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Earnings Call Analysis
Summary
Q2-2024
In the first half of 2024, Hostelworld achieved a 9% increase in net bookings despite a 10% drop in average booking value (ABV) due to a shift towards lower-cost destinations, particularly in Asia. This shift resulted in only a 1% revenue growth. However, the company's social strategy significantly improved efficiency, reducing marketing expenses as a percent of net revenue from 51% to 45%, leading to a 23% increase in net margin. Operating expenses were tightly controlled, falling by 2%, which contributed to an 88% growth in EBITDA to ÂŁ9.6 million. Hostelworld expects to maintain a circa 20% EBITDA margin for the full year.
So good morning, everyone. My name is Gary Morrison. I'm delighted to host our 2024 Interim Results this morning. I'm joined by Caroline Sherry, our CFO. And just to note, we will be taking questions at the end of the presentation, but obviously, please feel free to submit those during the presentation, and we will collect to answer those at the end.
So if we turn to the next slide, please. These are usual disclaimers. I will take these as read. Moving on to highlights and indeed the following page. So I'm going to start today by discussing our financial results in the context of the customer trends that we've seen year-over-year our social strategy performance, what we've done on OpEx? And then finally, what we have done with our operating cash flow this year.
So I'm going to anchor you in the top left-hand corner of GBP 3.7 million net bookings, which is 9% greater than first half '23. And the first customer trend to highlight is a slight mix shift towards solo travelers. So net bookings from our solo travelers were 13% year-over-year. The mix of total bookings is now 62%, up from 59% in first half '23. So consequently, total tax has risen by 6% versus the 9% net bookings. There are more solo travelers. And the net bed nights is a little less than the packs number given that solo travelers tend to make slightly shorter length of stay bookings and indeed, with a shorter lead time.
So now coming back to that top left-hand corner, GBP 3.7 million, plus 9%. The second customer trend we saw was really a strong preference for lower cost destinations year-over-year. Since we illustrate, net bookings from U.K. travelers were up 16%. indeed from all Europeans were up 13% from a nationality basis. And this is about 60% of our total bookings great growth from those core customer markets. But what we saw is these travelers very definitely had a preference for booking lower-cost destinations especially in Asia. So Asia as a destination actually grew by 39% year-over-year. And given the average bed price of EUR 12 in Asia versus, say, EUR 36 a night in Europe. The combination of the slight shift to solo's plus the strong preference from lower-cost destinations has contracted ABV by 10%. H1 '23 versus H1 '24.
So the combination of net bookings in that ABV contraction has obviously impacted net revenue growth, which was at 1% year-over-year. So against that revenue growth, however, I'm delighted to report that the social strategy is continuing to deliver with marketing [indiscernible] percent of net revenue for the period at 45% and that's down from 51% in H1 '23, and it's actually down from 48% in second half '23. So there's been a continued progression of a reduction as marketing as percent of net revenue. And indeed, at the 45%, it's at the lower end of the range that we gave in our Capital Markets Day of 45% to 55%.
So as you know, our social strategy is only available on app. And consequently, this really encourages our customers to use the app [indiscernible] platform. And what we saw clearly over the period, 20% growth in bookings on the app. So it's now 45% of our total mix. And indeed, 60% of our overall bookings are now coming through direct channels. So collectively, despite the 10% drop in ABV, giving us a revenue growth of 1%, our net margin actually grew by 23% half year-over-half year, delivering [ 22 ] [indiscernible] So phenomenal growth in net margin driven by that social strategy.
So now if I turn to OpEx. OpEx declined from 12.8% to 12.4%, minus 2% year-over-year. And despite the volume increases going through the platform, team did a fantastic job continuing to make the code more efficient. So our hosting costs actually decreased, which helped us reduce OpEx by that small amount. And hence, when we're taking that big growth in net margin over that slightly declining OpEx pace EBITDA increased from 5.1 to 9.6, which is an 88% increase year-over-year. So obviously, we're delighted to see that.
If you look at the business on a cash basis, that increase in net margin less the OpEx delivered 12.4 million in operating cash flow. That operating cash flow plus the cash on hand at the end of last year of 7.5 million. Collectively, that enabled us to fully pay down our residual AID debt of 10.3%, which is fully 2 years ahead of schedule. So obviously, very pleased to that with the saving of a tendon interest cost. And we also started to make payments on the Irish revenue warehouse debt. We made a down payment of 1.9, we still have 7.5 million outstanding and agreed repayment plan with the Irish revenue in place. So taking the 5 million cash less the 7.5 million outstanding gives us a net debt position of 2.6 million.
So if we turn to the next page, please. So just to sort of summarize that in terms of key highlights and what my thoughts are as we go into the second half of the year and indeed into next year. I'm really delighted to see that continued growth in net bookings, 9%. As I've said, it's far greater growth in lower-cost destinations. Indeed, Asia was up 39%. It's a record half year for Asia and Central America. Asia actually as a destination is now slightly larger than Europe. Social strategy just continues to deliver marketing as a percent of net revenue improved to 45% and that gave that really stellar net margin growth of 23% year-over-year. We continue to maintain an unbelievably tight rein on costs. So operating costs are actually down 2% despite that volume growth. But of course, that underpinned the adjusted EBITDA growth of 88% to 9.6. The business continues to have a highly cash-generative business model. We generated 12.4 million in operating cash flow. The AIB term loan facilities, I just mentioned, was fully repaid 2 years ahead of schedule. So I think we've got a far, far stronger balance sheet.
