How to Start a Hostel Business from Scratch?

Everyone knows that traveling is about discovering new countries, new cultures, new cuisines and virtually everything in-between. These days we go places like never before. Travel has changed a lot in the past 15 years or so. Back in the 1970s you couldn't just hop on a plane and visit any country in the world. Luckily, these days are long gone and today we have the opportunity to literally live on the road.

Perhaps one of the reasons is the changing economy. We have more money and free time than any other generation in history. But this is just one side of the story. Everybody knows at least one person working as a freelancer. My point is, the freelance economy opens up not only traveling opportunities but gives startups and individual entrepreneurs a chance to kickstart their businesses in service to the growing number of freelancers. More precisely, a great chunk of the freelance community is comprised of digital nomads.

For the uninitiated, a digital nomad is someone who works online on one or more projects from any point in the world. This small but growing group of digital nomads is literally living the dream of the entire population of planet Earth – traveling the world and taking their office (read laptop) whenever they go. What I am trying to say is – accommodation properties are already struggling to cover the needs of the travelers.

Today we are going to talk about hostels – how to properly run one, what to consider before hopping on the hospitality train, how to manage your budget, where to start from and so on. So if you are already flirting with the idea of having your own hostel, keep on reading.

Location

 

Ok, you have an idea about running a hostel. Now we have to put everything to practice. Since every business requires investments, which sometimes are huge, to say the least, I have to warn you that the location of your hostel might make or break your plans. The success of your property depends on its location. Usually, hostels' natural habitat are the big cities. And there is a reason for that. People who stay at hostels usually do so for a night or two. Most of them are somewhere between 18 and 34 years old. They are not demanding as they are open to new experiences. They are most likely in town for a music festival or they are just passing by.

Having said that, you must really pay attention to location. Needless to say, having a hostel in a small town won't do the trick. Even if it at the center. The reason is – there are not enough passengers in small towns. Of course, there are always exceptions – towns and villages that are at the seaside or near extremely popular tourist attractions might be potentially a good choice. However, keep in mind that they must attract tourists all year long since seasonal work might have you struggling to make ends meet.

So let's head back to the big city. It attracts foreign visitors because festivals, football games, nightlife, urban culture, concerts, events, etc. You get the idea – those to spend a night at your hostel are probably not familiar with your city and they would love to explore it. In order to do so, they need a place to crash, which is near the underground or other means of public transport, railway stations, and popular sites.

I am telling you this because I have seen it with my own eyes. Plus, I have experienced it as well. Imagine the following situation – you are traveling across Europe, the USA, or South America. Your main means of transport is the railways. You have a limited budget and you want to see as much as possible. How are going to find a place for the night? Exactly – by foot. The most successful hostels are situated at the heart of the big city, they are easy to spot, they are affordable, and they are near key places both in terms of public transport and sightseeing.

This leads us to our next point.

Nearby attractions

 

As I mentioned earlier, people visit your town for a reason – they are either sightseeing or they are passing by. Though sometimes the lines between the two tend to blur. The idea is that the more you have to offer to your guests, the more people will stay at your property. The more people stay at your property, the larger the profit. You can make the most of your location just by showing passengers all the beautiful, stunning, intriguing, lucrative, and worth-visiting places near your property.

Read between the lines – on one hand, those attractions are where your guests go but on the other hand, these places are where your guests might learn about you. Let me give you another example. When I was doing a bicycle tour across Europe in the summer of 2017, I ended up in Zagreb. The camping was way out of town and there were dark clouds piling up. I was at the railway station checking the schedule for tomorrow's train to Belgrade (I was dead tired and I didn't feel like riding). I had two options – to cycle my way through the thunderstorm some 15 km to the nearest campsite or stay at a hostel.

I put my bets on the hostel and here is why. While I was checking the train schedule, I noticed some flyers just beneath the timetable. It turned out that there was a street art festival in Zagreb. I did not only find out about all those interesting things taking place in Zagreb right now but I also stumbled upon a nearby hostel. Its name and address were printed out on the flyer. Should I say that I immediately checked-in?

But this is just the first part. To cut a long story short, here is what happened. At the reception, the staff members were kind enough to let me know about the nearby tourist attractions. Moreover, they told me which are free and which are paid. And as if that wasn't enough of an informational overflow, there were literally hundreds of brochures scattered around a big table. You see where I am going, don't you? If it wasn't for this valuable information I wouldn't have discovered Zagreb in such detail. I will stay at this hostel for sure, should I happen to be in Zagreb again.

