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costs of the online bookings

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funny.valentine started this discussion 10 years 1 month ago

Hi,

Together with a friend of mine we plan to open a hostel in Poland (ca. 40-45 beds in dorms and private rooms) somewhere in the spring 2015. After having identified a property that seems to suit our purpose, the time has come to do some more detailed budgeting work.

Among many cost items there is one that is difficult for us to evaluate without having insight into the real figures. I mean costs of reservations done through online search engines which depend on how many guests make their bookings with their use.

Would some of you be so kind to share with us how does it work in case of your hostels i.e. what is the share of the bookings done through the OTA’s vs. guests coming straight from the street or making reservations on your websites or by phone.

Other issue that bothers us is the potential structure of the operating expenses. Based on our indicative assumptions rental payments will be the biggest single item followed by laundry & cleaning, costs of food (basic free breakfasts) and brokerage fees charged by OTA’s (?). Are we missing something? Would you please be so kind to give us the feeling how the cost structure might look based on your experiences?

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Insta-Hostel

10 years

Hi,

I heard that in the popular cities with a lot of competition, share of OTAs from bookings could be as high as 70%. This number is lower in smaller cities. I think direct bookings should be at least 50%, otherwise you are not really in control of the business. Cost of OTAs range from 10% (gomio) to as high as 25%.

The key to more direct bookings is a good hostel website with a possibility of online booking. (not only a form, but a real booking with deposit payment.) For the other costs,you would have to ask hostel owners.

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Rucksack Brian

10 years

Hi Funny.Valentine. Welcome to the Forum!

In your costs you should also consider you staff salaries. That will be a very large part of your expenses unless the two of you plan to run everything on your own. Your utilities (gas, water, electric, etc.) will costs a lot. Don’t forget to factor in your taxes. Toilet paper will cost you way more than you probably expect too.

As Insta-Hostel suggested, you should shoot to keep your bookings from OTAs below 50% of your total bookings. The lower the percentage from OTAs the stronger your business will be. So add some marketing costs to your expense list.

Here is an older thread about income and expenses that might be useful.

The current trend in the hostel industry is to include the OTA commissions in the prices listed on each respective site. For example, if you list with HW then the commission is currently 12%. Simply include that 12% in their selling price so that the remaining balance due is the same price as a direct booking. With this method the cost associated with those reservations is greatly reduced. If it’s not clear how to calculate the selling price for each OTA, this post might help.

If you haven’t already seen it, here is our New Hostel FAQ page. Reading through those posts may give you some more inspiration and answer some more of your questions.

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