In terms of looking what we've achieved and how that powers us into the second half of the year, we will continue to invest in our social network. We're seeing growth in penetration in terms of the percentage of our bookings that are being made by social members and indeed, the usage of the network by those social members. The strategy in terms of implementation powers at booking growth, which is much faster than web at bookings growth up 20% year-over-year, web 2%, that delivers that wonderful marketing leverage that enables us to fuel future growth.
Third point, growing hostels supply. One of the things that we've called out ever since Capital Markets Day is we intended to slowly increase our market coverage. It's gone up by 3% half year over half year from 73% to 76%. So good performance there, and we will continue to do that. And I think collectively, based on what we've seen in the first half and what we believe will happen in the second half, we feel very comfortable reiterating the EBITDA guidance in line with market consensus.
So on that note, I will now pass you to Caroline, who will go through our results in a little bit more detail, and then I'll come back and give you some strategy updates. Caroline?
Many thanks, Gary. I'm very pleased to be here this morning to talk to Hostelworld's 2024 Interim Financial results. So moving to the next lot, please. Great. So this slide looks at net bookings before nationality. This is the nationality of our customer base and where our bookings originated. During the first 6 months of the year, net bookings grew 9% year-over-year. Europe, U.S., Canada and the U.K., these are our biggest regions from a source market perspective, and together make up over 80% of our source plan. We can see that demand was particularly strong from our U.K. and European customers.
Net bookings made by U.K. customers grew 16% year-over-year and European customers grew 13% year-over-year. That's a record level of demand amongst your European customers to account for 42% of our bookings. U.S. and Canada, both very important source markets of long-haul customers. Accounted for 21% of our bookings and saw a growth of 2%, building on what was a very strong performance last year. Interesting as well to see strong growth in Asia, which is traditionally one of our smaller source markets. Seeing such a significant growth rate of 15% year-over-year.
Oceania with the [ Olic ] region to contract, we saw less long-haul travel from the customers in this region with these customers opting for more short-haul bookings. And indeed, Oceania or source bookings to Asia was up 37% year-over-year.
If we could move to the next slide, please. So looking now at where those customers traffic. And we can see from looking at the slide, as Gary has mentioned earlier in the presentation, the dominant performance of lower cost destinations. We saw a record number of bookings to Asia. Asia accounting of 13% of H1 bookings with first Asia growing 40% [indiscernible] and North Asia growing 27%. Customers from Europe and U.K. were a significant driver of this Asian performance. With bookings from Europe to Asia, up 48% and booking from the U.K. to Asia, up 40%.
Central and South America, both the low-cost destinations. And together, our accounting were just under [ 20% ] of H1 bookings, both for an increase in demand year-over-year. Indeed, we saw a record number of bookings to Central America, a region that has seen sustained growth since the pandemic and is now 1.7x bigger than more 2019. Europe, however, still remains our largest source market from both a volume and a value perspective, accounting for just under 40% of bookings by destination. Performance here not as strong as last year with customers [indiscernible] to travel to lower cost markets. U.S. and Canada, an important source market for us. Customers here traveled to Asia, which was up 17%; and Oceania, which was up 14%. And whilst Oceania will be down year-over-year source market, we can see that as a destination, it grew by 12%, driven by bookings from customers in the U.K., Europe, America and Canada or double-digit growth year-over-year.
Now moving to the next slide. We can see how that booking performance played out in revenue. Generated revenue being gross revenue less cancellations, was down 2% year-over-year. We saw revenue growth across all low-cost destinations, particularly so in Asia and Oceania. And we feel the higher [indiscernible] destinations of Europe, U.S. and Canada contract the first 6 months. This shift in consumer demand for low-cost destinations resulted in average booking value contracting by 10% from EUR 15.15 in H1 2023 to EUR 13.60 in H1 2024. Of this 10% contraction, 6% was due to geographic mix. And as you can see from the chart, the average bed price inside Asia is 1/4 of that of Europe. As Gary made point of the [indiscernible], we sold this in the first 6 months, consumers opting for lower cost destinations where their money will go further.
The contraction in ADV was also driven by an increase in solo's and in shorter bookings, again, as Gary mentioned at the excess. The prices year-over-year were flat.
And moving to the next slide, please. Looking here now at how performance translated into net margin. So looking to the left, we saw that in H1 2023, we generated 17.9 million of net margin. Since H1 2023, we've seen a surge in demand to low-cost destinations in particular, and this performance delivered 2.4 million of margin. But another significant driver of margin growth was the efficiency of our marketing spend, driven by our app-centric social strategy. Marketing as a percentage of revenue, which is all paid marketing costs over revenue, less cancellations, reduced from 51% in H1 '23 to 45% in H1 '24. And as you may recall, we've guided marketing investment at less than 50% on a quarter basis. So we feel that we are well on track to deliver events that target.
