Hostel Owners Growth Factors

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Hostels have been slowly evolving into

larger, more expensive, amenity laden even quasi luxury.

Introduction:

Several factors have driven the development of hostels in the 21st century further & further along the continuum to larger, more expensive, full-blown, amenity driven higher quality, even luxury hostels.

Key Factors driving more, larger, & higher quality hostels:

• Demand:
• Investment Money, Trade and Management Skills
• Price (Profit): Price is a umbrella common denominator verified by Guest Reviews:
• Size:
• Amenities & Quality:
• Competition

• Demand: When the number of backpackers &. FIT travelers increases anywhere the demand for hostels increases, as well as the demand for more & perhaps higher quality hostel amenities by travelers willing to pay for that upgrade.

Also as typical hotel prices increase and hotel tourists want a more social & inexpensive lodging experience that also increases demand & willingness to pay more for hostels of increasing quality. Imaginative entrepreneurs capitalize on this demand by creating hostels with upgraded amenities, and higher prices, of course.

• Investment Money & management Skills: While small economy hostels can be home conversions or upgrades of small hotels funded with an owner’s minimal $ investment combined with their own trade skills to generate ‘sweat equity’ , ….anything much beyond that is going to require more investment skills.

My Personal Anecdote: Costa Mesa duplex.:At 24 (1964) after a California City land scam setback, I bought a small run down, filthy & flea-infested duplex occupied by 3 prostitutes whose children lived in the garage. Really.

I bought it with a US veteran’s loan with little money down. I had just started my Mailroom job at Daily Advertising Agency in Los Angeles at half what I made 6 months before with Thermos Company.

Evicting my tenants, I NOW, knew nothing about the construction trades, but had to immediately learn how to repair electrical, plumbing, & broken glass windows; paint: replace carpets, landscape AND manage & maintain it. And, I had to learn fast with little cash AND without YouTube. While my father remodeled part of our home and did all upkeep, maintenance, & repairs, he never involved me.

Also, my Manhattan Beach apartment was 40mi away, & that was 14mi from my Daily Advertising Agency work on Wilshire Blvd, Los Angeles, which was 46 Miles back to Costa Mesa. So, each day after work I made a 100 mi loop to work on my duplex; half that far on Sat & Sun. I was just scrimping by with my advertising mail room job's income plus a big box retail store’s weekend job, blindly ‘believing’ my duplex investment would pay off. That is called ‘sweat equity.’

• Size: Size of a hostel is usually a reflection of owner/investor’s financial resources, entrepreneurial ambition, competition, construction or remodeling skills, and hostel management ability.

Anecdote: Balkan ‘daddy’s’ son’s hostel: Somewhere I visited in the Balkans, a father had bought his lazy, ill-equipped son a hostel’s livelihood, as some misguided parents do. His management was slipshod, in particular I recall that guests would leave and it would be several days later that he would change the bed linen for new guests. A rare anomaly! It didn’t really bother me because I easily adapt.

Anecdote: China’s Longji (Dragon's Backbone) Rice Terraces: I used Dazhai Village as my base for my hike up & over the terraces. I arrived by bus several hundred yards downhill from the village, where by tradition, the village’s women folk haul your bags up to the village and your absolutely authentic spacious, wood slatted lodging homes. While I would normally carry my own luggage as a matter of pride, I don’t want to buck local tradition (and source of local income). Note: Don’t recall, but I doubt showers

NOTE: FIT travelers frequented hostels are

not normally a part of a cookie-cutter giant hotel chain.

• Price (Profit): Price is what the owner believe’s her room’s fair value to her guests will be, based on the array & quality of her amenities, her investment, guest demand, & her competition. Owner’s goal , of course, is to recoup her investment, cover her costs and make a fair profit. Obviously, an older hostel may have recouped its investment long ago, now covers all his costs and makes a GREAT profit. Just reward for early wise investing.

OTOH, a FIT traveler wants their desired amenities for the lowest price they are willing to pay, but each traveler prioritizes their ‘desired amenities differently

• Amenities & Quality: 35 40 years ago traditional hostels were often small authentic village home or rental spaces converted with a constrained budget’s modest resources into a hostel. Many still are functioning: Example along the

Camino de Santiago. Certainly hostel development in the east 20+ years has tended to be larger complexes, particularly enlarge or more competitive tourist markets but the smaller to medium markets the small and medium hostel still flourish.

