The €200m buy-out of
hostelworld.com owner Web Relations International (WRI) will allow the company to take advantage of the emerging South American market, its CEO has said.
Feargal Mooney says that the massive buy-out by private-equity investment firm Hellman & Friedman will facilitate the company's further expansion into the developing world with the untapped market in South America the main target.
"Hellman have a phenomenal track record when it comes to growing companies globally. We have a fairly ambitious growth plan and they showed huge enthusiasm for that growth. We will be focusing a lot on the developing regions – we opened an office in Shanghai a couple of years ago – and over the next 12 months we will be looking at South America. It is becoming increasingly popular as a destination and we will be working to build that market and build the hostelling business there," he said.
Launched 10 years ago, hostelworld.com is now the biggest hostel-accommodation website in the world with 93 employees and offices in Dublin, Shanghai and Sydney. The site is used by more than 23,000 accommodation providers in 180 countries and last year it generated net revenues of €38m and a profit of €16.1m.
WRI also runs budget-accommodation websites hostels.com and boo.com.
Hellman & Friedman has a strong track record when it comes to online businesses. Last year it sold internet advertising company Double Click to Google for $3.1bn having acquired it for $1.1bn in 2005.
While Mooney would not be drawn on the value of the deal, he said that WRI had achieved a fair price and shareholders would be happy. Sources placed it somewhere north of €200m. The more than 25 external shareholders are believed to include U2 manager Paul McGuinness and former Aer Lingus CFO Brian Dunne. Management and staff will share in the windfall.
WRI's business has been relatively immune to the recession, with budget travel on the rise as people tighten their belts. However, revenues from Europe have been affected by reduced prices at hostels across the continent.
The company recently launched a new website,
www.bedandbreakfastworld.com, aimed at older budget travellers uncomfortable with hostel lodgings.
"We have 6,600 bed-and-breakfast properties on the site. It should help us to retain our customer base a bit longer," said Mooney.
In addition to making inroads into South America, the company also plans to invest in the upgrading of its non-English-language websites to bring them up to the same standard.
Hostelworld.com is currently available in 23 languages but the websites are basic by comparison with the English site. However, the company has no plans to expand beyond the budget, independent and youth-traveller market.