REG - Hostelworld Grp PLC - Publication of Annual Report and Notice of AGM
03/04/2023 11:15
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RNS Number : 1660V Hostelworld Group PLC 03 April 2023
LEI: 213800OC94PF2D675H41
3 April 2023
Hostelworld Group plc
("Hostelworld" or the "Company")
Publication of Annual Report for 2022 and Notice of 2023 Annual General
Meeting
Annual Report and Accounts
Hostelworld, the world's leading hostel-focused online booking platform, is
pleased to announce that its Annual Report 2022 has been posted or is being
made available to shareholders today.
Annual General Meeting
The Company confirms that its Annual General Meeting will be held at 12 noon
on Tuesday 9 May 2023 at the offices of the Company, Charlemont Exchange,
Charlemont Street, Dublin 2, Ireland. A Circular, containing the Chairman's
Letter and Notice of 2023 Annual General Meeting, and a Form of Proxy have
also been posted or are being made available to shareholders today.
Documents available for inspection
The following documents:
· Annual Report 2022;
· Circular containing the Chairman's Letter and Notice of 2023
Annual General Meeting; and
· Form of Proxy;
have been submitted to the Financial Conduct Authority via the National
Storage Mechanism, and the Irish Stock Exchange (trading as Euronext Dublin),
and will shortly be available for inspection at the following locations:
National Storage Mechanism:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
and:
Euronext Dublin:
Companies Announcements Office,
Euronext Dublin,
28 Anglesea Street,
Dublin 2
and https://direct.euronext.com/#/oamfiling
The Annual Report 2022 has also been filed with the Central Bank of Ireland.
The Annual Report 2022 (ESEF compliant format), the Circular containing the
Chairman's Letter and Notice of the 2023 Annual General Meeting and the Form
of Proxy are available on the Company's website at www.hostelworldgroup.com
(http://www.hostelworldgroup.com) .
Regulated Information
In accordance with DTR 6.3.5(1A), the unedited full text of the regulated
information required to be made public under DTR 4.1 is contained within the
2022 Annual Report which has been uploaded to the National Storage Mechanism
and is available on the Company's website www.hostelworldgroup.com
(http://www.hostelworldgroup.com) .
The information set out in the Appendix, which is extracted from the Annual
Report 2021, is included for the purposes of complying with Regulation
33(5)(b)(ii) of the Irish Transparency Regulations 2007 (as amended) and its
requirements on how to make public annual financial reports. The information
in the Appendix should be read in conjunction with the Company's preliminary
results for the year ended 31 December 2022 released on 22 March 2023 which
can be viewed at www.hostelworldgroup.com (http://www.hostelworldgroup.com) .
Together, these constitute the material required by Regulation 33(5)(b)(ii) to
be communicated in unedited full text through a Regulatory Information
Service.
Contacts:
Hostelworld Group plc
Caroline Sherry, Chief Financial Officer
John Duggan, General Counsel & Company Secretary
Tel: +353 (0) 86 022 3553
Appendix:
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. The Directors are required to prepare the Group financial
statements in accordance with UK-adopted international accounting standards
and applicable law. The Directors have also elected to prepare the Group
financial statements in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union and to prepare the parent Company financial statements in
accordance with FRS 101 Reduced Disclosure Framework (Relevant Financial
Reporting Framework) and applicable law. Under company law the Directors must
not approve the financial statements unless they are satisfied that they give
a true and fair view of the assets, liabilities and financial position of the
Group and Company and of the profit or loss of the Group for that period.
In preparing the parent Company financial statements, the Directors are
required to:
· Select suitable accounting policies and then apply them consistently;
· Make judgments and accounting estimates that are reasonable and
prudent;
· State whether Financial Reporting Standard 101 Reduced Disclosures
Framework has been followed, subject to any material departures disclosed and
explained in the financial statements; and
· Prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard
1 requires that Directors:
· Properly select and apply accounting policies;
· Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the Group's
financial position and financial performance; and
· Make an assessment of the Company's ability to continue as a going
concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Responsibility Statement
We confirm that to the best of our knowledge:
· The financial statements, prepared in accordance with the Relevant
Financial Reporting Framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
· The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· The Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
This responsibility statement was approved by the Board of Directors on 21
March 2023 and is signed on its behalf by:
John Duggan
Company Secretary
21 March 2023
Principal Risks and Uncertainties
The Board takes overall responsibility for identifying the nature and extent
of the risks to be managed by the Group to ensure the successful delivery of
its strategic and business priorities. The Audit Committee monitors certain
risk areas and the internal control system, as set out in the report on
governance. The Group's Risk Register identifies key risks including emerging
risks and monitors progress in managing and mitigating these risks and is
reviewed regularly during the year by the Audit Committee and at least
annually by the Board. Emerging risks are identified from areas of
uncertainty, which may not have a significant impact on the business currently
but may have the potential to adversely affect the Group in the future.
