Hi everyone,
I guess we're all here for the same reason. We are interested in starting a hostel. Me too! I guess we have to take steps in moving forward, right? Since we're all here, lets begin?
Question 1:
Where do I begin?
Answer1:
CONGRADULATIONS!!! You have already begun. Getting the idea was the first step.
Question 2:
What now?
Answer 2:
Contact a real estate lawyer or business lawyer. Some firms practice in both. This way you can get information on both business practices, insurance issues and zoning regulations. These people will basically set you off on the right foot (depending on the lawyer you get). YES! YOU WILL HAVE TO PAY. DONT BE CHEAP OR IT WILL BITE YOU IN THE @22. Consultation should range from $50-$200/hr. Shop around. Lots of lawyers will do an initial consultation for free.
Question 3:
What do I do after contacting the lawyer?
Answer 3:
How much money do you have saved up? If you have $0 saved up then you do nothing until you have some $$$$. It really depends on your current situation. Do you own a home that you can hostel out to guests? If not then do you have someone elses property that they will allow you to hostel out to guests? Do you have the capitol to purchase the land/building?
Question 4:
If you have "said" property or cash...Then what?
Answer 4:
COOL! Lets say the lawyer fixed up your legal end (zoning, insurance, fire codes)...Now we can begin right? NOPE. How shabby does the inside of your place look? Does it need renovating? That costs money. Do you have $20,000-80,000 saved up for renovations? No? Better start saving.
Question 5:
Renovations are finished... Can we open?
Answer 5:
Not in your wildest dreams. Where are your guests going to sleep? On the floor? Did you forget the interior decorating? What about the kitchen and bathroom? For me, I estimate I will need $10,000 to $20,000 to buy all he necessary goods to start.
Question 6:
I bought all the necessary goods to start...and???
Answer 6:
Now youre ready to open. Its all up to elbow grease now.
Disclaimer: All this information is for reference only. I take no responsibility for anyone misusing the notes above. Dont go rushing off and trying to set this up immediately. Continue to do your research and think about your idea. Dont rush anything. It normally takes 1-2 years to plan and impliment something of this nature.
In my case, I will operate a 6-10 bed guesthouse for a few years to get some cash, understand the customers and get some statistics. Once I have a good level of statistics and some cash, I will contact a bank for a $2 million business loan. Thats 6-7 years down the line so no worries and no rushing.
Did I miss anything?
17 years
Thanks for the post.
I'll add:
I think that it's a good idea to work in a hostel or two to gain some experience before opening a hostel. Get a job at the best-rated hostel that you can and take notes. That should help avoid some common mistakes.
Also consider how you will attract guests to the hostel. Marketing is important. Don't skimp on the Web site, especially if you are in a major city.
17 years
You might want to write up a business plan for your hostel. Banks will want to see some sort of plan before handing over any cash and it's a good way for you to work through all the aspects of your business. Staffing, marketing,procurement, etc..
17 years
You might want to write up a business plan for your hostel. Banks will want to see some sort of plan before handing over any cash and it's a good way for you to work through all the aspects of your business. Staffing, marketing,procurement, etc..
The business lawyer will help with writing a business plan. Thats why you should always talk to a lawyer first. They can always set you in the right path...Capitol you need, licences, agreements, location...They have a large part of the resources you need. Also, because they do this for a living they can save you months of time in running around in circles. I did my fair share of tail chasing, but whoever utilizes the right lawyer may not have to.
Anyone else starting a guesthouse / hostel? Please post.
-Tom
17 years
Something to think about
Real Estate costs
Rough estimate of mortgage payments for a 30 year mortgage @ 7% interest
$100,000 = $833.33/mo
$500,000 = $4166.66/mo
$1,000,000 = $8333.33/mo
Lets say your house has 4 rooms, one of which belongs to you. 3 are guest rooms. Since we dont want to make them feel like sardines, we will only put 2 bunk beds in each room. Thats 12 beds. How do you calculate how much to charge? You add your mortgage payment ($100,000) to what you would like to be paid 1 month (start with a small salary unless you want to drive yourself into the ground). Lets say you want to be paid $500/mo. Add $500 to $833.33 = $1333.33. Divide $1333.33 by 12 beds = $112 (round up). Then divide $112 by 8 days (Always assume you'll get less business then you actually get. This will buffer you in bad times). So you roughly ask for $14 per bed in order to scrape by.
Remember to consider your location also. Major cities like Los Angeles, Chicago, Seattle, New York, Madrid, London charge premiums to stay there, but real estate is quite high there also. Smaller places like Wisconsin and the Dakotas may only be able to charge $5-10/night because no one goes out there. Real estate is also much lower.
