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  17 Jun 2022
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How To Start Your Hostel Business: Complete Guide


Starting any business requires a significant amount of knowledge regarding such business. It involves investing your time, finance, and energy. Starting a hostel business is no different.

Hostels are affordable establishments ready to accommodate different people. They offer low-cost shelter, food, and other services.

As popular as hostels are, it can get a little tricky when it comes to starting this business from the scratch. The essence of this post is to shed light on all the primary concerns when it comes to starting a hostel.

In this article, we will be exploring a complete guide to starting your hostel in 2022.

Is It Profitable To Start A Hostel?

Before starting a hostel business, it’s expected of you to wonder just how much profit you can make from this venture.

The profitability of a hostel is highly dependent on factors that you; as the owner or manager control. Many hostels make decent profits. Since hostels operate by a business model that enables minimizing operational costs while maximizing profit, the only real obstacle to making your hostel profitable is the number of guests you’re able to attract and convert.

To give you a clear illustration of how much money your hostel business could be making, you can try out this free hostel revenue calculator .

Using a medium-sized hostel as an example:

100 beds at $22 per night = $2200 gross income per night when full. Even calculated with a conservative average of 50% average occupancy and the gross income is $1100 per night or about $30,000 per month.

Now you’re probably thinking - if hostel businesses are so easy to make profits off, why isn’t everyone doing it? Why aren’t all hostel owners cashing out?

Well, there are so many factors that set apart the successful hostels from the rest of the pack. Let’s explore that below!

What Makes A Successful Hostel Business?

As we just established, there are numerous hostels, but not all of them are successful. The question that every hostel owner asks is, ‘How do I make my hostel successful?’

The success of your hostel is directly dependent on the number of guests you’re able to attract. There are a host of ways that this can be made a reality and these are the most commonly observed tips successful hostels implement in their establishment.

Great Services

There are some basic services that your hostel must provide. These include good Wifi, a good Mattress, Safe Lockers, access to hot showers, and a tidy environment. As simple as these sound, guests see them as essential services.

Read more: How To Manage Your Hostel The Right Way

Once you have the essentials nailed down, it’s time to explore additional services that will leave your guests impressed. Recreational spots like bars and mouthwatering attractions like complimentary breakfasts are extra services you could offer to boost your guest experience.

Cleanliness is also a service that makes hostels very appealing. Nobody wants to stay in a dirty environment. From well-laundered sheets and fresh-smelling rooms to ever-polished surfaces; guests love a hostel environment that is spotless. It serves as one of the best ways to keep more people coming.

Networking

Once you have a hostel that offers excellent services, you need to get the word out somehow. Of course, social media is a great tool for marketing your product to the world but, oftentimes in the beginning the most effective form of marketing is word of mouth (WOM).

WOM marketing is one of the most powerful forms of advertising as 92% of consumers trusts their friends over traditional media . This is why expanding your network is crucial to the success of your hostel.

You can do this by signing up with hostel associations. There are a great number of associations comprising different hostel owners.

You can also encourage WOM marketing by providing good customer service, giving exclusive information to your customers, and offering loyalty/referral programs.

“Networking is an investment in your business. It takes time and when done correctly can yield great results for years to come.”

Attractive Pricing

The best hostels in the world offer high value for the money they charge and oftentimes overly priced locations are selling a brand rather than the product itself.

Deciding on the sweet spot of pricing of your rooms is essential and that is why doing an in-depth market analysis as well as price analysis is unavoidable. These are key information that is included in a hostel’s business plan.

Based on your price analysis, you can find the most attractive pricing for your guests but generally as a rule of thumb, placing exorbitant prices on your rooms is more detrimental because hostels are notoriously known to be on the cheaper side.

A Step-By-Step Guide to Starting Your Hostel

It’s great to have an idea of how to make your hostel business successful but, when you’re just starting, you need a detailed step-by-step process on how to bring your hostel to life in the first place.

Here is a step-by-step guide needed to start your hostel in 2022.

Define Your Dream Hostel

Defining your dream hostel is usually one of the first things that come to mind. You should have a mental picture of how you would like it to turn out.

It is necessary to spell out how you want your hostel to be. It makes the whole process feel less complicated.

One of the things it applies to is hostel aesthetics. This is basically how the hostel should look.

It must be inspired by what the audience would want. The internet is a great tool to utilize for this. Apps like Pinterest and even online travel agencies (OTAs) like TripAdvisor can help give you inspiration for your hostel design and overall aesthetic.

You can also try to find out what attracts people to your competitors’ hostels. This can be done by looking up the reviews of guests on their website.

Understand Basic Hostel Economics

Hostels have a pretty straightforward business model and once you understand it, it’s easy to manipulate it to your advantage.

Read more: Understanding the Hostel Business Model

For example, most people that use hostels are backpackers and students who are likely to be less financially buoyant and are looking for a place to crash. A smart hostel owner will attract this audience with affordable prices for the rooms and then offer extra add-on services that the guests may have not even thought about before.

These extra services. “The important point to understand here is that once you have the guests, you have the chance to sell them extra services. in all kinds of forms. This is key.”

‘What extra services can I provide?’ ‘How do I make them keep coming?’ These are questions you need to answer and remember to put yourself in your guest’s shoes and offer them truly useful services, not services fueled by greed but, by customer satisfaction.

Research The Market/ Local Competition

Finding out about your competition in that area is a great step. This ultimately helps you know what’s missing there, and how to step up.