The hostel itself was 10 minutes from the railway station and 10 minutes from the main city square. See? Location matters, just as nearby tourist attractions do.

Amenities

 

If you have no experience running an accommodation property, your perception of amenities might fool you. Social media gives traveling kind of luxurious image when traveling on a budget is indeed flourishing. I have met people who roam with as little as $5 a day. You are obviously running a hostel here, not a 5-star deluxe hotel with tennis courts, giant aquaparks, and a private airport.

Nevertheless, do not neglect the amenities in your property. Make sure that there are enough showers and toilets. Industry experts say that the 1:10 ratio should be your guiding light. Put simply, you should have 1 toilet/shower for every 10 beds.

Ok, let's talk about your rooms. Most hostels provide bunk beds, which is understandable. However, please make sure there is enough space for luggage for everyone. No one likes sleeping with a backpack next to their head. Another good idea is to skip the chairs for a desk, a wardrobe, and nightstands. If you really want to take your hostel to the next level you may install a refrigerator in every room, though I advise you not to do so (we'll talk about that later).

At the very beginning I said that digital nomads are taking over the world, didn't I? Now it's time to think about them. Digital nomads are not like your ordinary guests. They might want to stay for a couple of nights and they might not be as actively sightseeing as regular travelers. Because they have to work. And because they have to work, they need a quiet and convenient space. The bedrooms might not always provide the comfort they seek and this is why hostels these days have at least one common room supplied with desks and comfy chairs. Plus, you might add a couple of PCs, a small library, and a projector. Since I told you not to put refrigerators in the bedrooms, now it is the exact moment to tell you refrigerators have their place in the common room. It would be easier for you to maintain them, clean them, and make sure no one stores illegal substances.

That being said, a good Wi-Fi connection is a must. I mean, without a proper wireless internet connection your property is nothing more than a late 19-century dormitory.

Have you thought about extra storage places? Some people travel by bicycles, others have several suitcases, a longboard, or a camping tent. I bet your guests would appreciate it if they have a secure place to store their extra luggage. My advice is to secure this repository and keep it locked. Make sure only staff members can access it.

Target group

 

I already hinted what your target audience might be – 18-34-year-olds travelers, digital nomads, entrepreneurs, punks, outcasts, hipsters... Don't be scared, however. Instead, you can take advantage of this target group. Just think about it for a second, these are all tech-savvies, which means you can easily target them online.

Ok, let's elaborate on that. Since you already know your guests are aged 18-34, you should first get your business up on Google Maps. Fill in as much information as possible. The more people get to know about you, the higher the chance they choose you over your competitors. You should take over the internet – TripAdvisor, Yelp, FourSquare, Facebook, Pinterest, Instagram, your target group is there and it is desperate to find you (or might be at some point).

Take into consideration your target group and adjust to its needs. Obviously, a reliable internet connection should be your top priority. Second comes hygiene. Most people go to hostels because they want to save some bucks. That being said, your guests care about prices. If they cannot afford a stay, you are overpriced. Keep it simple and clean. Make your property comfortable and user-friendly. Cut on unnecessary expenses. You can skip the flashy TVs and posh beds and instead invest your money in breakfast. Many hostels do not provide breakfast when they should.

Another thing that separates good hostels from bad hostels is the reception working time. Did I tell you, travelers go to your city for fun? I did, so you should make the check-in/check-out process as easy as possible. Your reception should be available 24/7. Moreover, the receptionists should speak at least English along with their native language.

Fine, I want to mention a couple of wise words regarding your online presence. Finding you on Google Maps or TripAdvisor should be a piece of cake but you should go one step further. Adding as many images of your hostel as possible will only boost your overall image. These days everyone is desperate to know everything about local businesses before they actually visit them. It's up to you to outperform the competition. Use your social presence to give as much information as possible. Remember – every situation is a potential source for an interesting story and every story can be turned into captivating content. Post images, short posts about your guest's unusual arrival, about that entrepreneur that kickstarted their business in your common room. Virtually, the sky is the limit when it comes to content marketing.

If I had a hostel I would definitely have a blog on my website. Blogs are almost 30-years-old but they still work and to be honest, people love them. Here is what you should do with your blog – regularly publish articles about local places worth-visiting. The idea is to present your city in its best. Talk about upcoming music festivals, talk about art (don't forget street art), share your own story in a series of articles. Everyone needs a little inspiration once in a while and your personal story is worth sharing. Plus, those of you who regularly check in LinkedIn already know that personal failure/success stories captivate people's minds.

