Earlier this year I spent a month in Indonesia and travelled a bit. I spent most of my time on Nusa Lembongan and Komodo NP. I don't have experience in Bali proper, but from my experience in other parts of Indo, hostels as we typically expect them are somewhat rare, homestays are more common but don'tusually have the same amenities we expect from hostels. I think a full featured hostel in some areas I think could be quite profitable if you found the right place. That being said, as far as I know, in Indonesia, like many SEA countries, a foreign investor cannot own majority stake in a business.
I am currently planning and investigating my own hostel/lodging opportunities. Feel free to send me a message if you want to share ideas.