The Group's Risk Register process is based upon a standardised approach to
risk identification, assessment and review with a focus on mitigation. Each
risk identified is subject to an assessment incorporating likelihood of
occurrence and potential impact on the Group.
The Group's Risk Register is subject to review by the Executive Leadership
Team (ELT) prior to reporting to the Audit Committee and the Board.
The Board has reviewed the principal risks and uncertainties against the wider
macroeconomic environment which Hostelworld operates in currently, taking into
consideration inflationary and other financial related risks as well as
consideration of the risks associated with continuing geopolitical conflicts,
climate risk and COVID-19. We recognise, in particular, that climate change
poses a number of physical (such as extreme weather events affecting customer
willingness to travel or the availability of hostels) and transition-related
(such as stakeholder perception) risks and opportunities for our business. We
take a risk-based collaborative and strategic approach to climate change. We
are aligning internal processes with the recommendations of the TCFD. The
Group has a detailed climate related Risk and Opportunities Register which is
included in the Sustainability at Hostelworld report within the annual report.
The most material risks facing the Group are set out in the following table,
together with comments on how they are managed to minimise their potential
impact. While the following table is not prioritised nor an exhaustive list of
all risks that may impact the Group, it is the Board's view of the principal
risks at this point in time. Individually or together, these risks could
affect the Group's ability to operate as planned and could have a significant
impact on revenue and shareholder returns. Additional risks and uncertainties,
including those that have not been identified to date or are currently deemed
immaterial, may also, individually or together, have a negative impact on the
Group's revenue, returns, or financial condition.
The Board also considered its obligations in relation to providing both the
annual viability and going concern statements and its conclusions can be found
in the Directors Report within the annual report and in note 1 to the
consolidated financial statements within the annual report.
No Category Description and Impact Management and Mitigation Direction of change
1 Macro-economic Conditions The Group's financial performance is largely dependent on the wider Management and the Board regularly monitor a range of trading, market and Increased
availability of, and demand for, travel services. economic indicators to
determine any risk to financial performance due to macroeconomic
uncertainties, and any potential
Travel services are enabled by the freedom of movement of people nationally
and internationally without prohibitive restrictions. Moreover, it is mitigating actions required.
supported by affordable air, ferry and train fares at significant scale, and
similarly good access to accommodation.
The Group's revenue and customer base is global, with a dispersed population
of users, and a geographically dispersed set of destinations. While market
The demand for travel services is influenced by a range of macroeconomic conditions may decline in certain regions, the globally diversified nature of
circumstances and their impact on consumers discretionary spending levels. the business helps to mitigate this with circa 60% of destination markets in
Economic activity, employment levels, inflation, interest rates, currency Europe and circa 40% in rest of world.
movements and access to credit are among the factors that can impact travel
demand.
Rising inflation rates can impact customer discretionary spending and reduce
their ability to travel. However, this is potentially offset by the evidence
of pent-up demand across the industry as a result of an inability to travel
through COVID-19.
In circumstances where events cause a material decline in consumer travel
behaviours and patterns on a global scale, management will take necessary
actions to conserve cash.
2 Impact of COVID-19, terrorism, geopolitical conflicts, and other There remains a risk of travel restrictions relating to new strains or waves Our target 18-34-year-old population tend to be flexible as to destination and Decreased
uncontrollable events on leisure travel of COVID-19. This could adversely affect the Group's business in impacted are less risk adverse. Their trips tend to be a 'rite of passage' rather than
regions. We are also exposed to the ability of other businesses within the a more discretionary or optional vacation resulting in less aversion to these
travel industry to meet increased demands as restrictions ease. Employee staff risks and more flexibility in configuring trips around restrictions.
shortages and flight cancellations negatively impact our business.
The continued threat of terrorist attacks in key cities and on aircraft in
flight may reduce the appetite of the leisure traveller to undertake trips,
particularly to certain geographies, resulting in declining revenues.
Geopolitical conflicts, climate change, natural disasters or other adverse
events outside of the control of the Group may also reduce demand for or
prevent the ability to travel to affected regions.
3 People The Group is dependent on its ability to attract, retain and develop creative, The Group is taking meaningful action to retain employees and has implemented Increased
committed and skilled employees so as to achieve its strategic objectives. Due HR policies and people processes to enable retention of key talent; namely
to the impact of the COVID-19 pandemic, the Group took actions to restructure moving permanently to a hybrid working
the organisation which commenced in 2020 and concluded in 2022, to ensure the
organisation is designed to optimally deliver our strategic priorities. Such model and the introduction of an Agile Working policy, a Working From Abroad
restructures, which included reducing headcount, can impact employee morale policy, paid wellness days and volunteering days to promote engagement,
and engagement levels. flexibility and work-life blending.
