I think Italy is the perfect place for a hostel. It is also a place where it is not too difficult to convince people to travel away from the main destinations. There is a lot of competition in Rome, but other towns and cities can really do with more hostels.
Italy has so many nice cities and a lot of them only have one or two hostels. Also travellers know that there are lots of nice cities outside Rome and Florence so they are more likely to make the effort to visit a hostel if it has a good reputation.
If I were to open a hostel in Italy, my first choices would be Padova, Milano and Torino; although it would certainly work in Bologna, Ravenna and Verona as well.
For big cities, Milan and Torino really need more hostels; but Padova is probably a better spot as it is close enough to Venice to be a viable alternative to the Venetian hostels.
Good luck with your hostel.