Many hostels are making a decent income. I attached some simple spreadsheets to this wiki page where you can make projections based on the number of beds you will have and your expected occupancy.
A medium-sized hostel as an example:
100 beds at $22 per night = $2200 gross income per night when full. Even calculated with a conservative average of 50% average occupancy and the gross income is $1100 per night or about $30,000 per month.