In The Big Chair - Feargal Mooney of Hostelworld

Feargal Mooney, CEO

Hostelworld has grown to become probably the biggest name in the world of hostels - some might say in a fairly low-key yet very focused way.

Guiding the company through acquisitions, an increase in competition and changes to the marketplace is an exec who has spent 15 years with the business.

Hostelworld has simmered away in the background for many years, growing and consolidating. Has it been as easy at it might have looked to those on the outside?

It's encouraging that it looks from the outside that it's been easy! No matter what business you're in, it's hard - and because it's hard, that's what makes it interesting.

Over the years we've obviously seen significant changes in competition, significant changes in technology, and with our customer audience.

We have a very young customer audience, which means we have to continue to acquire a lot of new ones and continue to stay relevant to them.

What a 20-year-old wants today is not necessarily what they want a year or two's time. All of that provides challenges.

Also for us as well, maybe differently to some other businesses, is that we've always been very focused on profitable growth - there are lots of businesses out there in the online travel space that have grown quite strongly but not necessarily profitably.

What has perhaps been the biggest challenge for the company since it was founded?

Apart from dealing with the competition, the technology changes and the evolving demographic, one of the challenges we have a business is with a lack of awareness of the quality of the hostel product and some perception issues (and misperception issues).

Quite often when people think about hostels they think of hostels 30 years ago - cheap, fairly basic and something you would choose as a last resort. But it has changed considerably and there's been a lot of investment, so increasingly it is a high quality product - design, a focus on food and beverage, facilities and so on.

But they retain something very unique, which is a vibrant social experience that lends itself to meeting and interacting with other international travelers.

It is not just another hotel - it's something different. This is something we have tried to addresds in our brand advertising and PR, and some of the hostel operators have recognised that too and have put a focus on raising awareness.

How do you now define your own marketplace (you still have "hostel" in your brand name), given the wider changes to the accommodation sector?

We are very focused on hostels and we see ourselves as being the best in the world for hostels. We do carry some budget hotel and private accommodation on the site but it's really only as back-fill product.

With that shift to mobile it hasn't necessarily been a case of just shifting customers from desktop to mobile. What we've seen is a complete change in customer behaviour.

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I see that as a unique advantage because we can be better at that than anyone else. That's important from the supplier-operator side as well as the customer side.

From the supplier side the technology is set up to sell beds rather than rooms, and other things that unique to the hostel space. And we see ourselves also as being out there representing the hostel industry.

We can also engage with our customers in a way that some of the generalists can't do, such as in the advertising where we had 50 Cent. We are very focused on that rather than just trying to use hostels as a lead-generator to sell a high priced hotel.

Do you sense that your property partners taken much of a hit as a result of the rise in private accommodation and the so-called sharing economy.

Not necessarily. Clearly there are some changes in the market but my sense is that the hotel space has taken the hit.

We look at private accommodation as a very different product. If you look at our customer base, over half are booking solo. If you're traveling solo, the price of renting an apartment or house is just not going to be valuable option for you, nor a very good, social experience.

Maybe differently to some other businesses, is that we've always been very focused on profitable growth - there are lots of businesses out there in the online travel space that have grown quite strongly but not necessarily profitably.

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So, from that perspective, we don't see it competing directly. Now, we're not naive either - when we talk to our customers, they do use private accommodation but for different types of trips.

Going across Asia for six weeks on their own, then Hostelworld is what they're looking for. Six months later, they might be going away with a football team or a stage party, so in that case a private might make more sense because they can split the cost.

We do see that the market has changed. There's no such thing as a hotel customer, a hostel customer, or an Airbnb customer - people are now just looking for the best type of accommodation that makes sense for their trip.

The awareness of alternative accommodation is a benefit to hostels, too, as people don't just think about a hotel when they're traveling.

Given what you've just said, presumably you would say the mega-online travel agencies are your biggest competitors?

We've made no secret of it, but our biggest competitor is Booking.com.

If you talk to hostel operators, there are two big distribution channels - Hostelworld and Booking.com. That's not to say that Booking.com are focused on hostels or it is a big piece of business, but the scale of the operations means they are clearly our biggest competitor.

