13 years
Welcome to the site... have you seen the hostel wiki yet?
These pages might be a good place to start:
If you have any questions after that, ask away... :)
Seeking information
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Greetings everyone!
I am currently taking an International Business Management class as a student at National University as part of earning a degree in hospitality. In fulfilling my tasks I am required to write a small paper about the hostel industry in America. My angle is what it takes to create a successful hostel in my area. I am hoping to find enough basic information regarding what factors are important to the success of a hostel, and any interesting facts about international operations it would help me to write a 10 page paper and develop some Power Point slides to present to my fellow students.
Thank you very much in advance
- Comments
13 years
Thank you for your suggestion, I am now 70 % finished. To get the last few pages filled, I am wondering about the occupancy % and the break even point. These forums have offered conflicting information as to what should be the optimal break even point for a hostel. Some postings have suggested as low as 30% while others as high as 80%. In the hotel industry, break even is generally around 60% occupancy, with some exceptions. What factors decide the difference?
13 years
These forums have offered conflicting information as to what should be the optimal break even point for a hostel. Some postings have suggested as low as 30% while others as high as 80%. In the hotel industry, break even is generally around 60% occupancy, with some exceptions. What factors decide the difference?
Here are some possibilities:
- rent or property costs
- employee wages (some countries have very low wages, and some hostels use a lot of work-exchange people)
- bar or no bar
- taxes
- renovations and building maintenance
- hostel prices -- price wars can drop the price
- number of private rooms
- etc.
13 years
How hostile is San Clemente about hostels
Steve Lacoss
7/29/2011
MGT 430
DR. Erik Jones
National University
Abstract
San Clemente offers a myriad of lodging options for guests. There are hotels, motels, inns, resorts, vacation rentals, bed and breakfasts, and camp grounds. Even with all these options, there are no hostels. With academic focus on business administration and hospitality, it feels natural to want to research the concept of the hostel, how it would fit in San Clemente, and what a successful endeavor requires. .
Table of Contents
Introduction 2
Definition 2
History 2
Hostelling International 3
Brands/Franchising 4
Internet Presence 5
Legals 7
Profitibility 8
Visitor Statistics 8
SWOT Analysis 8
Strengths 9
Weaknesses 9
Opportunities 9
Threats 10
Conclusion 10
Introduction
San Clemente offers a myriad of lodging options for guests. There are hotels, motels, inns, resorts, vacation rentals, bed and breakfasts, and camp grounds. Even with all these options, there are no hostels. With academic focus on business administration and hospitality, it feels natural to want to research the concept of the hostel, how it would fit in San Clemente, and what a successful endeavor requires.
Definition
A hostel is different than a hotel or guest house in that it offers budget-oriented, short term accommodations based on renting by the bed instead of by the room. They could be rooms with bunk beds in rooms or dormitories (Wikipedia 2011) with shared common areas, bathroom facilities, and a self-catering kitchen. Hostels generally cost less than hotels for both operator and guests. They offer an informal, sociable atmosphere aimed at building camaraderie with fellow guests. Guests are often expected to assist in housekeeping duties, or at least clean up after themselves.
History
The concept of the youth hostel movement sprung from the mind of a German elementary teacher named Richard Shirrmann, who allegedly was bothered by the negative effects of the Industrial Revolution on children. To counter this, he created a weekend wandering school that entailed field trips into the countryside. On one excursion, Shirrmann and his students became caught in a thunderstorm (Youth Hostels 2011). Finding shelter within a school, the concept of the youth hostel was born. The hostel concept flourished in Germany, and quickly spread into Switzerland, Poland, the Netherlands, Denmark, Briton, Ireland, France and Belgium (HIUSA 2011). In 1932, association representatives from these industries met in Amsterdam with the goal of adopting industry standards.
This meeting created the International Youth Hostel Federation (IYHF), a governing body for industry standards. Shirrmann became president of IYHF in 1933, but was soon forced to step down by the German government (Wikipedia 2011). By 1935, more than 2000 youth hostels populated Germany, with another 600 more throughout Europe, and 30 in the United States. World War Two forced a suspension of hostel operations until things settled down worldwide. The postwar era saw a resurgence of hostels sprouting throughout the world. In 1999, the youth hostel movement’s 31 million hostel overnight stays involved over 60 percent of domestic travel in Europe and 33 percent international travel (Marcussen 1999). It is estimated that roughly three million stays involved group booking. This growth continued until the September eleventh terrorist attack coupled with a breakout Severe Acute Respiratory Syndrome (SARS) greatly suppressed travel (HIUSA 2011).
