Travellers opt for urban luxury as posh hostel group Safestay doubles revenues

Francesca Washtell
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Safestay operates two hostels in London, one in York and one in Edinburgh (Source: Safestay)

Luxury hostel group Safestay's share price suffered today after it said headwinds in the London market will affect full-year trading, despite revenues increasing two-fold in the first half of the year.

The figures

Revenues at Safestay, which operates premium hostels in Elephant and Castle, Holland Park, York and Edinburgh, rose to £3.29m in the six months to 30 June, up from £1.4m in the first half of 2015.

Earnings before interest, tax, depreciation and amortisation (Ebitda) were up from £0.26m in the same period of last year to £0.78m, however its loss before tax widened to £0.6m from £0.2m.

The average price of its hostel beds remained stable at £18 per night and are expected to stay at the same level until the end of the year.

Read more: Safestay boss on why hostels have caught investors' attention

Fortunes diverged in the London market, as the group's "pleasing" like-for-like turnover at its Elephant and Castle hostel was offset by short-term headwinds affecting its Holland Park site.

Safestay's share price was down 5.77 per cent in late-afternoon trading yesterday to 49p, after the company said a more difficult market in London would take its full-year Ebitda to the lower end of its expectations.

Why it's interesting

In addition to its four existing sites, Safestay is eyeing expansion among "the principal western gateway cities of Europe", though it did not say when it is looking to make a move.

Read more: Hilton worldwide unveils plans for £76m hotel in the City

The business, which was founded by property veteran Larry Lipman five years ago with the aim of sprucing up the hostel market, is underpinned by a £35m property portfolio and has said guest satisfaction scores had been "excellent" in the first half of the year.

What Safestay said

Chairman Larry Lipman said:

The European tourism market has been facing some headwinds through 2016 driven primarily by acts of terrorism, softening economies and political instability which has notably had a well-reported impact on London's hospitality sector performance.

The group's exposure to this market, with two hostels, compounded by Holland Park being a new entrant, has created a drag on the 2016 performance. It is encouraging to note Elephant and Castle is recording like-for-like revenue growth of 4.5 per cent against this challenging backdrop and I remain confident Holland Park will reach our expected trading performance within the original target three-year maturation period.

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