hostelworld
378 days ago
 

Massive consolidation: HostelWorld buys HostelBookers

In a deal likely to send a shiver down the spine of budget accommodation websites across the globe, Web Reservations International has acquired HostelBookers.

Terms of the deal have not been disclosed.

The acquisition is an all-paper deal and is expected to need regulatory approval before completion, WRI, owner of HostelWorld, says.

HostelWorld and HostelBookers are the two major players in the hostel and budget accommodation sector, with Ireland-based HostelWorld the older of the pair having launched online in 1999.

Its once arch rival was born in 2004 and now claims to have around 20,000 properties on its portfolio.

The deal is being touted by WRI CEO Feargal Mooney as a deliberate attempt to compete head-to-head with what he calls the “big beasts” in online accommodation: Expedia and Booking.com.

He adds:

“The capacity to inject more resources into online marketing and technology is absolutely key to this sector, and our increase in scale will enable us to ramp that activity up in the face of some very large and dominant competitors.”

“We want to provide a service that both competes head to-head with the large online travel agents, and retains the personal service and sector knowledge that comes from being a smaller, budget-focused player – meeting the needs of hostels, B&Bs and smaller hotels, and providing enhanced service to our customers and partners.”

HostelWorld marked its tenth anniversary in 2009 by selling to private equity giant Hellman and Friedman, current investor in the likes of Nielsen and a previous backer of DoubleClick.

WRI also owns the lower-profile Hostels.com brand. HostelWorld and HostelBookers employ 140 and 120 people respectively.

HostelWorld has made a big play with its distribution partner strategy in recent years, having secured deals with the likes of Lonely Planet, TripAdvisor, Trivago and around 2,800 others.

 
 
Kevin May

About the Writer :: Kevin May

Kevin May is editor and a co-founder of Tnooz. He was previously editor of UK-based magazine Travolution for nearly four years and web editor of Media Week UK from 2003 to 2005.

He has also worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology and a postgraduate diploma in magazine journalism.

 

Comments

  1. kenya

    i am sure this was a good as in Africa where online booking is being accepted as the best way of confirmed booking the two are popular so we got to see good and great deals…

     
  2. Stuart McD

    Sorry meant to add, this story http://toomanyadapters.com/budget-accommodation-websites-which-is-best/ which compares various budgetish booking engines didn’t show HostelWorld in a great light either. Not a good sign.

     
  3. Stuart McD

    I don’t see how not letting hostels write their own descriptions is a problem for the end user. Sounds like a good thing actually.

     
    • Josh

      I’ve heard several hostels complaining about the way that their hostels have been portrayed on that site. I don’t think that hostels’ writing their own descriptions is bad for customers. Customer reviews can usually sort that part out.

      Also, Booking.com charges a significantly higher commission than WRI or Hostelbookers. By removing their main competition, WRI is more likely to raise the commission in the future. Those higher commissions might work for hotels, but they don’t work well for selling dorm beds.

       
  4. Mike

    We have had our small hotel in Bali for more than 2 years now. Initially we got all of our bookings from Hostelworld and Hostelbookers. We then thought it help if we also joined booking.com and later Agoda. HW and HB bookings have kind of dried up now and now Agoda is getting us the majority of our guests. They charge the most expensive commission, so it kind of forces us to raise our prices. Or raise our prices and then offer discounts to attract bookings. I think consumers think they are getting good deals, but a decent percentage of their money is going to OTAs. Sadly, direct bookings to our website are also way down. I think HW’s technology is way behind and they would need need to invest a lot of money to come even close to what Agoda is doing with their site and online marketing.

     
  5. Alan Dodd CheapHostels.com

    @ Josh

    Saw the report in the Indo today in Ireland.

    Could you tell me – who are the two small competitors to HW and HB?

    Cheers,

    Alan
    cheaphostels.com

     
    • Josh

      The four main hostel booking sites are: Hostelworld/Hostels.com, Hostelbookers, Hostelsclub, and GoMio. All of the other major hostel sites that I can think of off the top of my head are affiliates of Hostelworld or Hostelbookers.

      I don’t think that Hostelworld is a hostel-focused company any more. They just have the word “hostel” in the name. They are using the word “hostel” to upsell private rooms at non-hostels, which is something that hurts genuine hostels and hostel culture in general.

