Viability of opening a hostel

Golda Meir

I'm an avid traveler. I've been all over the world and 90% of the time I've stayed in hostels during my adventures, as they're generally cheaper than hotels and are more sociable. These days, I'm always sure to book my bed online in advance, as there is seldom room for walk-ins. It seems there is a shortage of hostels in the big cities and in the popular tourist hotspots - New York, Toronto, Sydney, London etc. For a while now I've been playing with the idea of opening my own hostel. Let's look at some figures:

Let's say my hostel contains 100 beds. Charge €25 per bed per night = €2500 income every night, if I'm booked out. In reality though, some beds will be more expensive - I could maybe charge €40 for a private room, which will increase that €2500 figure.

On top of this, many hostels contain vending machines selling drinks and snacks, laundry machines, internet kiosks. These services rake in money and could add a few hundred to your weekly income. Some hostels even contain a bar but personally I'd stay away from this as it's more hassle than it's worth.

Now, let's look at the overheads - The obvious one being the building itself. The hostel would need to be located where the tourists are. Usually this is in the centre of the big cities, which is where the shortages are currently. However, rents will be sky-high here. But what if it was located on a Carribean island, in Thailand, in the Australian outback? I predict tourism booming in China as it opens it's doors up to the West, so this could also be another cheaper alternative.
Electricity, insurance, advertising, small amount of staff (receptionist, cleaners) will also eat away at profits but overall I see the hostel as a money making machine.

Travel is becoming more and more common as a gap year before college is seen as a right of passage for young people these days. Not to mention the growing middle class in India and China, who are dying to explore the world as their Western counterparts have been doing for decades.

Thoughts?

ResearchWill

Firstly very few if any hotels or hostels run at 100% occupancy. It would be necessary to know the expected rates for each season. Secondly you are assuming in the cheaper to buy and rent areas you will still get €25 - €40 a night. In the best areas of Bangkok I can get good 3 and 4 star hotels from €20 a night up, I have stayed in one of the very best hotels in Bangkok for €100 a night and that included breakfast and 2 hours of free drink a night as well as unlimited laundry.

Like any hospitality business, if you have the right location at the right price you will make money.

highlandseoghan

I would advise doing a lot of research before making any decesions. In 2010 hostels in scotland had an average 39% occupancy rate. Advertising is going to cost a lot if the business is to be successful along with insurance which I would reckon would cost a fortune.

markymark21

http://www.hostelworld.com/hostels/Dublin?ShowAll=1


Judging by these prices 25 quid a night would be steep.

Is Dublin even a popular destination with back packers?

CatFromHue

Golda Meir wrote: »

Let's say my hostel contains 100 beds. Charge €25 per bed per night = €2500 income every night, if I'm booked out. In reality though, some beds will be more expensive - I could maybe charge €40 for a private room, which will increase that €2500 figure.

I'd go online and see how many beds you can book in a few hostels for tonight or tomorrow night to see how realistic the above is. Also factor in that this is August so should be the busy time of the year.

Golda Meir

markymark21 wrote: »

http://www.hostelworld.com/hostels/Dublin?ShowAll=1

Judging by these prices 25 quid a night would be steep.

Is Dublin even a popular destination with back packers?

I never mentioned Dublin in my OP at all. Not sure why you're bringing it up I wouldn't imagine it's a popular tourist destination, with the city being infested with beggars and drug addicts.

Let's take a look at London. A quick scan of hostel world shows €20 being the average for a bed in a shared dorm and €40 for a private. You may find a vacancy for a night here and there, but I challenge you to find a hostel where you can book a bed for 7 consecutive nights starting tomorrow. Also, a lot of the hostels listed are in outer London and in places of no interest to tourists. There is undoubtedly a gap in the market there. Ditto with NYC and Toronto and other real cities.

kilburn

Challenge accepted there you go 7 nights in kings cross 7 nights in camden average 15 quid !

http://www.hostelworld.com/search?search_keywords=London%2C+England&country=England&city=London

Doug89

I've stayed in a lot of hostels (mostly in Ireland, the UK and western mainland Europe), and I think they are something that are rising in popularity. I'd normally just go for the cheapest on the list and just deal with it, and believe me, I've stayed in some bloody kips.

This is by far the best hostel I've ever stayed in - http://www.hostelworld.com/hosteldetails.php/Hatters-on-Newton-Street/Manchester/4861

It had everything - it was cheap, clean, lovely staff, quirky interior, had free breakfast, great TV room and things organised in the night time.

Peterdalkey

kilburn wrote: »

Challenge accepted there you go 7 nights in kings cross 7 nights in camden average 15 quid !

http://www.hostelworld.com/search?search_keywords=London%2C+England&country=England&city=London

I know a couple of guys in the hostel business in Dublin and London and the key is a great central location. The problem is that even with falling property prices, great locations still command big prices and 15-20 quid a night with a decent offering provides a negative return. The Heath and Safety compliance costs are very steep indeed and you need a serious number of bed spaces ( a big building) per location to make any financial sense. Smaller hostels are closing like the new time!

highlandseoghan

Golda Meir If you believe that Dublin is not a huge tourist destination I don't think your ready to open a hostel.