Our total strategy has been very effective in generating marketing spend efficiency by driving new and existing customers to our Hostelworld [indiscernible]. This results in a greater mix of low-cost bookings and margin uplift, which Gary will talk to in more detail later.
Other of 1.8 million is principally deferred revenue, a provision movement, which tends for fleet cancellation bookings. 3 million of a drag from average booking value as discussed in the previous slide, ABV contracted 10% year-over-year. And these components combined delivered a margin of 22.1 million, a 23% growth year-over-year.
Moving to the next slide, please. Now we're looking at our operating cost base. These are costs excluding brand marketing. And this slide looks at the evolution of our cost base over the past 3 years, H1 '22, H1 '23 and '24. H1 '24 operating costs were 12.5 million, down 2% versus H1 '23.
And starting from the bottom up, the orange block is wage in salaries, our head count in June was at [ 27% ] a similar level to June 2023. We have, however, managed the impact of wage inflation through the utilization of lower-cost temporary contractor resources. Contractor costs, the pay block is up marginally year-over-year. We have utilized these specialist resources to support the ongoing work on our social platform. Enhancing the hostel facing experience through improving sign-up and onboard processes and our linkups products.
The yellow block, which is in-house tech investment has reduced. We continue to harness the efficiency of our Cloud House platform and marginalize tech stack.
And finally, the green block, which is made of all other operating costs. We've managed to keep this cost base. flat year-over-year, matching our cost base tightly, and it has that halved versus H1 2022.
Moving to the next slide, please. So taking it all together, starting from the left, we made a profit of 5.1 million in H1 '23, the [indiscernible] of 9% booking volume growth gave a 2.4 million uplift. Lower marketing percentage delivered another 3.1 million incremental margin. Deferred revenue benefits of 1.8 million, again, the timing of free cancellation balance sheet provision movements and a lower operating cost down 2% year-over-year, covered off in the previous slide, delivered 0.3 million of benefits. ABV was a headwind, contracting 10% year-over-year again, predominantly geo mix driven due to the surge in demand to lower cost escalations and an increase in silver [indiscernible].
And from an EBITDA perspective, we delivered a profit of 9.6 million, growing 88% versus H1 2023 And an EBITDA margin of 21% is up 11% versus H1 '23. And again, as Gary mentioned at the [indiscernible], we feel comfortable that we are on track versus our full year guidance of circa 20% EBITDA margin, on our market consensus of EBITDA [ 21.4 ] million.
Moving to the next slide, please. Now you look at balance sheet. And looking at our performance from a cash perspective. So we started the year, as Gary mentioned, with cash of GBP 7.5 million. We recognized GBP 46.4 million in booking revenue, offsetting this are our direct cost of 24.3 million and operating costs of 12.5. We capitalized 2.4 million of development labor costs and combined [ 33 ] million positive of working capital, that lead to 9.8 million in operating and investing cash flows. We prioritized our operating cash towards refinancing our balance sheet. We're paying in full the 10 million debt facility we agreed with AIB in May 2023 and repaying that facility for 2 years ahead schedule.
And as we discussed at prelims, the remaining 2 million balance on the RCF was repaid in February 2024. We have also commenced payment of the warehouse payroll taxes to Irish revenue. We owned [ 9.3 ] at the start of the year and paid an initial deposit of 1.5 million in May with monthly repayments of 0.2 million thereafter. This delivered a closing cash position of 5 million and adjusted free cash flow of 9.9 million on an EBITDA of 9.6 million, delivered a cash conversion of 103%.
Moving to the next slide, please. So this slide looks at our capital allocation. The business is asset light. And as we've saw in previous slides, it generates significant cash flow. In the first half of this year, we executed against a number of our key objectives for 2024. We fully repaid our desk with AIB, we commenced payment of the 9.4 million warehouse payroll taxes to barge revenue. Our net debt has reduced from GBP 12.3 million in December 2023 to 2.5 million at the end of June. For the remainder of the year, our objectives will continue to be to continue repaying the warehouse taxes [indiscernible] them to Irish revenue, 0% interest accruing on this facility. We will continue to grow our business, delivering advanced our growth commissions. More of which Gary will address later on in the presentation, and we will return the business to net cash in H2 of this year.
And moving to the next slide, please. The last topic in my section is out of ESG. Our biggest achievement in the first 6 months of this year has been the launch of our [ Stratas ] to sustainability framework, which we launched in February and spoke about prelims. This bespoke sustainability framework. The first of its kind signed specifically from the hostel category, which inherent to the global sustainable tourism [indiscernible] standards has seen a fantastic response since we launched. We have over 1,800 [indiscernible] displaying the sustainability [indiscernible] platform and another 250 hostels currently undergoing the sustainability assessment process.