      WRI will also now control which hostels can successfully sell their beds online. Example problem: Hostelworld sometimes rejects new hostels from being listed on their sites. In the past, a hostel could just go sign up with Hostelbookers and possibly still be successful. If this deal goes, some of these new hostels will have no effective place to sell their beds online. It depends on the city, but here is one example:
      http://i.imgur.com/rrAKa6M.png

      With the exception of Booking.com (which has a higher commission and other problems for hostels, like not letting the hostels write their own property descriptions), WRI controls the entire “above the fold” area in Google Search. If a hostel can’t get listed on Hostelworld or Hostelbookers, they have a much lower chance of success.

      The deal is very bad for the hostel industry for several reasons. That is just one example.

       
  6. juan

    Horrible news!
    I think the reason they haven’t picked up is because their intranets are horrible. Their UI for hostel owners are quite difficult to use, and doesn’t give you much control, notheless for hostels is bad news when the only 2 somewhat important players on the industry fuse.
    I use booking.com as well, and i can safely and they got us by the balls, but is a love hate relationship as they drive a lot of reservations towards accommodations furthermore their Intranet is WAY better than HW’s and HB’s

     
  7. Abhinav Kumar

    Competition in this sector is resembling the pharmaceutical sector, The top 10 -20 OTA keep the game all the time in their favor. They eat up within them self, so may be we will have more entrant for the next top 20 in each year. But surely the competition is hampered ,it is up to the authority to deal with it.

     
  8. Lippy

    Wow. Just plain wow! Probably not great for competition, but I don’t think it’s any different to before this happend, given their model. Hats off and congrats to both companies though,

     
  9. Stuart McD

    One word? Difficult.

    When an OTA’s commission is 10% rather than 20-35%, it concentrates only on the budget end of the market (where an avg bed might be $15 a night), and it lacks the fancier fatter properties to pad up the bottom line – then marketing to, and adding value for, the end user is going to be a challenge.

    Maybe the smaller ones will get rolled up as well. But overall not a great moment to be a stand alone business focused on the least profitable part of the entire ecosystem – especially now that your two primary competitors just decided to get it on.

     
    • Kevin May

      Kevin May

      @stuart McD – cheers again.

      one of those smaller player emailed thus off-record yday:

      “this seems like a great move for the company, that hopefully will benefit the whole ecosystem”.

      In other words, as a team member here said, ducking for cover.

       
    • Tim Westwig

      There is a new competitor. Hostelsrock.com , the giant hostelworld that once was owned and operated by people that really cared about the industry, is now a giant corporation and that needs to be exposed. The demographic of people that go to hostels do not want to support this type of corporation.. I hope the word will get out so that smaller hostel booking engines like ours, that are still owned and operated by people from the hostel industry can serve the demographic better.

       
      • Kevin May

        Kevin May

        @tim – are you saying Hostelsrock is now a giant corporation that needs to be exposed, or Hostelworld?

        Either way, what needs to be exposed?

         
  10. Stuart McD

    Not all that surprising a move – at least in Southeast Asia they have extremely similar inventories – though neither is at all comprehensive.

    What has made a big change out here has been traditionally mid- to upper-range OTA Agoda’s aggressive play into the budget end of the market over the last coupla years – right down to $5 dorm beds – in a way that could only have been hurting both HW and HB. Given HB & HW charge hotels a significantly lower commission, they have dropped the ball kinda badly. Perhaps this consolidation will help to turn it around.

     
    • Kevin May

      Kevin May

      @stuart McD – thx for the comment.

      I guess one question in all this is what does it mean for HB/HW’s existing (and smaller) competitors?

       
      • Josh

        There are essentially only two (much) smaller competitors and neither has been able to gain a major foothold in most cities. Beyond those two, the rest are just affiliates of WRI and Hostelbookers, so the deal will leave just one major hostel booking company in the entire industry. IMHO, the deal is very bad news for hostels.

         
        • minebea

          It appears that HW is raising the cost of doing business for hostels by introducing “service fee” equal 10%. Previously they collected 10% deposit and kept the deposit. Now, they are introducing service fee of 10% in addition to deposit. Thus, the total cost of doing business through HW is being doubled for hostel operators.

           
          • Ciarán

            Completely bogus claim with no foundation. Can categorically state this is not true.

             
          • Josh

            The commission didn’t double, but the new Hostelworld contract separates the commission into two separate terms in what seems to be part of the tactic to increase the commissions on hostels. This is one reason why hostels around the world are actively opposing Hostelworld at the moment.

            The confusion probably comes from the two separate terms, plus that Hostelbookers (now owned by WRI) previously tried to increase commissions on new hostels to 20%. Hostels have been concerned about that since the beginning and now that WRI controls all the major hostel-focused booking sites, it’s happening.

            One problem is that H&F/WRI don’t understand hostels or the hostel industry. The hostel industry is not like the hotel industry and shouldn’t be.

             
 
 

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