We wouldn't look at Airbnb or HomeAway as being direct competitors to us.

The original Airbnb model was so simple, and arguably the clientele of Hostelworld are in its sweet spot - do you sometimes think "damn, why didn't we think of that!"?

Not really. Originally it was spare room in a house or a couch - but Airbnb has moved a long way from that, and part of the reason is because the economics didn't really work particularly well for them.

They've moved into renting houses or apartments because that's where there's a price point that might be better. Yet even with that, they might be a big business, but a business with billions of dollars of investment that has taken a long time to reach profitable growth.

The acquisition of Hostelbookers in 2013 was one of a few landmarks for the business. How and why did that come about?

We began to see the introduction of alternative accommodation and more competition from the generalists, so within that environment we thought Hostelworld and Hostelbookers had always looked at one other as their biggest competitors, but in reality there are much bigger players in the online travel space.

So the pair could continue to compete with each other or we can combine into one, larger business then that allows us to be a larger player, representing the sector and competing more effectively.

Also, in terms of the investment now required in online travel in marketing, rather than us bidding against each other and driving up the cost, if we join forces and put the investment behind one strong brand, we get much more bang for our buck.

And do you think the concerns that some had regarding two market leaders coming together have now largely been forgotten?

Yes, I think so. Change is always a bit difficult and people get concerned about what the impact might be.

Ultimately, what our hostel partners have seen since then is that we have represented their interests, we have promoted hostels (and not just Hostelworld), we have invested in working with regulators and hosting conferences. We do a lot for the sector.

Those are the things that the big, generalist OTAs do not do. They're not particularly interested in hostels for their own sake, so we think we are an important part of the overall hostel sector.

What challenges have you faced (and opportunities have arisen) following the emergence of mobile as a search and booking mechanism, or have you been able to ride the wave of it?

We're at a point now where over half of our bookings are coming from mobile, and that is a result of a decision we made in 2013 to become mobile-first.

We've made no secret of it, but our biggest competitor is Booking.com.

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With that shift to mobile it hasn't necessarily been a case of just shifting customers from desktop to mobile. What we've seen is a complete change in customer behaviour.

We've seen a shift in our customer pattern. Previously they would've planned and booked their trip well in advance but you don't see that anymore - what you see now is that they book on a mobile as they're traveling.

This means that we now have a very short lead time (half of all bookings are for within a week of arrival; a quarter are within a day of arrival), and you also have a lower number of lower number of bed-nights per booking, as instead of booking for four nights in a city, they'll book for one or two nights.

So it's not necessarily the mobile technology product but we've had to deal with changes in how we engage with customers, marketing, and other things that come as part of the booking.

What this has also done is give us the opportunity to ensure that we are engaging with the customer throughout the trip.

These new elements are not necessarily to do with a booking but providing content and functionality that would be useful to the customer, such as MyTrips, a Hostel Notice Board and a Hostel Chat too for engaging with other travelers, and a translation tool with Google.

An interesting development in Asia in recent years has been the emergence of OYO and other branded budget accommodation. Do you think something on that scale could extend to other regions, or is it a particularly local phenomenon?

I would say it's early days at this stage. One of things that has struck me is that here we tend to think of five-star hotels, or we think of mid-range hotels, or hostels, or private accommodation, and it's very clear that we know what it is.

In Asia, the lines are not always as clear cut and the user base is massively fragmented user base.

What about you - after 15 years (nine at the top), what excites you and keeps you awake at night about the company?

The business keeps changing - that's what excites me. That's what keeps it interesting.

Fifteen years ago we had three tech people, and that was a different world. It's very exciting what happens now.

What keeps me awake - needing to make sure, particularly with our customers, we continue to stay ahead of where our audience is.

This is about the right content and features, to the right person, through the right channel, with the right prices and at the right time.

People always say it's the staff, the technology or the customers - but, after those, what is the most critical component to Hostelworld?

I think it has to be those things.

The most important things are: how can we make sure we stay ahead with our product offering to the customer? How can we raise awareness and change some of the misperceptions that are out there?