In addition to highlighting the stability efforts of hostels, we continue to showcase the inclusive nature of the category using our social channels to share in many hostels for sustainability, [indiscernible] quality and inclusion [indiscernible]. Here in Hostelworld, we take [indiscernible] for our own sustainability practices. And the past 3 years, Hostelworld has been awarded the funding climate action label in partnership with [ Sepon ], recognizing the work we do on our own Scope 1 and Scope 2 carbon emissions. We ourselves work to build a strong culture embedded in DEI principles for which we have recently being nominated for our business and finance for [indiscernible].
And now I'll hand back to Gary to speak to our cash in more detail.
Thank you very much, Caroline. So in essence, we continue to make investments in our social platform. As you will have seen, ever since we launched the social platform, it's been a remarkable differentiator growing [indiscernible] you customers, do net bookings revenue and we continue to invest in it.
And typically, we like to look at it in 3 ways. There's the profiles on the left what we do on the chat messaging platform in the middle and the linkups platform, which is on the right, which is for hostels to use our platform to publish their events to all users in a city. So if I start with profiles, this is just a selection of some of the things that we've launched in the first half. You'll see it as I want to hang out with people. So we added the ability to use your instant messaging status, typically, this might say you're on, off your sleeping but we've leveraged that to create a different sort of state, which is I want to hang out with people.
So very simply, on your profile, you can indicate you would like to hang out with other people. And then at the bottom of it, you can see it says [ Ras ] Instagram. So we've now added the ability for a user when they complete the social side on process and create their profile that they can also pull in 10 photographs from their Instagram and Instagram, as you all know, is likely around personal block. And it's a wonderful way for our customers to be able to showcase a little bit more about their personalities, but without actually requiring them to add or upload new photographs, they can simply leverage the top 10 photographs that they love themselves.
Turning to the middle, what we've been doing on chat. As the network has grown, we are seeing many of these chat rooms having several thousand users a day. This actually presents a couple of opportunities and challenges. The first is with so many users, how do we help people find the content that they want to see or to find other people, will find things to you. And the second thing is, of course, once you have found a group that you want to do something with, how do you maintain a chat with just that group? And what you see on the slide is a new feature, which is so that you can create your own chat group on our platform. And this is the same kind of idea that you would see on watch out telegram so on and so forth. And you can add more and more over time, but it just allows you to have a singular chat group on our platform.
Turning to the right. As you'll see later on in the presentation, we are delighted with the uptake of this platform on the hostel side. More and more hostels are loading inventory in the platform, which means more and more of our customers can see things to do, which really represents additional opportunities to find people to hang out with. And as a consequence, our hostels are very vocal in giving us feedback about what they would like to see on the platform. And in particular, they wanted the ability to add many more photos of their own and enhanced descriptions, things that we have delivered for them.
So turning to the next page. You'll recall the core mission is to help travelers find people to hang out with. And indeed, in the back end, would you track responses to private messages, private message being a one-to-one message between two individuals. And also what I would call open messages, where an open message is a message that's sent to the chat room. And we're really delighted to see the response rate for both of those two go up over time. And what we're also seeing is that users are starting to post specific chats in other social networks that they have had on our platform as indications that they have found people hang out with.
And if you look at the one on the right, for example, Mitch has posted a little exert of his chat actually on his Instagram. And basically, he posted in quite recently posted on our network, [indiscernible], a couple of us are thinking are going to [indiscernible] at each tomorrow speaker, as in loudspeaker, few drinks [indiscernible] into the water, dropped me a message if you're interested, 3 people replied, but obviously, there was a lot more that went because counting there, there were 8 of them. So we take great comfort and indeed joy on delivering our mission, helping travelers find other people to hang out with and having great fun in the process.
So turning to the next slide. This is one that I've mentioned 2 or 3 times, but indeed, I want to call it out again, which is the social members also become super powerful brand advocates for us. I think more generally, what we've seen is that the more the social members are using the platform to create these experiences similar to the one I just outlined on the prior side, we're seeing post across all the major social networks, whether it's Twitter or TikTok or Instagram or in Apple or Google Pay stores or in reputation review aggregators like Trustpilot.
And I think, in summary, this is just a great word of mouth for us it reinforces the brand to new customer prospects. And that if you book with Hostelworld, your hustling trip, you will find people that you want to hang out with.
So turning to the next slide. So looking at a more social KPIs, there are many KPIs that we check. One is the number of active chat users. The second message is sent on the social network. And then third percentage of social members, you can see linkups on trip. I'm pleased to report consistent strong growth in active chat users and actually an increasing volume of posts per chat user. So each chat user is making slightly more posts. Now I'd just add, you could be forgiven for thinking that there is a bit of a slowdown when you look at H2 '23 going into H1 '24. And actually, that's because we exceeded the chat room capacity of our vendor who helps us build a particular feature and deliver it. Their scope of their product was such that they could only handle a few thousand users in chat room per day we're now comfortably exceeding that. So the vendor has now reworked their platform, so even more people can use it. So we do expect in H2 '24 for that number to increase considerably.