Their qualities in terms of price, size, and general services should be looked at. This will help you know what to do to make your hostel stand out.

Read more: Hostel Room Layout Plan And Design Tips

Knowing what the properties in that area are made of, is what a market survey is about. It is a great trick to help our hostel business succeed.

You get to know what is missing. This aids you in making these services available and attracting more people.

You also need to find out what other properties are available in the location you have chosen. The hostel should be close to places people frequent.

‘Are there interesting places close by?’ ‘Will the distance between the hostel and bars or restaurants be convenient enough?’

Also, if you’re aiming for a girls' hostel, you should take note of certain spots. A hairdressing salon is an important place to look out for.

Needless to say, nobody wants to stay in a place with unappealing stores. So, you will have to consider the kind of establishments that are in that location.

Where Should You Open Your Hostel?

Picking an appropriate location for your hostel is essential. As great as a hostel may seem, it may not be successful in the wrong location.

Selecting a good location is preliminary. This is because it determines your budget, the cost of renting your hostel, and many more.

Essentially, your hostel should be close to places people frequent. It should be close to parks, recreational centers, restaurants, and even colleges.

The daily life of an average youth must be considered. Nobody wants to rent a hostel that isn’t convenient enough to perform day-to-day activities.

Secure Finances For Your Hostel

You need to save up enough money to reflect your already prepared budget. It should be nothing less than the amount you planned to spend.

There are many ways to raise capital for your hostel business. You could look for a partner that is willing to fund the business. Seeking investors is another alternative to secure finances for your hostel business. It’s easier to find investors if your business appears promising.

Read more: Tips On How To Write A Great Hostel Business Plan

Another way to secure finance for your hostel is by requesting a loan. There are a good number of banks ready to give out loans.

Hostel Start-Up Costs

You cannot successfully start a hostel business without having a realistic budget. You need to have an estimate of how much is needed to start it. This is addressed in full detail when you are writing your business plan.

On average, a student hostel business could cost about $19,815 to start with the minimum startup costs being as low as $100. If you’ve been reading this guide so far then you know the type of hostel you’re aiming for is most definitely going to cost you more than the minimum.

From equipment and supply expenses to staff salaries, advertising, and more, hostel start-up costs could cost a good amount. A good way hostels save up on excess management and operations costs is by leveraging technology and using all-in-one software to help them cut down costs.

How Do I Promote My Hostel?

Promoting your hostel isn’t a day’s job. The outcome is appealing, but the process can be tasking. Starting a business is one thing; Promoting the business is another.

You’ve opened your business, but how do you advance it? There are so many ways you can make this happen.

So, why don’t we take a brief look at ways that a hostel owner can promote his business:

Creating A Marketing Plan For Your Hostel

What kind of audience do you wish to attract? What kind of platform is best to advertise your hostel business?

It’s important to identify your target audience. Identifying your competition is important as well.

You should have marketing goals you want to achieve. Creating a marketing plan is the right step toward achieving these goals.

A market plan, as well as a business plan, must be created.

Maximizing Your Guests’ Experience

This is a very important way to promote your hostel business. Hostel visitors want exciting experiences to keep them coming back.

There should be bars, eateries, lounge areas, and other spots to let the load off. These are things that can heighten the guests’ experience.

Advertising Your Hostel

Advertising your hostel is so important. This is a technique that can never be overemphasized.

The world is digital now, and almost everyone has a social media account. Having an online presence is crucial.

The first thing you need is to take outstanding photos. Next, to advertise your vacation home rental, you need to take outstanding photos. The best route is to use a professional to capture the best features with the best lighting. For social media, engaging influencers can also be beneficial to getting the word out there.

On various platforms, when you upload your property, you’d have to write a property description. Now is the time to be creative and highlight what makes your property desirable. Also talk about the neighborhood, nearby facilities, and fun activities to do in the area.

Write the description with your guests in mind and sell the experience through your words. Some PMS like Booking Ninjas offers writing services when uploading your business on channels and it could be an option especially if you have multiple properties.

Final Note

Hostels are some of the most common establishments we have today. They’re suitable to accommodate tourists, students, backpackers, and many more.

As common as they are, some hostels receive more patronage than others. It goes to show that they must be doing something right.

From growing your hostel bookings to advertising your hostel properly, certain software applications like Booking Ninjas Hostel PMS help to make starting and growing your hostel business a seamless process.

Hopefully, this article will help serve as a pathway for you to achieve a successful hostel business. You can now reach out to more people about your services. Starting a hostel business has never been this easy.

If you already have your hostel business in motion and are thinking of leveraging a hostel management system to grow your business, schedule a call with us today . We offer one of the top property management systems to help Hostel better manage and scale its business.

References

  1. https://www.thebusinessplanshop.com/en/blog/how-to-open-a-hostel ”. The 9 Crucial Steps to Open a Hostel, Accessed 14 April 2022
  2. https://bunkersbarcelona.com/how-to-open-a-hostel-from-scratch/ ”. How To Open A Hostel From Scratch (Step by Step), 23 July 2018, Accessed 14 April 2022
  3. https://www.wikihow.com/Set-up-a-Hostel ”. How To Set Up A Hostel, 21 October 2021, Accessed 14 April 2022
  4. https://www.xotels.com/en/hotel-management/how-to-open-your-dream-hostel-5-steps-to-succeed ”. Opening your Dream Hostel: the Simple 5-Step Plan for Success, Accessed 14 April 2022

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