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Help with Income & Expenses Estimate

Start a Hostel

commander started this discussion 15 years 11 months ago

Hello,

I'm thinking of opening a hostel in Chicago. I've been doing research for about a month or so and anticipate several more months of work before I'd consider opening. I've put together a very preliminary income and expense estimate based on talking with a few hostel managers and investigating my local market:

Monthly Income & Expense Projection
Chicago Hostel

Income:
100 beds @ 60% occupancy @ $10 bed (100 *.6 *10 * 30 days)
=$18,000 Gross Monthly Income

Expenses:
$3500 Rent or Mortgage Payment
$2500 Manager's Salary
$5520 3 FTE (full time employee equivalents) @ $10 / hour
$1000 Electric Bill
$600 Gas Bill
$300 Cable TV / Internet Bill
$1000 Supplies
$500 Advertising
$500 Insurance
$500 Miscelaneous
=$15,920 Gross Monthly Expenses

= $2080 Net monthly profit

I've deliberately tried to be conservative. I expect year-round occupancy to average higher and I think I could get a higher rate than $10/bed. The rent and mortgage payment is accurate for ~5000 square foot (460 square meters) property in my desired area. The 3 FTE employees means any combination of employee hours that total 3 equivalent full time employees (could be 2 part time and 2 full time or whatever).

This is just a very initial estimate to get an idea as to whether I should proceed further. I am not including start-up costs, I am just for now interested to see if this is potentially viable on an ongoing basis once established.

What other expenses am I missing? Any other comments?

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commander

15 years

Thanks Rucksack and Hostels for your thoughts - and please anyone with more thoughts about making what is a large open space (the main open room of a church with high ceilings) into more cozy bedrooms, please continue to let me know. If anyone is intersted, the cost for the dividers is about $100 / foot. So each 12 foot wall (10 feet high) is about $1200.

Yes, Rucksack, we can have some of the features you suggested! I want to be careful between having playful fun with traditional church imagery and potentially being in bad taste, but I think there is room here to make light of the officialdom that is church in the context of a fun hostel atmosphere. Here and there I have been to bars or restaurants in old churches that seem to make it work - and it is something of a nice feeling to drink in church!

The property agent is saying this space is almost impossible to rent as there is almost no use for it except a church...so this gives me something of an advantage. Zoning seems to allow a hostel here, but another thing I'm wondering about is neighbors --- should I start to approach them about how they'd feel with a hostel in the neighborhood?

regards

Commander

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santa klaus

15 years

I am a little bit sceptical about the dividers. I haven´t seen something like that in a hostel anywhere. If you say it seems to be OK at that hostel in SF you might be right, but I´m still sceptical. Noise and security are obvious problems. When people rent a room, they expect a ceiling I guess...

Is there really no way to buid a light ceiling and some walls into this structure? It´s obviously a nice building with a lot of character.

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Josh Hostels

15 years

If you decide to go with a ceiling here's a photo of how one hostel ventilates their windowless dorm rooms.

(Just another idea.)

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uktrail

15 years

If you have a large dorm that is clearly a dorm, and put in some dividers to make a touch of privacy while still it is clearly a dorm, that's fine.

If you put in dividers, or lockable cubicles that look like separate rooms, people will treat them as such and may talk in one of the rooms, but their sound is heard throughout the "whole dorm". So I don't think they are a good idea.

Pacific Tradewinds? I remember it, it was rather like the first of the above, the lights were for the dorm rather than the partitioned area, so everyone in the whole dorm is awakened when anyone comes in in the night.

There's a hostel in a church in Edinburgh which is just like you describe. The dorms feel as if they are separate rooms, but the walls are transparent to sound and go up halfway to the roof, and there's no windows -- I call it depressing, and reviewers have complained about them.

And in any of the cases, a snorer will be heard throughout.:(

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aboriginalhostel

15 years

Another idea... you seem to have a very high ceiling. You could actually build a loft on it or maybe even several levels. I know it costs a lot but then you could have a capacity for even more people. Start small, think big.

I'm a window person, couldn't really stay in a room without a window, however I guess you could deal the air circulation with air conditioning. The open top would bother me a lot as well... but it doesn't cost a lot to put a fake ceiling just like Klaus said. I would also invest bit more on soundproof insulation, like fiberglass. Imagine an alarm clock going off 5am would wake everybody up... especially because a church suppose to be a very good acoustic environment.