In terms of Linkup, as I just mentioned before, we're now quoting how many -- what percentage of our social members who can see linkups in trip not just at least one, but at least 3, so giving some sense of the variety. And we're seeing really great growth H1 '23 compared to H2 '22. It just continues to grow.
So moving to the next slide. So we often talk about the strategy continuing to attract and retain high-value customers. And we look at this on a very regular basis. So if I start from the left-hand side, as we've mentioned before, social members in terms of penetration now account for 80% of all of the bookings on our platform. But crucially, what we also see is that new social members make slightly over 2x the bookings compared to nonmembers over the first 91 days post acquisition, and then they're 3x more likely to met these bookings on the app. And these specific variations in booking behavior, both the frequency and the propensity to use the app have remained pretty much constant since launch in 2022. And indeed, as the penetration rate has increased. So it just goes to say that the social strategy is continuing to deliver that great growth in new customers, but also on a greater proportion of app bookings.
And you can see that really well from the next slide.
So looking on the left-hand side, the social strategy has not only given us that meaningful differentiator and those higher value customers, but the app-only implementation of that strategy because accelerated bookings growth on app, is up 20% year-over-year. It's now 45% of the total versus 2% on web. But when you look across all of our direct channels, free direct channels, it's now about 60%. And this has served looking on the right-hand side to reduce our marketing expenses as a percentage of net revenue over time. Started out at 60% in H1 2022, and it's continued to contract or decline H1 '24, it's now 45%, which is at the low end of our Capital Markets Day range.
I would just note that we will always go for top line growth where we see long-term profitable new acquisition, new customer acquisition opportunities. So it could go up a couple of percentage points. But if it does, then it's because we see opportunities to grow our top line a little bit faster. But obviously, that consistent reduction over time bodes extremely well and provides the proof points that the social strategy is delivering over an extended period of time.
So moving to the next slide and sort of translating what we've just seen in terms of revenue, recurring revenue and a cohort view of the world. So I'll perhaps start by just explaining the chart for those who haven't seen it before. If you look at 2017, that is our revenue in the first half of 2017 and the pink bar represents the revenue that we generated from new customers acquired in the first half. And the bars underneath it represent the revenue generated from customers that we acquired before first half in 2017. So turning to the pink bar. As to customers come back in 2018, 2019, you can see their contribution in the pink bar.
So now turning to 2023 and looking at 2024. So the first point to note is that revenue retention year-over-year is the combination of customer retention rate how many customers come back. Their booking frequency, how do they buy. And of course, ABV movements, what did they buy? So looking at actuals, which is 2024, with a minus 10% ABV year-over-year. You can see that even with that contraction, we can see growing revenue retention despite that year-over-year decline. And that really bears testament to the growth in customer retention and increased booking frequencies and our social strategy. But to demonstrate that more clearly, I've added another column on the far right-hand side to show exactly how much that customer retention and booking frequency alone is worth by using a flat ABV by comparison. So you can see there's the power of the social strategy.
So turning to the next slide. So finally, turning to [indiscernible] items. We expect to maintain high single-digit growth rate in net bookings. I think revenue growth is going to be lower as we signaled, driven by the ABV contraction which again is mostly driven by our customers' preference for lower cost to nation, destinations, especially in Asia. We also expect that our social strategy will continue to deliver favorable marketing as a percent of net revenue noting that this could be greater than the first half, '24 at 45%. If there are opportunities to invest in new customer growth profitably. But if we couple these trends with unbelievably tight control of OpEx, we feel very comfortable that the adjusted EBITDA performance of the business will be aligned with market consensus.
Turning to our final slide. In the meantime, we will be continuing to execute on our strategy. In particular, we will continue to invest in that uniquely differentiated social platform. We see, and I think we've demonstrated over the last 5 half years since we launched it, which was April 2022, it strengthens our growing competitive moat, and it drives continued share gains and very, very profitably. In parallel, we'll always continue to optimize our marketing mix. We will continue to work on platform conversion and developed lot acquisition channels.
If you could sort of think about this more as the OTA side of the equation. And the reason, of course, that we do this is it increases our marketing leverage period-over-period. And that gives us the oxygen to be able to fuel new customer acquisition growth in the future which then multiplied by the revenue retention rate and the cohort analysis, you can see that, that drives compounding revenue growth.
And finally, from a sort of a platform perspective, that OpEx gain or rather the OpEx reduction, small reduction that we quoted half year over half year, a good chunk of that is being driven by migration of our platform to that cloud native Gemini and AI-enabled architecture. This because it's far more efficient in terms of its memory usage, it's processing uses. It helps us reduce hosting costs. And indeed, it accelerates innovation because we can access many more of these cloud native services from our platform provider. And ultimately, it will continue to lead to higher operating leverage.
So I want to thank you all for joining us today. We're very, very excited about the business. We're super happy with our performance first half today. We're looking forward to seeing how the rest of summer develops coming into year-end. I think we have a great strategy that's just continuing to deliver. And on that note, I would be delighted to take any questions. Thank you very much, David?
