Hostelworld (LSE:HSW) was battered by the pandemic and had fallen into penny share territory by late 2020. Since a nadir of 47p, though, the AIM-listed stock has more than doubled to reach 110p today.
Canaccord Genuity thinks it can head even higher, though. Earlier this week, the broker gave the stock a 205p price target.
While a single analyst’s view could be shrugged off (they’re sometimes very wide of the mark), it’s worth noting that other analysts also think the stock is undervalued. Their average target is 63% higher at 181p.
So, might there be a potentially lucrative opportunity to consider here? Let’s dive in.
A new revenue stream
Hostelworld is an online travel agent with a £137m market cap that connects travellers with 18,000+ budget hostel and accommodation partners across more than 180 countries.
However, to break beyond this niche category, it’s aiming to become “the world’s leading social travel platform“. What does that mean?
Well, imagine you’re travelling solo to Rio, but want to meet up with people for drinks or fun activities. Hostelworld provides the solution, offering chat rooms with other bookers and AI-powered event recommendations.
I saw this in action recently in Warsaw. A diverse group of travellers I spoke to had met up in the Old Town for drinks and food via the app. Importantly, they weren’t all hostel-dwellers, as some were staying in hotels and Airbnb apartments.
They had joined this meetup through buying temporary Social Passes that granted access to the app’s social network. So this opens up a whole new revenue stream beyond just hostel bookings.
So what?
The social travel platform is catching on. Last year, community members reached 3.4m, with messaging among them growing 81% year on year.
Social Passes were only launched in November, so these figures should grow significantly in 2026.
From a business perspective, there are a number of benefits I see here:
- The potential monetisation of millions of solo travellers staying in alternative accommodation
- Social Pass is extremely profitable revenue (a near-zero marginal cost)
- As more travellers join, this creates a network effect that improves the firm’s competitive advantage
- Millions of travellers messaging and planning meetups produces a goldmine of data (better recommendations, targeted ads, etc)
There are two other key benefits I think are worth dwelling on. First, social members book approximately twice as frequently on Hostelworld as non-members. So it’s making the platform more sticky.
Also, this should lower marketing costs (particularly on Google) as more travellers start coming directly to the app. In the second half of 2025, direct marketing costs fell to 45% of revenue, down from 48% the year before.
Every booking, every message and every connection adds to a proprietary data set…and as the network grows it generates richer data, which drives better matching, which attracts more members.
CEO Gary Morrison
How cheap is Hostelworld?
Looking ahead, the biggest risk to bookings is the inflationary impact of the Middle East conflict. Also, rising unemployment among young people isn’t ideal (most hostel bookers are young).
However, these risks looked more than baked in to me. Based on forecasts for 2027, the forward-looking earnings multiple is just 7.2.
Adding in a well-covered 3.3% forward dividend yield, the stock appears to offer tremendous value. I think Hostelworld’s worth considering at 110p.
Should you invest £5,000 in Hostelworld Group Plc right now?
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Ben McPoland has no position in any of the companies mentioned.