The Group had been feeling the effects of the global increase in attrition The Group have recognised that an increased investment in career development
related to COVID-19 ("the great resignation"), and although attrition has and training of our people is key to employee engagement and in 2022 recruited
slowed in 2022, the Group is finding it increasingly difficult to remain a dedicated learning and development specialist within our HR team, with
competitive to attract talent, which has the potential to further disrupt the robust plans to support the development of individuals as well as the people
business. management population across 2023.
The Group has a key dependency on attracting and retaining employees in Robust external benchmarking has ensured there is better understanding of the
engineering, quality assurance, product management and data roles to competitiveness of the reward offering. Employees identified as key
facilitate delivery of projects and maintain site and infrastructure talent/critical skills were awarded various retention plans in a bid to
stability. Identifying and securing top talent is becoming increasingly retain.
difficult in a competitive market. Due to the increased demands in terms of
remuneration and benefits in the talent market, in addition to expectations
around location and flexibility, particularly in the technology sector, there
is a risk that attrition will rise again unless we continue to keep pace with Having completed a headcount reduction in response to COVID-19, the Group
the market and ensure our total reward offering for new and existing hires is closely monitor headcount. While larger technology companies were making
on-par with the industry standard. announcements relating to significant headcount cuts, we avoided this and will
continue to assess headcount needs in 2023.
All of this presents several significant risks, including increased attrition,
difficulty retaining valuable key employees, increased time to hire, weakening The Group currently operates from five global offices, which provides
of our employer brand and therefore ability to attract high calibre talent, flexibility for location of key talent, and has further increased its reach to
potential negative impact on employee morale, productivity and overall attract talent by new locations in Germany, Spain and Italy. The Group also
engagement, an adverse impact on our culture, and resource constraints; any of engages with a 3rd party 'Employer of Record' to be able to hire talent from
which could adversely impact our business and reputation. countries where we don't have an entity.
A Non-Executive Director fulfils a workforce engagement role as set out in the
2018 UK Corporate Governance Code.
4 Data security We are an innovative technology company dependent on sophisticated software The Group takes the protection of our customer and employee personal data very Unchanged
applications and computing infrastructure. seriously. We maintain controls and policies to comply with laws that apply to
our business, address evolving security threats, and support business
innovation and growth.
The security of confidential business information we generate when engaging in
e-commerce and the personal data we capture from customers and employees is
essential to maintaining consumer and travel service provider confidence in All employees undertake comprehensive IT security and data protection training
our services. As an online platform, we are constantly exposed to cyber at induction and complete annual refresher training.
security related threats in the form of internal and external attacks or
disruption on our systems or those of our third-party suppliers.
We have a robust and comprehensive data privacy, security and protection
compliance programme in place. We operate a supplier onboarding process that
Our flexible hybrid working model, our work from anywhere policy as well as includes a detailed review of the data flows, GDPR considerations and
our engagement of contractors dispersed in various jurisdictions, increases interrogation of the integrity of the IT security of the supplier. We
the data security challenges faced by the business. constantly risk assess our vendors, the personal data they process and the
maturity of controls in relation to information security and data protection,
and schedule periodic reviews of controls in place.
As the business pursues its social strategy and this strategy evolves, data
security shifts into sharper focus with the extended categories of data
shared. Our information security controls are aligned to leading industry standards,
ISO27001:2017 and NIST Cyber Security Frameworks. We are PCI compliant with
the guidelines of the payment card industry and are audited to these
standards.
In 2022, the migration of the e-commerce platform to the cloud was completed.
The security risks of cloud computing vary depending on the delivery model
used, but many of the risks extend into every type of cloud solution.
We have a data protection compliance framework in place that is aligned to our
on-going obligations under the GDPR, ePrivacy Directive and other applicable
laws. We have invested and continue to invest in our own data protection
The Group's IT Platforms must comply with GDPR regulations and stay scalable, compliance resources to monitor and ensure compliance including a bespoke data
robust and reliable. privacy management software tool. We employ a Data Protection Officer (DPO)
who is responsible for informing, advising and monitoring compliance on all
matters relating to the protection of personal data in the Group. Our DPO is
supported by designated data protection champions throughout the business.
Due to our hybrid working policy we continually assess the risks of remote
access. We use Single Sign On and Multi Factor Authentication to ensure
adequate protection.
