Hi, I have a question for hostel owners
How much should be the occupancy rate you advise to reach the break even point for a small hostel with around 20-30 beds. Thank you very much for your advises.
Friendly,
Mauro
10 years
Hi Mauro,
Most people around here say to set your break-even point at around 40% occupancy.
If you haven’t already seen it, you might take a look at this thread. There are some links to discussions about income and expense estimates and financial templates that might be helpful for you.
10 years
Hi Rucksack Brian,
I thank you very much for your helpful informations. I am working on a business plan to open a small hostel around 20-30 beds, what is making me doubtful is that with a small hostel I suspect the return on investiment would not be appropiate. I would like to build a hostel because I love the environment being a traveler, and I do not do it mainly for remunerative reasons but I would like to optimize this aspect. Considering that it would be managed by to person ( 1 full and 1 part time or eventually 2 full time) is there a size or a type of hostel would you suggest to improve the possibility to create an adequate profit. In few words is there a recomended size for a viable hostel?
Thank you very much for any help provided.
Friendly,
Mauro
10 years
I don’t think there’s a magic number that could be applied across the board.
Small hostels that are owner-operated have the advantage of low operating costs and limited staff expenses. The atmosphere is frequently more intimate as well. The tradeoff is that you have a limited number of beds to fill, and therefore limited income. If you can count on a steady flow of people, then you could play with prices to find a balance that is appropriate for your guests and comfortably profitable for you.
The danger comes when you reach a size where you need additional staff to run the place, but the revenue from the extra guests doesn’t cover the costs of having that staff. Where that point will fall will depend largely on the number of guests that you can comfortably handle on your own without needing additional help. I started a thread about when you need more receptionists, and hopefully some other folks will share their experiences as well. It also depends on the physical size and layout of your property. (Will the guests be spread out across a large space or concentrated in a smaller area? How much space needs to be kept clean?) The employee wages in your area will also be a huge factor.
The bigger the hostel gets the less personal attention guests will expect. If you’re not interested in creating an intimate atmosphere then you can get away with fewer staff handling a larger number of guests, just like a hotel.
So you may want to go very small or very big to get the best ROI. The middle range may very well be a phenomenal hostel, but not necessarily the most profitable.
10 years
Hi, with regards to the subject, I can say with some certainty that it would take about 60% occupancy level to break even (for annual total operational costs) for a 40 bed hostel in a 300-320 sq m space in central/ busy district(s) of Prague, Czech Republic.
That said, can anybody having hostel experience, in Prague, CZ, give me any idea of when a new hostel can reach the 60% occupancy level in that location in the said city. Could it be in the 1st year, or 2nd or 3rd? Keeping this in mind that the hostel provides all the facilities at very competitive rental rates plus has nice clean comfortable surroundings with all amenities that a good small sized hostel can have. No corners are have been cut to provide decent and comfortable facilities to the guests. Free beverages (hot & cold), FREE: towels, hair dryer, soaps etc. Laundry from customers charged minimally, bed-lamps, entertainment systems, wifi, lockers, baskets, privacy curtains, the works..//
Thanks in advance/
8 years
The local hotels where I plan to open my hostel have an occupancy rate of 67%. I am estimating that in my first year I will have a 60% occupancy or higher based on this. My break even seems to be at just around 50% occupancy.
8 years
What size would you consider small-medium size hostel that can be owner-operated, and from what size you would say need to hire more staff?
8 years
One person could probably run a 20 or maybe even 30-bed hostel completely by himself under certain conditions.
Even for a very small hostel it is better to have at least two people running the business so that you can share responsibilities, motivate each other, bounce ideas off one another, get some time away from the hostel, and generally avoid burnout. At the very least, I would recommend hiring a housekeeper to take responsibility for the cleaning.
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