Hostelling International
Today, Hostelling International (HI), formerly the IYHF, is a non-profit organization that represents over 4,000 hostels that account for over 35 million overnight stays annually in more than 80 countries (HI 2011). In 2010, the American Hostellers International branch, American Youth Hostels (YHA) generated over $18 million in revenues with $15.7 million in bed rentals. Total expenses came to $16.7 million for a net profit of 1.3 million (Rensik (2011). In 2008, American Youth Hostels reported $17.9 million in revenues with $15.5 million in rooms. With $16.8 million of expenses, American Youth Hostels realized a profit of $1.1 million. In 2010, Hostellers International Canada reported $9.2 million in room revenue for a total of $12.6 million in revenues and $12.2 million expenses for a net profit of $ 391,053. European financial data was not available for Hostellers International.
Hostellers International is made up of national associations, some of which are for-profit. A prospective hostel that wishes to join the Hostellers International network and use the Hosteller International brand must become a member of one of these national associations. Attempts to learn more about this path were blocked by a lack of email responses. The Hosteller International brand web site is similar to Choice hotels web site in that they both offer reservation capabilities to any of their member rooms, various promotions, and membership benefits. Like Choice Hotels, It holds each hostel to standards that aims for an enjoyable stay that is a comfortable, safe experience (HIUSA 2011).
Brands/Franchising
In Europe there are over 37 published hostel chains outside of the HI network and only 7 chains within the United States. The websites for the American chains are modest with little more than property descriptions and reservation capabilities (USAHostels 2011). In the South Americas, there is a small franchise chain called El Misti. It is mainly based in Peru and Rio de Janeiro. The email feature of their web site to ask about franchise was not functional, and alternative attempts failed to elicit responses. For European chains, the only chain that offers franchising opportunities is Journeys Hostels, which touts itself as the “world’s first hostel franchise company” (McBrearty 2010).
13 years
Journeys offer its brand as a franchise with five year contracts. The contracts have unlimited renewals with no additional fees with the condition of adhering to the normal terms of the franchise agreement. The initial cash price is £12,500 plus Value-Added Tax. This translates into $20,376 plus tax in United States Dollars. In addition to the initial costs, there are fees that are accrued weekly. These fees total eleven percent of bed sales. This breaks down to management service fee of eight percent of turnover excluding taxes, a marketing and promotional fund fee of two percent, and a one percent going towards a system fee (Fox 2010). Credit cards are accepted and Journeys is willing to work with banks if loans are required.
In exchange for these fees, Journey offers a rapidly growing and established brand, access to their global marketing system, PR activity, purchasing power, a reservation booking system, expert advice, and international web exposure (Fox 2010). Journey’s marketing staff endeavors to reach new and existing audiences with the goal of building a strong and positive reputation. The staff offers training for cutting edge practices to utilize social networking sites such as Twitter and Facebook. Guidance for revenue management techniques and pricing strategies are available (Fox 2010) to help get the most out of the product.
The customer relations management practices work to maximize communication with guests and media. This begins with the Journeys reservation system, continues throughout the entire stay, and follows up with a “Hostel Stars” guest survey system that elicits feedback and suggestions (Fox 2010). In Europe, Journeys practices economies of scale when possible. This reduces costs for the franchisee. There is a variety of training courses available to help franchises to provide the best experiences for the guests and employees. Franchise standards are enforced with random audits that evaluate the entire guest experience and hostel condition (Fox 2010).
Internet Presence
Research from 1999 indicated that while most hostels had web sites, very few had room booking capabilities (Marcussen 1999). This was partially due to credit card security issues, high bank fees, and undeveloped technology. Today, it is possible to book reservations at almost every hostel web site. The first part of a good marketing plan for a hostel includes the design and publishing of a web site. It is the first contact point for most hotel customers (Starkov 2008). A potential guest receives their first impression of the hotel when he or she visits the web site. The design is important to make a good first impression. If this does not happen, then the visit also becomes the potential customer’s final point of contact (Starkov 2008). It is important to develop a website optimization strategy that will enhance the web site’s user-friendliness, compatibility with search engines, ease of travel booking, and create a positive interactive relationship. There are also affiliate marketers such as Hostelworld.com, Hostelplanet.com and hostels.com.
