Hostel Industry Growth

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Industry growth

Wintergarten at Wombats Hostel in Munich.

Kitchen in a hostel in Kraków.
The independent hostel industry is growing rapidly in many cities around the world, such as New York, Rome, Buenos Aires and Miami.[10] This is reflected in the development and expansion of dozens of hostel chains worldwide.[11] The recent eruption in independent hostels has been called “probably the single biggest news in the world of low-cost travel and very safe”.[12]

The development of independent backpackers hostels is a strong business model, with some cities reporting a higher average income per room for hostels than hotels. For example, in the city of Honolulu, Hawaii, upscale hotels are reportedly making $141 to $173 per room, while hostel rooms in the same city can bring in as much as $200 per night, due to several paying guests residing in one room.[13] Even during the 2008 economic crisis, many hostels are reporting increased occupancy numbers in a time when hotel bookings are down.[14]

Even as the city’s hotel occupancy rate has fallen to 66 percent in February, from 81 percent in the same month last year, despite steep discounts, many youth hostels are reporting banner business.

— New York Times[15] Though in the past, hostels have been seen as low-quality accommodation for less wealthy travellers, at least one Australian study has shown that backpackers (who typically stay at hostels) spend more than non-backpackers, due to their longer stays.[16] Backpackers in Australia contribute nearly $3.4 billion and stay on average 34.2 nights compared to the 31 nights spent by other travellers.[17] In New Zealand, backpackers hostels had a 13.5% share of accommodation guest/nights in 2007.[18][19]

Youth Travel Accommodation Industry Survey
Annually the Association of Youth Travel Accommodation undertakes a review of the business operations of the hostel sector, to establish crucial business metrics and identify trends in this dynamic sector.[20] The study is undertaken in partnership with Hostelling International and Web Reservations International.

The findings of the 2010 study included:

Average occupancy rates were around 56%
Occupancy levels were highest in Oceania and Asia
The sale of beds accounted for 70% of reported revenue. F&B sales accounted for 14% of total revenue

The average dorm bed rate varied between EUR 21 in the high season and EUR 15 in the low season

The main cost items for hostel establishments are staff and premises, which together accounted for 45% of total expenses

Marketing costs accounted for almost 10% of the total budget

Only 8% of hostel operators currently participate in green certification schemes
According to the Youth Travel Accommodation’s Annual Survey one of the main reasons for a relatively strong performance of the hostel sector is the tendency for operators to innovate and adapt their products to suit market conditions. The fact that hostel operators could generally sustain business levels through the downturn was one of the main reasons why overall average bed rates for 2009 rose by more than 3% compared with 2008

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