Their charm sprung from their inherent original use as an original family home or whatever. They sprung up in areas of minimal, but growing backpacker & early FIT traveler demand for the minimal required basic guest facilities & amenities: dorm bunk beds, bath with hot showers, kitchen, & common rooms,& low price. Often they have been continually updated with newer kitchen appliances, bathroom remodels etc. and additional amenities.

Anecedote: Shaxi, China’s “Shaxi Yezi's Home Inn”: In a tiny rural southwestern Chinese town on the ‘old Tea Road (think Silk Road for tea), this hostel equivalent was a traditional old residence with wooden floors, thin-slab wooden walls & timber framing. Wickedly authentic for several extended days of hiking the surrounding hills & rice paddies. Chilly nights under their cosy electric heating blankets

That same increasing demand for inexpensive, basic lodging sparked greater & greater competition, larger, amenity-packed, & more profitable development of medium to larger hostels in larger markets which required a more ambitious; skilled, business-like approach, greater access to investment monies & perhaps hostel management experience.

Anecdote: Catania, Sicily hostel: was simply an old apartment with multiple bedrooms easily converted to a hostel. Simple and somewhat out-of-the-way, but adequate for me at its price.

Charm: A hostel’s charm, if any, was originally necessarily somewhat rustic & minimalist and was more a product of the original building itself rather a concerted esthetic effort by owner. Hostels were meant to be utilitarian. But there are also great exceptions.

Anecdote:Mae Salong, Thailand’s “Little Home hostel-equivalent:: This tiny mountain town near Thailand’s northern border is one of the loveliest lodgings I have stayed in over 19 years.

Beautiful lush foliage surrounded my deck looking out way over the Thai mountains below & to the horizon, lovely dinners on their restaurant’s deck with a few other travelers.

Even my bed had the same kind of pure white, warm duvet I used at

home. Sooooo welcoming after a day’s hiking the back country roads, thru tea terraces & the town’s shops.

Sometimes, a converted old house may have been inherently atmospheric, while others had their bare bones sticking out. Long-standing hostels may have slowly developed charm over the years rather than in one-fell-swoop.

Anecdote: Camino de Santiago ‘former home’ hostel: One atmospheric hostel sat directly on the CdeS with views of an old bridge and the town behind it. It was a converted multi-level home with antique, homey memorabilia that would naturally fill such a home, old stove, furnishing, old photos on the walls, & small library. Unfortunately, dorm rooms had poor ventilation and curiously some European kept closing the window which re-opened quickly because I was next to it.

Anecdote: Cosy Comfort Hostel’s ‘bare bones”, Buenos Aires: this half finished ‘hostel’ had missing wall sheet rock, exposed plumbing & electrical, and shower wasn’t working, etc. etc etc. yet advertising & PRICEed as fully functioning.

While annoyed, I empathize with his fledgling hostel effort, gave advice (I’m sure) but I did not begrudge the young owner’s fledgling venture lackiong adequate funding & skills. I stayed a few days and moved on. Years later I looked for it —NOPE!

Wickedly authentic for several extended days of hiking the surrounding hills & rice paddies. Chilly nights under cosy electric heating blankets

• Competition: As FIT & backpacker travel increased in desirable travel areas so did competition between hostels particularly from those with the greater resources of imaginative entrepreneur’s and investors who capitalized on their insight by creating a hostel usually with more & upgraded amenities tab their older competition.

These larger hostels built with near unlimited funds would have many more

bedrooms allowing them to benefit from economies of scale . IOW, more rooms generate more income for a similar array & quality of basic amenities (kitchen, bathrooms, common room & laundry, & perhaps even a few very, unique high end amenities (remote work cubicles, entry card security, pools, exercise rooms) at higher prices, of course.

This newer, large converted hotel or newly constructed hostel building may offer some of the high end amenities of an expensive

hybrid-hostel or hotel: exercise room, bidets, cafe, swimming pool.

Its interior decor may be fresh, perhaps grand, but seldom the authenticity of an older “charming” hostel.

Hard to give a 2025 Lamborghini the ‘charm’ of a 1930 Duisenberg J Murphy Torpedo Convertible.

Both different! Both enviable.

Industry’s growth:

backpackers, families, and eco-tourists.

* CAGR stands for Compound Annual Growth Rate