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Advice needed before making any investments

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Sergiu.G started this discussion 14 years 2 months ago

Hello there!

I come before you in hope of finding empathy and advice on the problems that refrain myself to start a hostel. I'll try to keep the story as simple as possible so I won't take up much time.

My parents have purchased a house a few years back and they still have a couple of years to pay off the loan, while the house sits there degrading further and further. They don't want renovate, but demolish and build a multi-storey house after they pay the morgage and put money aside (:confused: don't ask me why). In any case i've thought that it will take at least 5 years 'till that time comes and i can somehow exploit the property for profit and even help them repay the debt.

And now the basic specifics:
Location: Romania, Bucharest. The metro is located at 15 minutes of walk. Total of about 20-30 minutes from downtown (2 metro stops/stations). The house is not located on a major street or avenue, therefor it's not visible to the public.

Costs of renovation and interior investment: 10.000-15.000 Euros

Rooms:
1 dorm 6x3 meters - 5 bunk beds
1 dorm ~3x3 meters - 3 bunk beds
1 dorm ~2x2,5 meters - 1 bunk bed
1 small kitchen
2 toilets, 2 showers
all rooms are connected through a room in the middle where the reception would be

Total capacity: 18 people

I've decided that if i am going to start it, i will keep it seasonal, from october-march it will be closed, thus reducing the investment costs by 30% (~5000 euros); the costs of heating.

Competition:
The competition seems to be pretty steep. There are a few hostels situated right in the heart of the capital and from what I've read from reviews, they are pretty well equipped and satisfied with the services.
The prices range from 7 to 24 euros per night, on average it's about 10 or 11 euros.

My calculations showed that i need to have 7 beds occupied daily at minimum for my target profit.
Here's the kick:
If a person stays on average 3 days that means I'd need to find about 700 clients every month ?! :eek:
I'm worried i won't find 50 in the first 5 months...

Therefor my main concern for the time being is how will i find so many clients every month?

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ACBBPatrick

14 years

Hello there!

I come before you in hope of finding empathy and advice on the problems that refrain myself to start a hostel. I'll try to keep the story as simple as possible so I won't take up much time.

My parents have purchased a house a few years back and they still have a couple of years to pay off the loan, while the house sits there degrading further and further. They don't want renovate, but demolish and build a multi-storey house after they pay the morgage and put money aside (:confused: don't ask me why). In any case i've thought that it will take at least 5 years 'till that time comes and i can somehow exploit the property for profit and even help them repay the debt.

And now the basic specifics:
Location: Romania, Bucharest. The metro is located at 15 minutes of walk. Total of about 20-30 minutes from downtown (2 metro stops/stations). The house is not located on a major street or avenue, therefor it's not visible to the public.

Costs of renovation and interior investment: 10.000-15.000 Euros

Rooms:
1 dorm 6x3 meters - 5 bunk beds
1 dorm ~3x3 meters - 3 bunk beds
1 dorm ~2x2,5 meters - 1 bunk bed
1 small kitchen
2 toilets, 2 showers
all rooms are connected through a room in the middle where the reception would be

Total capacity: 18 people

I've decided that if i am going to start it, i will keep it seasonal, from october-march it will be closed, thus reducing the investment costs by 30% (~5000 euros); the costs of heating.

Competition:
The competition seems to be pretty steep. There are a few hostels situated right in the heart of the capital and from what I've read from reviews, they are pretty well equipped and satisfied with the services.
The prices range from 7 to 24 euros per night, on average it's about 10 or 11 euros.

My calculations showed that i need to have 7 beds occupied daily at minimum for my target profit.
Here's the kick:
If a person stays on average 3 days that means I'd need to find about 700 clients every month ?! :eek:
I'm worried i won't find 50 in the first 5 months...

Therefor my main concern for the time being is how will i find so many clients every month?

I think you should re-check your math. You will be happier. (much) :)

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ACBBPatrick

14 years

Hey Serg here is a pdf of a spreadsheet I did to show you the math. I can send you a working copy of this direct to you if you want to pvt me your email address. It's pretty simple and allows for some playing around to check some "what if" scenarios such as higher/lower prices, more/less months open, higher/lower revenue targets. It also shows your required occupancy percentage for each scenario. Hope this helps.

(oops just noticed I raised your price ,when I was playing around on the model, to 12 euros per night in the example spreadsheet, it happily reduced your required customers by over 6 per month.!)

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Sergiu.G

14 years

IMAGE(http://www.gogaminggiant.com/wp-content/uploads/2010/07/facepalm.jpg)
No better way to describe my feeling. I'm terribly sorry for the temporary lack of knowledge in basic algebra and thank you for pointing my mistake out.

The cost of a shower => 0.7 euros
150 Litres water - 0.12 Euros
3kW*h electricity for heating water - 0.56 Euros
Fan electricity - 0.02 Euros
The cost of using a toilet => 0.03 Euros
10 litres water - 0.03 Euros
The maximum cost of all house lightning per 12 hours => 3.36 Euros
20 lightbulbs - 0.28 euros per hour
Cost of washing bed sheets ~0.7 Euros
Estimated cost of cleaning the whole house: ~2 Euros

[INDENT]I am going to speculate that a person uses the toilet 3 times a day and takes a shower daily. That means a round total of 1 Euro (from 0.79)
Bed sheets are changed and washed every 3 days => 0.3 euros per day (per bed)[/INDENT]
That means keeping a person costs 1.1 euro per day

[INDENT]The house is cleaned every 3 days => 0.6 euros per day (the whole house)
The cost of electricity daily is 3 Euros
The cost internet is 0.4 euros per day
The cost of disposing garbage is ~1 eur per day[/INDENT]
That means utilities cost 5 euros per day

Am i missing any other expense? Any comments on my speculations?

Edit: Included garbage disposal

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Iuliana

14 years

Hi Sergiu!

There are some unexpected costs too. Sometimes things get broken and maybe you want to offer also something for breakfast too.

I think it is a great idea to have it seasonably, maybe open it for New Years again for a few days, it might be full house.
There are already to many Hostels in Bucharest but there is always place for a good one.
I am having a Hostel in Cluj-Napoca. You are welcome to visit us and see what's going on in a Hostel.

Good luck!

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Sergiu.G

14 years

Apologies for the big delay.

Iuliana i am aware that there are a few good hostels here in Bucharest. I'll spen a few nights in each one and try to make a better service. Another thing is i'm not opening a 100 capacity hostel either :)

I would like to talk to you in private about those unexpected costs if you'd be so kind.

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Iuliana

14 years

Hello Sergiu!

If you wish you may contact me. I would be happy to help you out. You can send private messages also through Hostel management.

Did you do some more research on the opening of your Hostel in the meanwhile?

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