We work closely with an expert solution provider in the architecture and
provisioning of cloud services, as well as a certified security company for
independent vulnerability and security scanning.
We work closely with our product teams to review evolutions in our social
strategy to ensure privacy by design in respect of all projects and iterations
of existing projects.
5 Cyber The Group is susceptible to cyberattacks which could compromise the integrity The Group expends significant resources to protect against cybersecurity Increased
of our systems and the security of our data. Cyberattacks by individuals, breaches and regularly increase our security-related expenditures to maintain
groups of hackers, and state sponsored organisations are increasing in or increase our systems' security.
frequency and sophistication and are constantly evolving. The Group expects
this risk to become more difficult to manage as the tools and techniques used Due diligence is performed on all third-party vendors to ensure that
in such attacks become ever more sophisticated. sufficient and appropriate security controls exist to protect Hostelworld data
and systems.
The recent move of internal systems to the cloud brings further cybersecurity
challenges. There is a risk that the Group's current technical, The Group have an arrangement in place with a specialist third party firm to
administrative, and physical IT security framework may not be successful in monitor network activity and to detect, neutralise, and report any unusual
safeguarding our information assets against cybersecurity attacks. This may activity to our corporate IT function.
result in bad actors stealing customer information, transaction data or other
proprietary information. There is also a risk of infiltration of the Group's
systems through cyberattacks carried out on third party vendors or contractors
of the Group. IT policies, procedures, and cyber security initiatives are reviewed and
updated regularly to address the changing regulatory environment, including
data privacy regulations, and to mitigate the evolving cyber security threat.
There is a risk that internal resources will not have the necessary skills to
ensure that data and systems hosted in the cloud will not be exposed due to
inexperience or misconfiguration. Procurement processes have been developed to ensure that third party
onboarding includes thorough due diligence prior to the execution of
agreements. Cloud-relevant training has been identified and internal resources
continue to be upskilled in this area.
There is a risk that insurance companies will impose limitations on cover to
prevent adequate insurance protection in the event of a cybersecurity attack.
6 Financial The Group's activities expose it to a variety of financial risks. The Group's The Group proactively manages financial risk by seeking to minimise potential Unchanged
revenues and costs are impacted by rising inflation rates, which may also adverse effects on its
deter our customers from travelling.
financial performance.
Foreign exchange movements may impact travel decisions and travel patterns by
customers, as travel from one market into another (operating with a different Foreign exchange movements may impact travel decisions and travel patterns by
currency) becomes more expensive. Furthermore, the Group is exposed to customers, but typically there is a degree of inherent hedging. In a normal
translation risk which occurs if the Group has a surplus or deficit in a trading environment, USD revenue receipts approximate related USD marketing
foreign currency which changes in value over time. outflows which mitigates FX translation risk. The Group minimises holdings of
excess non-euro currency above anticipated outflow requirements.
The Group has a €30m term loan facility in place with certain investment
funds and accounts of HPS Investment Partners LLC (or subsidiaries or The Group has established a disciplined framework, including key ratios and
affiliates thereof). The Group's term loan facility creates repayment KPIs, of forecasting and reporting which is regularly reviewed and challenged
obligations and covenants, reporting to the involved brokers and lenders, and by management to ensure compliance with the loan facility's obligations and
requires constant monitoring of our leverage position and liquidity metrics. covenants, and affordability of repayment terms including interest.
The facility bears an interest at a margin of 9.0% per annum over EURIBOR.
Increases in interest rates increases the cost of the facility. Without a
return to strong trading levels it is not certain that the Group can meet the
covenants set out under the term loan facility agreement.
7 Competition The risks posed by competition could adversely impact our market share and Our primary mitigation is the execution of our strategy and to capitalise on Unchanged
future growth of the business. While we face a number of key risks under our unique market position.
competition, in each the competitor we reference is likely to have more
resources than we do to enable them to compete more effectively.
We target new customer acquisition and grow the most profitable customer
cohorts (with focus on Customer Lifetime Value/Customer Acquisition Cost) by
There is risk in relation to supply whereby competition from direct optimising overall marketing investment. We strengthen the Group's core
competitors, alternative accommodation operators, and disruptive new entrants platform in order to improve its flexibility and the experience of our
may lead to a loss of key accommodation suppliers. They may achieve this customers.
through their ability to absorb revenue losses and/or additional costs in
order to compete on price or bidding strategy, their ability to grow core
inventory base (both in terms of property count and destination coverage), and
their ability to enhance product features faster through depth of resources. We focus on expanding our global footprint, meeting emerging demand while also
strengthening our overall product offering.
There is risk posed by Google or other large market players broadening their
offering and becoming a direct competitor. We leverage the capabilities of our partnerships to ensure we are delivering
best in class and the most advanced technology-based solutions for our
customers and hostel partners.