Blah blah blah....
Also take 1-2 years to think about your plans. This should not be done fast or else you will stumble on lots of mistakes.
Initially only offer simple stuff
1) Beds / linens/ sheets / blankets
2) Full kitchen (yes some stuff may get lost or stolen)
3) Clean bathroom
After you have mastered the basics above, then you should go on to add "BIGGER, BADDER, BETTER".
17 years
Add $500 to $833.33 = $1333.33. Divide $1333.33 by 12 beds = $112 (round up). Then divide $112 by 8 days (Always assume you'll get less business then you actually get. This will buffer you in bad times).
Also calculate private rooms (if any) and extra income -- e.g., Internet kiosks, tour bookings, food, bar. If you have a larger hostel those things can create significant income.
I found that tour bookings are a good way to keep the front desk happy -- pay them a commission on their bookings and it gives them some extra spending money. The staff also get to go on free tours. Creates extra services for guests and increases employee benefits without costing the hostel.
17 years
Hello,
I am also working on starting a hostel, right now I already know all the laws, requirements, zoning, license stuff...well all the boring things...and I´m hunting for a building (which is the hardest part).
At least in my case I don´t see any need for a lawyer, sure I had to do my share of visiting town hall and government offices to get the information I needed, but there are plenty of free resources to guide you through the steps to take, doors to knock and even to design your business plan.
House price in the area is quite high, so after making numbers about estimate costs and average occupancy expected for the year (being there in the conservative side, I believe real average would be higher) I have came to the conclusion that minimum number of beds to make it work would be around 25 to 30 so that the business could cover costs and pay mortgage and loans considering the prices I have seen.
Also you have to consider other expenses besides loan payments and your salary, like insurances, web hosting and other marketing stuff, normal running expenses like water, heating and electricity bills, laundry-even in case you take care of this yourself it ads up a bit to those running bills plus to cleaning pruducts-, taxes over the building and/or over the business and/or over profits, extra expenses on high season if you require to hire some part time help, etc.
Also don´t forget that for a business of this kind you might be required to install smoke detectors and a fire alarm and stuff of the like that ads up to the initial costs.
Up to now I have only found either a tad too small houses or huge ones (with huge price also haha)....or good sized affordable ones that require complete restoration....but that would be too costly money and time wise...and too complicated also.
Well, good luck to you all and to myself also hehe
17 years
Also you have to consider other expenses besides loan payments and your salary, like insurances, web hosting and other marketing stuff...
Good point about the marketing expenses. Many hostel bookings come through online booking services like Hostelworld, Hostelbookers, Hostelsclub, etc. When someone books through those services, the hostel generally loses about 10% of the room rate. Those losses have to be factored in.
Web hosting can be obtained for about $60 to $70 per year. I wrote an article with my Web hosting recommendations. Site5.com is my #1 choice for cheap hosting. They are $5/month and have the best control panel of any cheap host that I've used.
17 years
Many hostel bookings come through online booking services like Hostelworld, Hostelbookers, Hostelsclub, etc. When someone books through those services, the hostel generally loses about 10% of the room rate. Those losses have to be factored in.
Yes, I thought about that...and have a question regarding that also, How do hostels normally manage that? I mean I guess they leave a percentage of rooms to be booked via those online services and another percentage to be booked directly either through the hostel website, phone calls or in person...and I guess those percentages will vary depending on the season and such and will probably be something to decide once the business is running and you see how things go, but what would be a typical way to decide those things or a typical share to start?
Thank you :)
17 years
Hostels usually manage their availability with the different booking engines. A hostel will open an account with Hostelworld, Hostelbookers, Hostelsclub, Hosteltimes, Hostelmania, and possibly others... Then you allocate a certain number of beds to each one.
Managing the availability between all the booking engines can be complicated. Most hostels just use the biggest ones.
The percentage of your bookings that come through booking engines depends on your location (city) and the visibility of your own Web site online.
Before you open you could set up an account with a couple of the larger hostel booking engines. Allocate a percentage of your beds to them and they will market your hostel online (taking the booking commission). Use them to take bookings as much as they will provide (getting 90% of your room rate is better than 0%). If you start filling up your beds with other means, then cut back your availability with the booking engines. You can manage your availability through hostelworld, hostelbookers, etc. through online forms.
17 years
Ever play monopoly? This is almost like a super slow paced monopoly game. Bad thing is you dont see your rewards and gains for years. Once you start collecting your $200 at GO then the money really starts coming in.
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