The countless benefits of owning your own business are well documented. It is no surprise that dozens of new businesses are started across the United States every day. What is surprising though, is that the profitability of owning a hostel has gone largely unnoticed, especially since there is considerable demand for hostels in many cities throughout the country, including but not limited to the likes of Boston and San Francisco.
What is a hostel?
A hostel is a budget-friendly type of accommodation for travelers that focuses on a shared social experience. When one books a hostel, he or she typically books a bed that may be in a room with up to ten or more travelers. In addition to the low costs, travelers stay in hostels to interact with other travelers, be in central locations that rival expensive hotels, to get discounted tickets to events, and to receive advice from the staff who are usually knowledgeable locals.
The profitability of a hostel is best understood when compared to owning and operating a hotel. Even though the revenue per guest is lower, hostels are profitable because of the higher number of guests and fewer amenities to maintain or services to offer, relative to a hotel. With that, the ratio of staff to guests is highly favorable and the profit per square meter actually rivals that of a hotel. Furthermore, the higher number of occupants brings potential food and beverage revenue even higher and increases other auxiliary revenue stream.
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Now that you understand what a hostel is and why it’s profitable, you’re ready to open one up right? Not so fast.
There are some steps that need to be taken before you can embark on this lucrative journey of owning a hostel.
One of the very first steps you want to take is to do some more research on the hostel business. If you’re reading this article you’ve already started on the right foot, but rigorous market research is a key ingredient for success in all business ventures.
Next, you probably want to develop a business plan, so that you may clarify the purpose and direction of your business, subsequently allowing you to understand what needs to be done for forward movement. Some of the components of a hostel business plan may include: an investment thesis, your management team, a mission statement, the hostel description, market feasibility, channel strategy, promotions/marketing, and a financial analysis. You also need to make sure you have a good business plan in place in order to access mortgage loans for your business. You should therefore make sure that your plan is well thought out and structured.
As with virtually all other businesses, starting a hostel requires you to identify your optimal location, which should be visible from the highways and main roads. Tips such as choosing a city or town that draws in tourists to begin with but isn’t overly saturated with hostels already go a long way. Once you have your location selected, you need to get certified or licensed by your local food and safety government agencies. Unfortunately, the procedures vary from place to place, so articles, such as this one, are limited in how much help they can provide.
Owning a Hostel is Anything but Hostile to Your Pockets
If you do everything in this article, including meticulous market research and a thorough business plan, you will surely know what to do next. After you’ve become a hostel owner and/or manager, be sure to keep us posted on your progress and visit us for pointers on other business ventures you may want to pursue—remember having multiple streams of income is a strategy for building wealth. Also shout out the website you learned from and share the article!