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How to open a hostel

Updated March 23, 2017

Hostels are like a glistening Mecca for broke, often young travellers. These budget-friendly, no-frill accommodations provide a bed and camaraderie for adventurous travellers wishing to spend no more than £30 on lodging. Opening a hostel, however, requires more than enforcing curfew and placing bunk beds in a few rooms.

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  1. Find a piece of property for the hostel. Running a hostel is not cheap, especially when the most enticing hostels to travellers are located in the heart of the city where real estate costs are the highest: anticipate spending thousands per month on rent for a decent 4-bedroom, 3-bath space.

  2. Or, write a business plan and get a bank loan to purchase a piece of property. A cost-saving solution is to look for already-established hostels for sale, or fixer uppers. Jim Kennett, owner of a hostel bought a piece of condemned property and saved money by performing the renovations with the help of travellers. During renovations, consider starting a work-exchange program to get free labour in exchange for lodging and meals.

  3. Go through your business plan. Based on the size of the space, estimate how many beds you can place in the space. Add up all anticipated fixed and variable costs, including staff wages, electricity, water, gas, rent, insurance and food. Devise how much you will charge per traveller to determine revenue. From your estimated costs and revenues, calculate your break-even amount and how many travellers per night are necessary to earn a profit. Expect more travellers in busy touristy months. Adjust the amount charged per night if needed. Additionally, charge more money per night during peak tourist months.

  4. Purchase furniture and supplies. Buy beds, linens, towels, sports equipment for rental, couches, chairs, tables, a TV and a few computers, lockers, curtains, patio furniture, toasters and dishes. Buy house maintenance items as well, like brooms, mops and cleaning solutions. Expect to spend at least £6,500 on basic household items necessary to run a hostel.

  5. Design the hostel. Encourage travellers to choose your hostel over the one down the street by creating a welcoming atmosphere. Keep in mind your target audience of university-aged travellers. For example, one of the top rated hostels on hostelworld.com, Rossio Hostel in Lisbon, Portugal, has warm inviting colours in red, bean bag chairs, hard wood floors and an art-deco aesthetic.

  6. Draw inspiration from the city. Hang large posters of the city skyline, place potted plants full of fauna indigenous to the region and choose a colour scheme that accentuates the city.

  7. Hire hostel staff members. Seek friendly, multilingual, travelled and educated staff members who are highly familiar with the region. Post the job description on free websites, like Craigslist and on the Hostel Management forums. Make a job description detailing the hard work entailed, such as enforcing quiet hours, washing linens, making light meals and keeping the place clean. To avoid high turnover and retraining costs, explain to job candidates that you desire a three- to six-month commitment. Perform a background check and follow up on personal and professional references.

  8. List your hostel with well-known organisations like Hostel International.

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Things You'll Need

  • Property
  • Furniture
  • Household Items
  • Staff members

About the Author

Since 2008 Catherine Capozzi has been writing business, finance and economics-related articles from her home in the sunny state of Arizona. She is pursuing a Bachelor of Science in economics from the W.P. Carey School of Business at Arizona State University, which has given her a love of spreadsheets and corporate life.

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