Changes in customer behaviour (for instance post COVID-19 a customer may
prefer a private room to a public dorm) may lead to a loss in customer traffic
and demand for our services and/or an increase in customer acquisition costs. We evaluate strategic opportunities to diversify away from exclusive
dependence on OTA business and develop a broader experiential based travel
offering to our customers.
There is a risk that the hostels on which we are reliant give their supply as
exclusive inventory to our competitors.
We roll out commercial agreements to secure competitive rates and inventory
across our property base. We make use of the "solo system" and "social cues"
strategy to gain access to increased inventory and ward off other platforms
from competing in this space.
8 IT Platforms and technological innovation Over recent years the ever-increasing pace of change of new technology, new We focus on staying current with new trends in technology development and Increased
infrastructure, and new software offerings have changed how customers customer behaviour.
research, purchase, and experience travel. Notable shift changes include
mobile networks, mobile applications, meta-search providers, display
advertising, and social communities.
We invest a significant amount of our product and user experience functions on
research and
Unless we continue to stay abreast of technology innovation and change, we development and interacting with similar companies both within and external to
risk becoming irrelevant to the modern customer. Technology evolves rapidly, travel.
and updates can become quickly obsolete.
We leverage the capabilities of partnerships to ensure we are delivering best
The Counter business currently sits outside the main Hostelworld.com in class and the most advanced tech-based solutions for our customers and
development environment and needs to be consolidated which could mean a risk hostel partners.
of disruption to service.
The Group has continued with the ongoing modernisation of our underlying
platform to enable us to support faster execution across our core platform. We
will work on onboarding the Counter business into our Hostelworld development
environment in 2023 so that it benefits from this modernisation and
investment.
9 Third party reliance We rely on hostel accommodation providers to supply us with our inventory. The We focus on maintaining good relationships with hostels and Unchanged
majority of our revenue is generated by hostels who are connected to third vendors.
party channels. If these channels do not make required updates that allow
hostels access our latest features, we may fall behind competitive offerings.
If these parties suffer from an outage, it will lead to a potential loss in
supply. We work closely with hostel partners and hostel associations to monitor all
key developments in the
market. We regularly temperature check the sector both broadly through mass
Given COVID-19 and ongoing financial pressures, with our hostel partners in communications and surveys or using more focused means including face to face
particular, there is increased risk of properties going out of business, no meetings or one on one calls to ensure that our recorded data is as up to date
longer operating in the hostel category, or removing significant hostel as possible.
elements from their properties.
Risk assessment and due diligence controls are carried out in respect of each
We rely on a number of key third party providers in relation to systems and third-party provider.
service providers. Any interruption in service from any of these providers may
lead to a loss in revenue, loss in site and app functionality, increased input We try to identify alternative providers where possible which includes
from customer services and engineer time, and ultimately if we experience consideration of the effort of transferring services. Material vendors are
multiple failures we risk reputational and brand damage. subject to an annual business review, which is coordinated by the dedicated
internal procurement function, where all key risk areas are reviewed. In
addition, all vendor contracts and requests must be processed through the
Group's purchasing & contract review process.
The Group relies on payment processors and payment card schemes to execute
certain components of the payments process. We generally pay these third
parties interchange fees and other processing and gateway fees to help
facilitate payments from customers to our travel service provider partners. For services providers we ensure contractual obligations dictate minimum
There is a risk that the Group may not maintain its relationships with these functionality and speedy resolution of issues. We put alerts in place to
third parties on favourable terms or that these transaction fees imposed by immediately capture any downtime and replicate as much functionality as
these providers are increased. possible in-house.
The Group has made preparations in the event hostel partners and/or key
service providers fail. The Group closely monitors the financial health of key
suppliers and taking steps to mitigate risks.
10 Search engine algorithms A large proportion of traffic to our websites is generated through internet The Group invests heavily in recruiting and retaining key personnel with the Unchanged
search engines such as Google, from non-paid (organic) searches, and through requisite skills and capabilities in paid and non-paid searches.
the purchase of traffic from travel related user queries/searches (paid
searches).
This in-house expertise is supplemented by the deployment of leading
technology tools and their continuous development to align and match changes
We therefore rely significantly on practices such as Search Engine in search engine algorithms.
Optimisation (SEO) and Search Engine Marketing (SEM) to improve our visibility
in relevant search results. Search engines, including Google, frequently
update and change the logic that determines the placement and display of
results of a user's search, which can negatively impact placement of our paid The search marketing team works closely with Google to understand any changes
and organic results in search results. Google algorithms have become very in functionality to the Google Ads platform so that we can avail of any
sophisticated. We also use algorithms to determine the optimal bid (price) for efficiencies in our search traffic. The Group participates in alpha and beta
each user acquisition. feature tests that give Hostelworld first mover advantage with new
functionality that can help drive efficiency.
