Safestay considers selling off hostels amid cost pressures

Hostel operator Safestay has said it is considering selling off further sites or seeking investment after struggling with ongoing cost pressures.

In a trading update, the group said it has sold its 225-bed hostel in Edinburgh Cowgate to a private investor for £5.35m, just two years after it purchased the site for £4.3m.

 

It will continue to trade under the Safestay brand as part of a new 10-year franchise agreement, which will see the hostel group receive a fixed annual payment of £75,000.

 

Proceeds of the sale will be used to pay off debts and support the group’s aims to double the size of its portfolio to over 50 sites over the next few years.

 

It comes as Safestay warned it expects its 2025 revenue to be lower than last year after struggling with “significant” pricing challenges during its key summer trading months.

 

The group, which operates around 20 hostels in Europe, including five UK properties across London, Edinburgh, Glasgow and York, posted a loss of £900,000 in 2024, down from £1.4m in 2023.

 

Safestay said it would look at disposing of sites, selling and leasing back certain properties and a potential equity fundraise to boost its cash reserves.

 

Safestay chairman Larry Lipman said: “More broadly, the trading environment across the European hostel market remains challenging with continued pressures on pricing. Against this backdrop, we are considering a range of strategic options to both support our plans for sustainable growth and crystallise value for shareholders.”

 

 

Earlier this year hostel operator won a £1.4m Covid business interruption payout from its insurers to compensate for losses incurred during the pandemic.