Thank you, Gary. Good morning, everybody. I'm David Brady, Head of Commercial Finance here at Hostelworld. Thank you very much for the questions that you've submitted throughout the presentation, we'll take the opportunity about what as many of those to Gary and Caroline as we can on the time that we have. And if there are any questions that we don't get to in the time that we have, we'll do our very best to follow up with you over the coming days.
I think, Gary, you might turn to you on your first question. Very topical and a lot of questions coming in about our views on the recent news flow in the industry of slowing growth in the U.S. So our view of that and how it's impacted our first half results and then your thoughts on our outlook there.
And then also a lot of questions about demand into and demand from Europe, one of our key markets, especially you might comment on those 2 markets for us, please.
Okay. Thank you, David. I'll start with Europe, if I may. So what we have seen, first half last year is the bookings sort of being made by our U.K. customers are up 16% year-over-year. The bookings that are made by our European customers are up 13%. So in terms of European and U.K. travelers, the demand for travel [indiscernible] is extraordinarily robust. What we have seen though is that demand has very definitely been a preference for lower cost destinations.
Now Asia is up 39% year-over-year. And as we talked about in the presentation, if you look at the bed prices in Asia, on average, there are about EUR 12 a night. That compares with an average of EUR 36 a night. And I think when we look at our cohort of travelers, 18 to 35-year-olds on more specifically 18 to 25 year olds, 62% of those are solo travelers. In general, these travelers do not have mortgages. They do not have families to support. So for them, it's really -- I still want to travel, I have budget to travel, but how do I maximize it. And I think in that context, the performance clearly shows that the demand is very strongly there, but they're wanting to go to Asia because they can stretch that out for a much longer time.
In relation to the U.S., the U.S. destination, as Caroline pointed out, is only 2% of our bookings. It is EUR 46 a night. So it's definitely the highest price point. Having said that, North America, U.S. and Canada, bookings from those nationalities are about 20% and again, consistent with what we've seen in Europe, there's been a very definite shift whereas more of those bookings would have gone to Europe last year, last first half year. This year, they kind of bypass Europe and they've gone to Asia. So the net of it is very, very strong growth in lower cost destinations. Europe to Europe is very modest growth actually, U.K. to Europe has been slightly negative this year, where customers have started to go to low-cost destinations.
So I think the more important thing to think about though is given that there's been that contraction because of the destination mix shift, the important thing is to then look at net margin. So the social strategy, which we launched in April 2022, has just continued to deliver. Second half last year, marketing as a percent of net revenue, 48%. This year, it's now -- this half year, it's now 45%. So even with the contraction due to destination shift, net margin has gone up by 23%, which is a stellar performance and we're super happy with that.
Thank you, Gary. Next question then is there's quite a lot of interest around how we broke out our performance by geographic vertical. And you might explain to people how to think about our marketing costs and our strategy then by geography and particularly how that plays out on revenue and cost performance that people will see in the second half of the year.
Okay. So the third most important thing, we are a global platform. So our job is to serve travelers wherever they are or wherever they want to go. And I think what we see from an economic perspective is the first point to make is we have no fixed marketing costs that we need to amortize. All of our marketing costs from variable and what we see is that if customers are going to lower price destinations, those marketing costs flex with bed price. So they actually move with destination revenue. So as a consequence, if revenue growth, whatever it happens to be, this half year it's 1%, then what happens is our marketing will automatically flex our paid marketing will automatically flex with that change.
And then you have the social strategy, which overlays it, which brings marketing costs down, which is a global phenomenon.
In terms of the way to think about stimulating demand, really, that's all about making sure that we have the right competitive supply. And in that regard, you'll have seen from the statement that our market coverage, which is the hostels that we have in our platform sort of multiplied by where demand actually is has moved up from 73% to 76%. That coverage, we have mostly new hostels in our platform. Slightly more, I would say, supply that's been made available in Asia, but we've seen that market coverage increase everywhere.
So the next question might turn, if that's okay, to the area of that product pipeline and specifically the kind of developments and enhancements that you're finding to the social features, social platform or people will see there in the rest of the year, do any of those address monetization opportunities? Is there any big ramp-up necessary in CapEx to deliver that? And any early learnings that were incorporated from our experience [indiscernible].
So I'm going to take the second piece of that first, which is monetization. And what we have said and we'll continue to say is the best way of monetizing social is to continue to grow. The more that we grow volume, the more that we consistently grow share, that is the way to monetize it. We don't want to put too much friction into the product by trying to monetize social in some way too early. We've maintained that strategy throughout and we'll continue to do so. Mindful that at a certain point in time, we will think about other ways that we can [indiscernible], that would be the first one.
In terms of strengthening the social platform, it's always a work in progress. We are building something which doesn't exist in the travel industry. So we're always learning about how our travelers are using the platform. Essentially, we look at it in terms of 3 pieces, what we do on profiles, what we do in our chat sort of slack messaging platform and linkups. And I'll probably just talk about the first two.
