I would LOVE to run a hostel, but I am unconvinced that I can actually make a profit from running a hostel.
With the price of real estate the way it is in most places now, I would think that just paying back the mortgage would eat up any revenue.
For example, a loan of say $300,000 would entail a mortgage payment of at least $1,500 a month. Add to that utilities and property taxes and you are at about $2,500 a month at least, that is before you account for your time and anything else.
And I am being very conservative with my estimate of a $300,000 loan.
So, you need to be making at least $80 a day, every day of the year just to pay for your mortgage/utilities/taxes. Is this realistic?
How can anybody make money in this business? Or is it more of a lifestyle choice?
17 years
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.
17 years
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.
How many rooms do you need for 100 beds? What size would such a hostel have to be?
17 years
Depends on how many beds you put in each dorm. 100 beds would be 25 four-bed dorms, or 16 six-bed dorms... or a combination. You can calculate it with the spreadsheet that I mentioned.
E.g., 100 dorm beds at $25 per night at 70% average occupancy is about $53,000 average gross per month (not including private rooms).
If you have a good enough location to support a busy Internet cafe also, you might be able to make an extra 6 figures from Internet.
Since you will have a lot of guests that are going to spend money, you could also make significant extra income from:
* tour bookings
* car rental bookings
* bar (most travellers are going to drink)
* food (all travellers are going to eat)
Calculate how much income each room might bring as an apartment, and how much it might bring as a hostel.
I've only worked with larger city hostels and was not involved with purchasing the property so I don't know about juggling those costs.
17 years
Depends on how many beds you put in each dorm. 100 beds would be 25 four-bed dorms, or 16 six-bed dorms... or a combination.
OK. But, I would still think a 25 room hostel would set you back a fair amount.
I am talking close to $2 million in an area of town where travellers would be interested in staying.
I was looking at opening an actual Hotel versus a hostel and the numbers just weren't working out. Primarily because of real estate costs.
Have you run or do you own any hostels?
17 years
The hotel costs weren't working out in your calculations either, or just the hostel costs?
I've worked in and with hostels for 6 years and have dealt with many "operations" and marketing aspects of the business, but did not deal with property expenses/issues at any of the hostels.
17 years
The hotel costs weren't working out in your calculations either, or just the hostel costs?
I've worked in and with hostels for 6 years and have dealt with many "operations" and marketing aspects of the business, but did not deal with property expenses/issues at any of the hostels.
The hotel costs weren't working out to make it profitable.
As far as I can see that is your single biggest expense unless you have the building in your family or handed down to you.
Starting a NEW hostel would require the real estate to be bought or leased and real estate is too expensive from what I am calculating.
Whether you look at Spain, France, the UK, Croatia, Canada, India.. real estate prices are at record highs. It is only in the US now the real estate market is cooling.
17 years
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.[/QUOTE]
100 beds is medium sized?? Wow.. Do you think its necessary to cram in as many beds as possible??
17 years
100 beds is medium sized?? Wow.. Do you think its necessary to cram in as many beds as possible??
I've worked at and with hostels from about 80 beds to over 300 beds. There is a new hostel in Edinburgh that is over 600 beds. I think of anything from about 80 to 130 beds to be mid-sized (just a personal measurement).
Starting a NEW hostel would require the real estate to be bought or leased and real estate is too expensive from what I am calculating.
I don't know about juggling the real estate costs... it may be that new hostels are taking a loss at the beginning, but I know that new hostels are opening even in areas where real estate is expensive.
17 years
If it helps, I opened my hostel in January 2006. The cost of the building was $550,000. I have 13 private rooms and 28 dorm beds. My expenses come to about $7500 per month. This includes mortgage, utilities, and setting aside $1000 per month for insurance and property tax. My first year, the hostel brought in on average $12,000 per month in the winter and $23,000 in the summer. If you live on site, then obviously you will save money not paying additional rent or mortgage. The standard commercial loan will require 30% down payment. The easiest way now to buy property is to look for bank repo property, which most banks list on their websites which properties they have or you can contact the commerical loan dept. Also fixer upper property is always good if you have a fair amount of knowledge on painting, drywall, plumbing, ect... Also look for owner financed properties, you can get in for as little as 5% down. A good source for property is loopnet.com I hope this helps.
17 years
If it helps, I opened my hostel in January 2006. The cost of the building was $550,000. I have 13 private rooms and 28 dorm beds. My expenses come to about $7500 per month. This includes mortgage, utilities, and setting aside $1000 per month for insurance and property tax. My first year, the hostel brought in on average $12,000 per month in the winter and $23,000 in the summer. If you live on site, then obviously you will save money not paying additional rent or mortgage. The standard commercial loan will require 30% down payment. The easiest way now to buy property is to look for bank repo property, which most banks list on their websites which properties they have or you can contact the commerical loan dept. Also fixer upper property is always good if you have a fair amount of knowledge on painting, drywall, plumbing, ect... Also look for owner financed properties, you can get in for as little as 5% down. A good source for property is loopnet.com I hope this helps.
Thanks for the numbers Joseph. Interesting breakdown. A few questions.
- What are your employee costs?
- What is your occupancy in winter/summer?
I have looked at Loopnet before. Don't they ask you to purchase a premium membership or something?
Thanks!
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