We risk being significantly behind in our marketing strategy. Particularly, in
respect of paid searches, our costs to improve or maintain our placement in We continue to enhance our skillsets in house and capabilities by partnering
search results can increase. This could result in a decrease in bookings, and with third party vendors to enhance our search engine optimisation.
thus revenue, and an increase in costs. It could also result in having to
replace free traffic with paid traffic, which would negatively impact margins.
Furthermore, the algorithms that determine our customer acquisition price are
dependent on user level data that may not be provided where users do not
consent. Since we are placing a bid for each relevant user query to be
acquired, the granularity and precision is extremely important for efficient
investment allocation.
Changes and developments in the algorithms can happen in a rapid fashion and
it is critical for Hostelworld to remain up to date.
11 Climate change, sustainability and corporate social responsibility Climate change and sustainability continue to be areas of increased focus for Climate change issues may impact travel decisions and travel patterns by Increased
the Group and are further evolving as areas of heightened concern with our customers but is mitigated to
internal and external stakeholders.
the extent that our business is a global one, with a dispersed population of
users, and a geographically
There is a request for more accountability from our customers, employees, and dispersed set of destinations. We take climate risk into consideration in our
other stakeholders as to what the Group is doing to limit its direct and forecasting and budgeting processes. Further detail is included in the
indirect impact on climate change. Viability Statement within the annual report and the Sustainability at
Hostelworld report within the annual report.
Listing rule developments require tangible reporting on climate disclosures
(by virtue of TCFD) including identified metrics and targets to measure the For ESG and TCFD the related steercos received specific training from a
Group's progress on its sustainability journey. Other legal and regulatory third-party provider. We also engage with third parties' specialists for
requirements also impact reporting required from the Group and keeping abreast additional support where required, including monitoring the environment for
of all developments in the area is a key risk. any changes in requirements that could affect the Group.
Physical climate change risks such as extreme weather events could affect our As an e-commerce business based in five office locations around the world with
inventory competitiveness and results of operations. In addition, transitional 241 employees, whilst our Scope 1 and Scope 2 carbon footprint is relatively
climate change risks such as changes in stakeholder expectations, travel small, we recognise that the Group has a role to play in protecting our
patterns, technologies, and policy and regulation may affect the Group and environment. We have set out the metrics and targets we use to monitor our
results of operations. footprint in the Sustainability at Hostelworld report within the annual
report.
There is a risk that we do not meet shareholder expectations regarding our
target setting and performance against creating a more sustainable operating Our goal is to work with hostels on their own Staircase to Sustainability
environment. initiatives. We have begun to work on a hostel facing sustainability plan to
address asks from both the consumer audience and the hostel partners. This
work will see hostel efforts being showcased on the platform, allowing
customers to see precisely what areas a hostel has made progress in. The first
We also know that our consumer base feels strongly about making sustainable step in the execution of this work will be an educational programme for
travel choices and our hostels look to us for guidance in the area of partner hostels to surface the bespoke framework we have created for the
sustainability, requiring us to help to support this group of stakeholders. sector. We are also recognising efforts, in the areas of Community and Eco
particularly, in our annual HOSCAR awards.
12 Regulation Regulatory and legal requirements and uncertainties around these could subject The Group has an internal legal team and external legal advisors to advise the Unchanged
the Group to business constraints, increased regulatory and compliance costs Group on current and
or otherwise harm our business.
anticipated legal requirements. Our legal advisors monitor and advise on
regulatory matters in locations in which we provide services with a particular
focus on those areas where we have local operations.
Our business is global and highly regulated. We are exposed to issues
regarding competition, licensing of local accommodation and experiences,
language usage, web-based trading, consumer compliance, tax, intellectual
property, trademarks, data protection and information security and commercial Suitably experienced resources have been engaged to ensure consumer compliance
disputes in multiple jurisdictions. requirements, compliance with the Listing Rules, the UK Financial Reporting
Council Corporate Governance Code and the Market Abuse Regulations.
The recommendations of the Task Force on Climate-Related Financial Disclosures
(TCFD) place an onus on the Group to disclose its compliance. The Group needs We have a clear TCFD governance structure in place, and we utilise third
to stay aware of all future regulation and policy changes within parties to monitor the landscape for any further climate and sustainability
sustainability. related changes which may impact the Group.