So in terms of profiles, we have continued to increase the amount of information that we ask users to tell us about themselves. But we've also tried to think about, well, how can we make it easier. And one of the things that we've done in first half amongst many things is to simply allow users to integrate their Instagram [indiscernible] so that they can automatically pick 10 photographs, probably the 10 programs that they most like and to integrate those into our platform. So it provides a much richer profile. And indeed, in the second half, we're going to continue to work on that, what I would call the social onboarding process.
Now in relation to the third question, which was around AI, one of the things that I talked about is eventually, we'll get to a point where we can ask the Gemini, chat GPT, go and look at those 10 photographs and write me a bullet point summary of what that customer is interested in. Then we can present that to the user and say, "Thank you for loading your 10 photos, here is a little AI generated summary, would you like to edit it?" So it's all the while thinking about getting all relevant information and making that much easier.
In relation to the chat room, I think there's a couple of things. We are now operating literally thousands and thousands and thousands of bespoke chat rooms every single day. One for every property, one for every city. There are people joining those chat rooms every day as they make bookings with us and obviously, 3 days after check out, they would leave and probably join another chat room in the next destination.
But what we find is, in an environment where there are thousands and thousands of people in these chat rooms, some people want to have a smaller chat of people who have decided that they are going to go to a particular venue in the evening. And the other thing is around chat discovery, which is making it easier for people to find information on the platform. So in relation to the first thing, we've launched a group chat feature, very similar to what you would find on WhatsApp, Telegram, where you could organize a subgroup with an admin, that's already launched. We're seeing that being used. And then chat discovery, that's something that we'll be working on in the second half this year.
Thanks, Gary. For the next question, we'll turn to the supply side, if that's okay. A lot of questions and a lot of interest around the 3 percentage point improvement in our market coverage that you highlighted in the presentation. What would you and the team put that down to the kind of actions that helped drive that? And what more can we expect on the supply side? Is the scope for that to increase in the coming half year and years ahead?
I think there's probably three things. One is the hostel industry continue to see huge value from our customers. In general, our customers are the ones who really understand the hosteling experience, when they show up, they are the ones that are very social, they go into the bar, they consume food, beverage, they enters the experience, they write great reviews. They have slightly longer lengths of stay. As a consequence, we have and continue to give them the best customers.
I think the second one, which is more of a product thing is working to make it even easier to sign up to our platform. We're never going to drop the requirements in terms of inspecting licenses and so on. So we're sure that people have their requisite license to operate. But what we can do is to make the whole sign-up process a lot easier in terms of getting the photos, the descriptions and reducing that cycle time.
And I think the third thing, obviously, now you can pretty much travel anywhere, our supply-side team has ramped up the conferences that we hold in every single region, sending people out into the field to selling the Hostelworld message and the great customers that we can provide, webinars and so on and so forth. So it's really three things that are driving it. And those are the same three things that we will continue to go after second half of this year, into next year and the year beyond. It's a process in [indiscernible].
Thanks, Gary. The next question we turn to performance and social network, and there's been more growth in number of active users in proportion of bookings coming from social members again, what would you put that down to? And how would you have people think about the outlook for those metrics in the second half of the year and years ahead? Is there scope for that to increase further and how we might deliver?
So I think a couple of things. I suppose the headline metric is the proportion of bookings made by social members. So from a standing start of 0 in the first half of 2022, we're now up to 80%. Now is that going to continue to decline? It may, maybe it will go from 80% to 85%. There's always going to be a proportion of people, perhaps larger groups who use the platform because we have great inventory availability and rates. And consequently, they don't sign up to their social network. So is there a little bit more headroom? Potentially.
I think the key thing for investors, if I may, to get super excited about is even with the proportion of bookings made by social members getting up to 80% now, the economics of a social member versus a nonsocial member that we've been talking about every time we've updated on rolls has remained remarkably consistent. If you look at a new customer joining our platform, if they sign up to social, they have to opt in, it's not opt-out. They, on average, over the first 91 days relative to a nonsocial member, are still making twice the number of bookings, and they're 3x is more likely to use the app. And then that obviously plays out in the retention curves that I talked about earlier.
Thanks, Gary. Caroline i might turn to you with the next question, and it's a continuation of the discussion on social. Clearly, social is growing and becoming a more important part of the business. Something that's very important to us then is our role as a responsible regulator on the platform. You might talk to you a little bit about how we think about that. And particularly mechanisms that we have in place to help identify and remove any inappropriate content?
Yes. Great question and one that's very relevant for us. So we use in stock third-party call Sunbird to ensure that our customer safety is up for the [indiscernible] we do. And this to under the background monitoring the chart in the social features. So we have robust monitoring processes in place. And we also are fully compliant with recent Digital Services Act which was enacted in February of this year, and relevant meditation plants here in Hostelworld, and this promotes transparency and accountability on line.