One other concern is about plasterboard walls, you can simply kick it through even from another room, decreasing the feel of safety. Even if no one does it, people would still consider about it. So I'd recommend to have several layers of plasterboard on both sides, like an inch wide (that would mean about 2-3 layers). That would be strong enough to resist.

Other than that, your idea is impressive.

Brian, those thoughts about Buddy Jesus made me ROTFL. :D
Especially because of your name, sorry about that. Have you seen Monthy Python's Life of Brian? ;)
It would be very funny and make people actually remember the place to have such interior design.

About the neighbors, it would be convincing saying sheltering youth in a safe environment, offering them activities. This is still not lying but not being brutally honest and not far about the truth. I guess you don't want to open a bar at the beginning, so people won't have much of complaint about the noise or drunk strangers on the street, except smokers.
Smokers are problem in every hostel, even if you are one of them.

Also wanted to mention that, according to expenses, did you count the 10% costs for taking online bookings by third parties, like Hostelworld?

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skibum001

15 years

G'day Commmander,

Personally, I think 'fake' dividing walls can be very difficult to pull off. I remember a hostel in Copenhagen called Sleepin Heaven. It was an old converted factory and one of the dorms in summer was just a curtained off section of an open hall with about 100 beds in it! Not particularly nice (or hyggelig as they say there!). Very noisy and I felt like I was in a homeless shelter.

I've also seen thin wooden walls to make windowless rooms in Thailand like the one @hostels linked to. Again, pretty yuck as the owners tend to make these kind of private rooms much smaller than they would be otherwise.

Its not all bad news however. The suggestion of a mezzanine level is fantastic. the high roof could give you a chance to be unique and special for travellers (if done well). Check out this example http://www.nylofthostel.com/.

Finally, don't be afraid of controversy when marketing. To steal a concept from Seth Godin, you need to be remarkable. You wont be able to please everyone (you'd be too boring if you did) so as long as you can totally impress a niche, you don't need to impress anyone else. Creating controversy in wider society in a way that your target market finds amusing and appealing will do wonders for business.

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Rucksack Brian

15 years

Another idea... you seem to have a very high ceiling. You could actually build a loft on it or maybe even several levels. I know it costs a lot but then you could have a capacity for even more people. Start small, think big.

I visited the Ville Saint Exupery in Nice, France over New Years. They use the chapel of a monastery as their common room/bar, and they have recently added a mezanine to recover some of the space overhead. In the mezanine they have several tables, a row of computers, and a big screen TV tucked out of the way where it won't interfere with the socializing taking place in the bar below. It's still a nightmare to heat the chapel because they didn't completely close off the ceiling, but it does add quite a bit of useable space. Do you have another area that you prefer to use as the bar/common room? Would it be easier to convert that space into dorms than the chapel?

Brian, those thoughts about Buddy Jesus made me ROTFL. :D
Especially because of your name, sorry about that. Have you seen Monthy Python's Life of Brian? ;)

I am not the Messiah!

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aboriginalhostel

15 years

I am not the Messiah!

You see, you could even start a new religion by losing a shoe! :D

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commander

15 years

Thanks for the helpful comments!

I'm hearing that some type of room dividers are not ideal, although they might be workable as used in some other hostels. I've also heard that a loft of some type might be something to investigate. I have to say right now I'm not sure if doing exactly what everyone suggests will be plausible on day one. Perfection is a goal for the future! But perhaps just getting something reasonable started is a more realistic near-term goal. The price for this building is such that I think I can offer very cheap dorm prices but provide something like single or double rooms. I'm thinking start simple then expand.

Today I had a discussion with the church about this idea. They are offering the building for sale or lease, and I asked them about being a landlord for a hostel. They thought the idea might be a reasonable one and not incompatible with their ideas about an appropriate use for an ex-church. They're going to think about it and get back to me....btw I would likely have an easier time with the city and community if I kept the church as some kind of partner, at least on paper...without letting them interfere with my plans to make this the biggest nonstop party hostel in North America! (just kidding - a clean well run hostel is my initial basic goal)

All suggestions or comments appreciated!

Commander

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santa klaus

15 years

btw I would likely have an easier time with the city and community if I kept the church as some kind of partner, at least on paper...

As far as I have observed, it can eventually turn out to be a real pain in the ass to be associated with a weird preacher from Chicago! :D

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