Feargal Mooney, former CEO of hostelworld.com, speaking at a recent business seminar co-hosted by Crowe, Bank of Ireland and the FD Centre.
Drawing on Crowe’s experience of helping clients build lasting value in their businesses and to mark the launch of our new Leadership Insights magazine, we are delighted to launch a special ‘Building Business Value’ series in conjunction with five of Ireland’s most successful business leaders.
Crowe managing partner Naoise Cosgrove comments, “We work with clients to build long-term value in their business by identifying and leveraging the key value drivers specific to them. By critically analysing their business, we can provide practical advice to maximise opportunities and mitigate risk.”
“We believe that crucial lessons can be learned from the experience of others. For this reason, we have collaborated with business leaders to discuss key drivers they have leveraged to scale their business and building long-term value.”
Feargal Mooney outlines the importance of a business owner in maintaining focus on the core business:
Don’t get distracted
Feargal Mooney joined Hostelworld in 2002, shortly after it was founded, working as Chief Operations and Finance Officer.
At the time, capital wasn’t accessible to them, and Hostelworld was not an attractive proposition to potential investors. “It was after the original dotcom bust, nobody wanted to go near dotcoms.”
In terms of financing, Mooney estimates that less than €1m of investment ever went into Hostelworld, from founders, hostel owners and a small number of angel investors early on. “Like a lot of start-ups… you’re just trying to balance investing in growth with making sure you are paying the wages.”
Once the company started to break even, around 2002, they began to focus more on a growth strategy. “With a business like this it’s a two-sided market. You’ve got to get beds from hostels in order to attract customers to your website – but in order to get beds from the hostels you’ve got to tell them that you’re going to be able to deliver customers,” he reflected. “So we were trying to build that up in a coordinated fashion.”
However, as they began to look at expanding further, Mooney admits, “We went off track and got a little bit distracted.”
They acquired a hotel booking site and Mooney admits that the three years spent focused on this side of their business meant they took their eye off who their core customers were and where they were making the money. “Where we were making money was in the hostel business. Where we were spending all our time and losing money was in the hotel business. We realised we weren’t investing in the hostel business or evolving our technology to meet the changing needs of our customers.”
In 2008, just weeks after Mooney was appointed CEO of the company, they were due to go public. Days later the crash hit and Mooney pulled the IPO. “We weren’t anything like ready to be a public company,” he says.
It was a tough decision and an unpopular one with investors, but he realised that the last three years being distracted by hotels had damaged the company. “In that time a fairly significant new competitor had come into the hostel space and we had taken our eye off all the core hostel business that was making money, and the new competition took market share.”
In the challenging recession environment, he acted quickly and his approach was customer-centric. “The starting point is just looking at customers. Whatever is going on, whether in your own business or in external markets, ultimately your business needs customers and customers’ preferences will change and move on and you’ve got to make sure you’re adapting to that.”
He closed the hotel business and focused back on the core, changed his pricing model, invested in technology with the bold move to mobile (now more than 60% of the business comes through mobile) and adopted a new marketing strategy.
With these measures in place the company was healthier and successfully executed an IPO in 2015.
One piece of advice: “The three As: ability, ambition and alignment. If you have ability and ambition but it’s not aligned with what the customer needs, it’s no good. Focus on what the customer needs.”
As a leading accountancy and business advisory firm in Ireland, Crowe has been supporting and growing Irish businesses for over 75 years. We have an unrivalled understanding of the Irish business environment and pride ourselves on delivering hard-working, practical solutions to all our clients’ business challenges. Contact a member of our SME team to find out how we can help you.