Hostel chain Safestay receives possible takeover approach

Hostel company Safestay launches tender as part of strategic review after receiving ‘highly conditional approach’

  • The Covid-19 pandemic has inflicted significant financial damage on Safestay
  • Safestay losses have risen from £600,000 in 2019 to over £10m last year
  • The company recently sold an Edinburgh hostel for £16m to A&O Hotels and Hostels










Budget hostel chain Safestay has revealed a potential takeover approach has been made to the company.

Bosses said the company would begin a strategic review following a “very early and highly conditional” proposal for a possible acquisition from an unnamed party.

The coronavirus pandemic has inflicted significant financial damage on the group, which operates 20 hostels in ten European countries and has been forced to close its properties for more than half of all days in 2020.

Slowdown: The coronavirus pandemic has inflicted significant financial damage on Safestay, which operates 20 hostels in ten European countries

Even when its facilities were open, occupancy rates were only 38%. His earnings fell by around three-quarters to £4.8million while his losses soared from £600,000 in 2019 to over £10million last year.

In an attempt to improve its balance sheet, it has taken advantage of numerous public support measures, including the UK government’s furlough scheme, renegotiating rental terms with landlords and cutting head office costs.

She also sold the lease of two properties; a local in Barcelona for a small fee in February and its Edinburgh hostel for £16m to the Berlin chain A&O Hotels and Hostels.

The company said it would use this latest sale to reduce its debt load by more than a third and provide it with enough cash reserves to put it in a “position of strength” as the accommodation sector recovers. .

All of the company’s hostels were initially closed in April 2020 before being phased open the following month. They were then closed again from November to May 2021. But Safestay said last month that all but two of its hostels had reopened.

Founder and Chairman Larry Lipman said today: “Beginning in May, we began to reopen our portfolio of upscale hostels and saw occupancy improving month-over-month in line with internal forecasts. “

Start over: Safestay under Larry Lipman said today:

Restart: All Safestay hostels were closed at the start of the pandemic and from November to May 2021. But it said last month that all but two of its hostels had reopened

He added: “Individual and group bookings are coming in for the winter and for 2022 and build our confidence in returning to pre-Covid trading levels. We firmly believe in the attractiveness of the Safestay brand.

“However, we recognize that this is a natural point, as we relaunch the business post-Covid, to undertake a strategic review, in order to maximize value for all shareholders.

“This process will reveal whether there is additional shareholder value beyond the upside we believe we can deliver.”

Safestay appointed PwC as an adviser and said bidders should contact the consultants. He added that he was not engaged in any discussions with a bidder about an acquisition.

Glamour: One of Safestay's two hostels in London is located in Holland Park, West London.

Glamour: One of Safestay’s two hostels in London is located in Holland Park, West London.

Lipman is a serial entrepreneur whose business career has seen him found self-storage company Safestore, property investment group Safeland, auctioneer Hercules Property Services and office rental specialist Bizspace.

He set up Safestay seven years ago and opened his first premises in London at John Smith House, the former Labor Party headquarters at Elephant & Castle. The company’s other London site is located in Holland Park, West London.

Almost all of its hostels are located in major European capitals, such as Brussels, Berlin and Prague, with the exception of Barcelona and the cathedral city of York.

Safestay shares closed trading up 10% at 22p on Friday.

Linda G. Ibarra