So in addition to using the Sunbird chat monitoring to, we also use AI, so we use Google tools to monitor the images that are uploaded into the chat to ensure that they are appropriate. And this is a space that's ever evolving. So we continue to work with Sunbird on utilizing their enhanced tool. So working with them, they are also learning AI automation into the tool that they have. And again, constantly looking to raise the bar of trusted safety for our [indiscernible] online. In saying that if anything is flagged, our customer service support team are there to manage any reported users or messages, make sure that there's no inappropriate content being posted. There's no abuse to customers, and customers can report another customer a flag message that they deem inappropriate, and that is dealt with by the customer service team. They take immediate action to investigate, they take action that's appropriate.
But what I would say is typically what we see in the channel. It's a very safe and appropriate audience. People who have booked with us, they are the ones who opt in into the channel. They have to make a booking to be in the chat forum. And so typically, what we see is a very engaging form, very positive, sharing lots of local tips hints and making positive connections on it.
Thanks, Caroline. Might stick with you for our next question, please comment that around other operating costs. In the presentation, obviously, we noted that another strong performance there, [indiscernible] down minus 2%. But within that, there was an increase in compactor costs. So maybe it might be useful just to go through what was driving some of the ups and downs, and puts and takes in other operating costs.
Yes. So other operating costs are essentially all of our operating costs, except for paid marketing. And within that cost focus it was 12.5 million in H1 2024 and down 2% [indiscernible] from the period last year. And the biggest cost component is that a way to [indiscernible]. So [indiscernible] businesses, we're facing wage inflation, something that we have managed. And managed to actually reduce our wages and salaries bill year-over-year despite a similar level of headcount.
And what we've done here is two things really. So one, looking to find the best talent in lower-cost destinations. So looking beyond maybe our core markets where we've hired previously. And utilizing a combination of permanent resources but also temporary contractors to support and execute the business product and technical enhancements that we've delivered in the first half of the year. So combination revealed, hiring low-cost destinations but also utilizing temporary contractors. The combination of which means when you take temporary contractor costs and wages and salaries together and you look half year over half year, the cost is actually pretty much flat. And despite the fact there that we have a lot more resources with more resources, I should say, because we have been able to take that budget and that repurpose it towards temporary contractors.
Thanks, Caroline, and thank you, everybody, on the call for the questions. Our last question is certainly one of the most [indiscernible] topics that was covered and maybe it's a question to put to both of you, and I'll frame two parts around thinking on capital allocation and our priorities there. A lot of questions around our short-term capital allocation priorities particularly what we mean by continued investment in the business. Is that increased market spend? Is that further spending on [indiscernible] improvements? Or mix of both?
And then also the last questions on our longer-term capital priorities and our strategy for shareholders there. Are we thinking about returns? Are we thinking about inorganic opportunities, particularly if the business now is on track to move into a net cash position.
So maybe I'll take the first part. So continue the investment in the business. I mean, ultimately, the goal is to maintain a steady and consistent growth in net margin ultimately, that's what we're in the business to do. So that is achieved really through incremental product investments. We talked about a lot of them today in terms of things that we are doing on the social side. There's also things we do on the core booking platform. There are things that we do in the base platform, which is hosted within a cloud provider. So really, what we try and do is to make sure that the incremental investments that we put out on the product and the platform, they give us a bit more oxygen in terms of conversion growth a bit more booking us through app and then we can look at taking some of that and sequentially investing that in new customer growth, where we see that the economics of that new customer growth are very favorable.
And the combination of those two things is basically the way that we satisfy and hopefully satisfy our investors that we will consistently grow net margin.
Yes. And I think in terms of the balance sheet, we're really pleased with what we delivered in the first half of the year. We're well on track for the commitments that we set out at the start of the year. We've repaid the ARB debt facility 2 years ahead of schedule. We have commenced repayment of the warehouse payroll tax security revenue. We're continuing to invest in the business, as Gary has discussed. And we are well on course to being net cash positive in the second half of this year.
I think investment in the business is one Gary and I are particularly excited about, and we see there's plenty of runway for us. Continuing to enhance what we are already building. And we can see the level of return that, that investment is having and what that's generating for shareholders. So first half of the year despite an ABV essentially a price contraction of 10%, we've managed through the enhancements we've made to social, to our customers we're acquiring, to reduce our marketing investment, resulting in a 23% margin growth combining that then with the tight OpEx base delivering an [ 88% ] EBITDA growth.
So I think that strategy is generating significant returns for us and is something we're very pleased and something we're going to continue to focus on.
Thank you, Caroline, and thank you, Gary. We're right up against the RNS that concludes the Q&A. Thank you to everybody for joining the presentation. Thank you for the questions. If there's any points that we didn't cover off there. We'll do our very best to follow people in due course over the coming days. But with the conclusion to Q&A, I'll just hand back to Gary just for closing remarks to wrap up the call.
Great. So thank you for joining us today. As I said at the end of the presentation, we're super happy with the results. We're in the business of serving our travelers wherever they are and wherever they want to go. The things that we're really focused on is making sure that the social strategy continues to deliver and drive that net margin growth. That in turn over super type control of OpEx and a very cash-generative business gives us lots of options for the future.
We're excited about the second half, and we're excited about the growth opportunities that we see going into 2025. So thank you for your continued support and look forward to meeting some of you in person in the coming days.