.6 million at the end of December.
- Hostelworld paid €1.3 million toward its Irish tax warehousing liability during the half.
- It completed its first share buyback program in April, at a cash cost of €1.3 million.
- The company paid a final 2025 dividend of €0.0158 per share and declared an interim 2026 dividend of €0.0083 per share, payable in September.
- More than 4 million shares were repurchased and canceled under the £5 million buyback program, representing just over 3% of original issued share capital.
Social network becomes central to strategy
Management emphasized the company’s evolution from a hostel-focused online travel agency into a social travel platform with three revenue streams: core hostel commissions, budget accommodation and Social Pass. Events content from OccasionGenius is scheduled to be integrated into the social network in early third quarter.
Unique social members rose 7% year over year, unique chat users increased 26%, messages sent rose 65%, and messages per unique user increased 30%. Gary said engagement growing faster than membership was evidence that network effects were developing.
The company said customers who become social members generate more transactions, revenue and direct margin over their first year than non-members. Management said social members cost less to acquire and serve because they are app-centric and make most bookings through the app.
Budget accommodation is bringing in new customers at low or zero marketing cost, with about 18% of buyers new to Hostelworld, according to management. About 39% of Social Pass purchasers are new customers, and one in five of those customers subsequently books core inventory within 90 days. Management said 97% of those bookings take place in the app.
Gary said that if the customer base were entirely social members, marketing expense could eventually trend toward 35% to 40% of revenue. However, he maintained the current 45% to 50% marketing guidance range for the remainder of 2026 and 2027, citing changes in customer-acquisition channels and the developing role of artificial intelligence platforms.
Second-half outlook
Sherry said early third-quarter trading reflected similar trends to the first half, including strong average transaction value growth. She said booking volumes continue to be affected by the Middle East conflict and that the impact could persist until disruption eases and travelers gain confidence in travel decisions.
Despite that uncertainty, management said it remains on track for low-double-digit full-year revenue growth. The company reiterated its capital markets day targets, including marketing expense of 45% to 50% of revenue, adjusted EBITDA margin above 20% for the full year and adjusted free-cash-flow conversion above 70%.
For the second half, Hostelworld plans to focus investment on recruiting more social members, expanding first-party-data-led marketing, developing referral channels, launching event discovery across 750 cities and adding AI-powered matching and discovery tools.
About Hostelworld Group (LON:HSW)
Hostelworld Group plc operates as an online travel agent focused on the hostel market worldwide. It offers software and data processing services that facilitate hostel, B&B, hotel, and other accommodation bookings. The company also provides business information consulting and marketing planning services; and marketing and research and development services, as well as management services. In addition, it engages in the technology trading business. The company was founded in 1999 and is based in Dublin, Ireland.