Payment Services Directive Two (PSD2) is an EU Directive that applies to The Group have been working with the Central Bank of Ireland to ensure the
payment services in the EU and regulates the authentication process for Group is compliant with the PSD2 EU Directive.
accepting credit cards, which the Group need to comply with. The Group is also
subject to payment card association rules and obligations under our contracts
with the card schemes and our payment card processors, including the Payment
Card Industry Data Security Standard (PCI DSS). We have appointed external insurance brokers to help us ensure we have the
appropriate insurance in place on the best possible terms. In April 2022 we
carried out an audit in conjunction with an independent insurance broker to
ensure that our insurance policies and limits reflect the risk environment and
The EU Package Travel Directive (the PTD) sets out broad requirements such as reflect industry standard.
local registration, certain mandatory financial guarantees, disclosure
requirements and other rules regulating the provision of travel packages and
linked travel arrangements.
We have expanded our ability to offer customers their preferred method of
payment in the most efficient manner on all our platforms.
Changes to the rules regarding the use of "cookies" on our website and mobile
applications have the potential to impact on our ability to serve our
customers. Cookies are valuable tools for the Group that we use to enhance our The provisions of the Digital Services Act have been subject to a detailed
customers' experiences and increase conversion. The GDPR and ePrivacy review and the implications in relation to social functionality and customer
Directive require "opt-in" consent before certain cookies can be placed on a review have been fully assessed and necessary processes are being updated in
user's computer or mobile device. advance of statutory application.
The e-Commerce Directive currently means that the Group cannot be held liable The wider legal framework is also kept under review pertaining to online
for content merely published on its platform, however the Digital Services Act safety and media regulation requirements.
seeks to place greater obligations on companies in relation to content
moderation as well as transparency reporting with the imposition of fines for
non-compliance.
As the Group's social strategy evolves, the scope of content which may require
moderation increases drastically. The development of social features also
places greater focus on our GDPR compliance in relation to transparency,
legitimacy of processing and data security and data retention.
The Group is also subject to new sign-up regulations including the DAC 7 EU
Tax directive. Any addition of new regulatory material that needs to be
collated upon sign up, will slow down the operations of GMT and could impact
the number of properties added to the site each year. If there is a
reclassification of what is a 'hostel' in any locality, this could impact how
we choose to display property categorisations on our site. Also, even if a
licence is collated upon sign up, the laws within each city can change,
resulting in a closure of properties and removal of beds from Hostelworld.
13 Business continuity Failure in our IT systems or those on which we rely such as third party hosted As an e-commerce organisation, the Group's BCP focuses on the continued Unchanged
services could disrupt availability of our booking engines and payments operation of consumer facing products and related services to ensure our
platforms, or availability of administrative services at our office locations. e-commerce trading systems can continue to process
bookings. The Group has worked with external advisors to produce robust
documented business continuity and disaster recovery capabilities.
Failure of business continuity planning (BCP) could result in significant
disruption to service.
The ongoing modernisation programme of both Corporate IT and the website to
cloud based services increases resilience to business interruption.
We updated our standard supplier terms to provide more robust and
comprehensive contractual provisions regarding force majeure (covering
epidemics/pandemics) and BCP (requiring suppliers to implement the provisions
of our BCP at any time).
The Group's BCP and disaster recovery plan was successfully implemented to
support the business in its response to COVID-19. Both this plan and the
supporting backup and failover facilities are regularly reviewed to ensure
their continued validity.
14 Brand and reputation A central pillar of Hostelworld's strategy is the continued evolution of the The paid marketing teams have continued to invest in promoting our app, Increased
app's social features which has functionality to fulfil the growing solo specifically the new social
traveller market's need to meet other travellers.
features and encouraging targeted audiences to download the app. The brand
marketing teams have
Given strict cost discipline in place, there has been reduced spend on brand worked to keep all owned channels functioning and active, ensuring that
marketing over the last two years. This has undoubtedly impacted both brand wherever possible we retain audiences. There has been a small investment in
consideration within the existing audience and brand recognition for emerging social media content creators who produce peer-to- peer video content. We are
audiences. The inability to quickly process customer refunds from the initial seeing a return on investment with increased engagement and a growing follower
COVID-19 cancellations is also likely to have eroded existing customers' account across both TikTok and Instagram.
trust. Organic channels have declined in terms of reach and engagement since
early 2020. The owned social media channels lost a huge audience and are
seeing a slow rate of growth in terms of fans/followers.
An ongoing CRM strategy alerts the existing customer base to the social
features at touchpoints throughout the customer journey.
A successful cyberattack resulting in significant downtime or loss of data
could cause reputational damage. If a cyberattack was realised there is a risk
that the fallout both internally and externally could damage the reputation of As an organisation we have communicated to customers via CRM and social media
the company causing customers to move to a competitor platform. our stance on emotive issues such as the war in Ukraine, providing ways in
which our customers can support hostels in impacted areas.