Why a blog, really? Some might say that this doesn't make sense. Let me explain why this is a great misconception. What if you just have an ordinary website? Obviously, you look ordinary, your location looks ordinary, and travelers don't hit the road to seek the ordinary. On the other hand, if you manage to make your city look appealing (by default every city is appealing, though online reviews tend to change that) potential visitors are more likely to turn into real visitors.

Blog posts have another benefit you might have not thought about. Once you share a compelling blog post to your social media channels, you practically snatch traffic from social media and redirect it to your website. This increases your conversion rates as these website visitors just need a little push to make a direct reservation. Your blog post should be great enough to make them click/tap the “reservation” button.

The whole idea of actively managing your online presence is to market yourself.

Hostel Marketing

 

We already touched upon that matter. So let's revise the key points we mentioned earlier – distribute flyers and brochures among important locations such as railway stations, art galleries, cafes, bus stations, the underground, and other places that are known for being crowded with travelers. Make sure your hostel is visible enough – provide signs and neon lights to navigate your visitors. Remember, if people fail to outright find you, they'll just go somewhere else.

Enough of offline marketing. You should better focus on your online efforts. Make sure your business is up on Google Maps, TripAdvisor, Yelp, FourSquare, Facebook, Pinterest, and Instagram. Of course, you can always expand your social media presence so take the above-mentioned platforms as the essentials. Once you are online, waste no time in creating valuable content. This includes blog posts, social media posts, short stories on Facebook and Instagram, polls (Facebook allows you to start interesting polls and thus engage your audience).

We'll dig deeper into digital marketing in a separate post.

Staff, management, and competition

 

You don't want just a hostel. You want to have the best hostel in town! Though location and marketing are crucial, without proper management you are bound to fail. Think about it for a second – your property ain't going to manage itself. You need to be there and constantly analyze everything, not just the financial side.

Let's talk about competition first. Unless you live in a village, the chances are there are already several hostels in your city. Before even doing the first steps towards opening a hostel, you should first check out the competition. Go and see what the others do, look through their websites, prices, social media channels, read online reviews. Doing that will help you understand several very important things – what do your competitors offer and what their visitors think about them. I can't emphasize hard enough how important is the latter. You should never ever underestimate the opinion of the public. In fact, it should be your guiding light. For instance, you can use the fact that people need something they couldn't find in the other hostels near you. This is a one-off opportunity to grab the chance and do your best to give them what you need. This is what I call a first-class guest “theft”! If we are talking amenities, do not only provide them. Make sure everyone knows you have added this and that to your property. This is a great source for online content – create Instagram posts, Facebook posts, and even longer blog posts. Explain why you decided to add an extra common room, separate showers or whatever it is.

The idea of keeping an eye on the competition is to know where you stand and how you can improve what you already offer.

Use this information in such a way that it has its place in your management ecosystem. Put simply, your staff and team members should know where you as a team are heading and pull towards that goal. Delegate social media marketing and content creation to someone who does just that. Apart from cleaners and receptionists, you should also have one guy/girl dealing with marketing. This also means that either you or someone else should take care of your website because you need a website, there is no doubt about it.

Remember, keep your staff to a minimum and pull together as a team!

Rent vs Own Property

 

The debate here is never stopping. Some hostel owners prefer to rent a place and turn it into a hostel, while others settle for nothing but a private property. Before making a decision it's better to take some things into consideration.

If you decide to rent you have to choose wisely. The greatest advantage of renting is that you can choose from a couple of location options and pick up the one that gets closer to the desired location examined above. Keep in mind your budget and your financial plan when choosing. You should have already set your prices and expenses. That being said the rent should not consume your profit. Pay attention that the property you are about to rent may need considerable renovation. Before you pen an agreement with the property owner, make sure the rent period is long enough. And by long enough we mean at least 10 years. Your goal is to pay out your initial investment and generate profit for that period. If you can add an option to buy in your lease contract, it is advisable to do it. I'll tell you why – after 10 years in the hostel industry you should be already a recognizable name, a brand associated with a specific location. The moment you relocate is the moment a big chunk of your community will leave off.

On the other hand, if you buy, your initial investment would be much higher. However, it will pay off in the long run. Sometimes, hostel owners form trusts with friends and relatives in order to purchase a particular venue. In turn, each investor receives a portion from the revenue. Some people prefer this method in a way to avoid banks.

To be honest with you, there is no right way when it comes to the rent vs buy dilemma. You should carefully calculate your expenses, profits, budget, unexpected renovation costs, etc.

 
Kostadin Nikolov
Copywriter and Content Marketer