Poor customer experiences can also impact brand damage. There are cases where
a customer has a poor experience at the hostel, either through employee We have external PR advisors supporting us to manage any corporate PR
interactions or booking issues. It can be difficult for the customer to incidents. The crisis communications plan is being updated to reflect the use
separate the experience in the hostel from the platform they booked with. With of external advisors.
the expansion of our offerings, the scope for reputational impact from
customer experiences increases, coupled with the ongoing trend of seeking
redress in a public rather than a private forum.
Hostelworld invest heavily in security controls to protect the platform and
the network from malicious cyber activity. Regular reviews ensure that all
controls are current and effective. The crisis communications plan has been
If Hostelworld is identified as an organisation that makes false claims about updated to reflect the potential for a cyber security attack. We will use our
its Diversity and Inclusion or Sustainability activities, the reputational external PR agency to minimise impact.
damage could be devastating. Greenwashing claims are a risk to any
organisation that is reporting on its climate change and sustainability
objectives and goals.
We have put in place an ESG Steerco to oversee our sustainability agenda, and
where needed we utilise third parties to mitigate against the risk of bad
press including engaging with a reputable third-party South Pole on our
Hostelworld may also face scrutiny in their response, as well as their speed climate neutral journey and using our public relation partner to review any
of response, to developments in the greater geopolitical climate. Failure to sustainability material on our site, in press releases or in our annual
respond in line with mainstream public opinion or a delayed response impacts report.
companies brand and perceived integrity.
Our customer service team strive to ensure that customers have a positive
experience at all stages of interacting with us. The Group has a crisis
management policy in place which includes appropriate escalation which is
regularly reviewed for relevance and requires input from senior management.
15 Taxation The Group can be subject to digital services tax (DST). Some countries have Our tax risk is managed by the employment of suitably qualified personnel and Unchanged
taken steps to introduce DST to address the issue of multinational businesses close engagement with big four tax advisors. In collaboration with our tax
carrying on business in their jurisdiction without a physical presence and are advisors, a large professional services firm, we
therefore generally not subject to income tax in those jurisdictions.
assess possible tax impacts in the jurisdictions in which we operate to ensure
our tax obligations are aligned to the operational nature of our business. We
receive briefings to Board by our tax advisors, where required, on tax risks
The Group can also be subject to new vat rules being implemented and new and any changes in tax legislation which impacts on current tax structure of
reporting requirements. Hostelworld currently operates a B2B (Hostelworld to the Group.
Hostel) VAT model and are VAT registered in Ireland. Non-EU countries are
introducing local rules in relation to electronically supplied services (ESS)
whereby if a business does not have a VAT/GST number a B2C (Hostelworld to
Traveller) relationship is assumed and VAT/GST should be charged on supply. A biannual review is performed with our tax advisors on DST and ESS, and their
The EU are introduced DAC 7 which increases the reporting requirement of impact on our Group as trade and turnover (on which the tax is levied)
digital platforms. continues to pick up.
There is an increase to the income and corporation tax risk profile of the We are reviewing our internal processes and information gathered from the
Group due to the increasing global workforce footprint of the Group, the properties on our website to ensure compliance with local ESS regimes and the
relocation of some executive leadership outside of Ireland, and the requirements of DAC 7 reporting.
introduction of a 30-day work from abroad policy. A tax authority may consider
a permanent establishment to exist in a country by virtue of some activity
being carried on there. A tax authority may deem an employer to have a payroll
withholding tax and social security obligation if an individual finds We closely monitor our global footprint and put the appropriate tax structures
themselves personally tax resident in a country. in place when applicable. We also monitor business travel and have in place a
strict work from abroad policy.
The Hostelworld Group structure is driven by our Intellectual Property (IP).
Ireland acts as the Group entrepreneur and directs the activities of the We approve where the key functions are located within the Group and align
overseas service providers. Key functions, assets or risks undertaken/managed transfer pricing policies to reflect this.
outside Ireland may cause tax leakage.
If those tax authorities take a different view than the Group as to the basis
on which the Group is subject to tax, it could result in the Group having to
account for tax that it currently does not collect or pay, which could have a
material adverse effect on the Group's financial condition and results of
operation if it could not reclaim taxes already accounted for in the
jurisdictions the Group considers relevant.
Changes to tax legislation or the interpretation of tax legislation, changes
to tax laws based on recommendations made by the OECD in relation to its
Action Plan on Base Erosion and Profits Shifting 2.0 (BEPS) or made by
national governments can result in additional material tax positions being
suffered by the Group.
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