Affiliate marketing is a practice of rewarding an affiliate for each customer or visitor brought by the marketing efforts of the affiliate (Jain 2008). Originally, travel agents were the affiliates; they would sell the hotel to travelers. The Internet has changed how people book rooms. People never go to their agent any more. Instead they search the Internet for their traveling decisions. Hostels get free advertising and reducing the amount of selling efforts required (NG 2009) after they advertise on affiliate marketing sites. The more affiliates a hostel signs up with, the more exposure it receives. It is important to monitor affiliates because some will use unsavory means to bring customers to their website to sell the products. This causes the merchant to contend with damage control to keep the reputation credible (Ng. 2009).
Affiliates, such as Expedia and Orbitz, charge hotels as high as twenty percent of the booking cost for a regular hotel in the USA in commissions. This can potentially erode the profits. The hostel affiliates are currently charging the hostels just ten percent of the booking value in commission, a much more affordable rate. The fine print of the affiliates all require internet parity with posted rates. They do not want a hostel offering a better price than them for the same room (hostel 2011). There are workarounds to this. Do not offer every room type to the affiliate booking systems. The room types not listed on their sites does not require parity. Set daily allocations that the affiliates can sell. Once the limit is reached, the other rooms can advertise higher rates. Advertised package deals with additional products and services are not restricted due to value added features. Same with special promotions based on group size or stay duration.
Due to the socialness inherent with the hostel culture, social media is quickly becoming a favorite method of marketing. Twitter has over 214 accounts for hostels (Hostel management 2011). There are 53 hostels that have postings on YouTube, Facebook has 64 hostels, and Flickr has about 20. Surprisingly, LinkedIn did not possess any hostel accounts. A random check at several hostels Facebook pages shows that it is utilized almost daily by the hostels with lots of interactions and announcements. Blogging is another way for a hostel to market its benefits. Currently 40 hostels blog within their own web site, while 23 blog on external hosting sites. Hostelblogs.com possesses 48 different hostel blogs (Hostel blogs 2011).
13 years
Legal
Before installing a hostel in San Clemente, it is important to investigate the licensing and zoning laws to discover the city’s attitude towards a hostel. A business license to operate in the city costs $100. The City Code states that "apartments, motels, hotels, rooming houses, cottages and buildings having rental spaces" means a place where three (3) or more rooms, apartments, cottages or rental spaces are located upon one (1) piece of property, or upon adjoining pieces of property under one (1) ownership, and are available for rental” (San Clemente 2011). The hostel probably will have at least three rooms. Parking would not be a big issue because it requires a parking space for every 700 feet of occupancy space for a motel instead of the density of occupants. Zoning for bed and breakfasts requires that the “number of guest units shall be limited to a maximum density on the site of one (1) unit per five hundred (500) square feet of lot area” (San Clemente 2011). There are no provisions in the special uses section of zoning for hostels. It might require efforts to lobby the city to issue an exception to the bed and breakfast space per guest provision.
Profitability
National statistics on hostels in the US are not collected by government agencies. Those companies that do collect this data either want to charge for it or do not respond to email requests, and therefore, are excluded. As a relative substitute, data about the lodging industry as a whole is examined. In the United States, hotels generally require a 60 percent occupancy rate in order to break even (All Business 2011). In South Orange County, occupancy is currently reported to be at 71 percent (Lansner 2011), and nationwide occupancy is at 54 percent. The Comfort Suites in San Clemente is at 74 percent occupancy. This indicates that the local lodging industry is well above the break-even point. San Clemente tourism should be able to support the additional rooms a hostel will create. Unverifiable reports from hostel discussion boards indicate that many hostels break even as low as at 30 percent occupancy, with the average being around 45 percent.
Figure 1 demonstrates a method for calculating revenue projections based on the number of beds available when different percentages are rented. To calculate the number of beds, multiply number of rooms by number of beds per room. In figure 1, there are two rooms with four beds each and three rooms with three beds each. This totals 17 beds. The next step is to multiply number of beds by price per bed. If the price is $25 per bed, then 17 beds * $25 = $425 revenue for one night. This means maximum revenue over a period of a month is $12,750, and $155,125 for a year. Since it is not realistic for a hostel to sell all available beds every night, it is important to determine how much revenue is required to break even. For example, a hostel requires 60 percent occupancy in order to break even. Using figure 1, this would mean the hostel would have to bring in $93,075 yearly.
Figure 1.
Visitor Statistics
While most visitors to San Clemente are from within 60 miles, 16.3 percent live within California but outside 60 miles from San Clemente, 8.9 percent are from within the USA, and 1.8 percent is foreign visitors (King 2001). Visitors who stay overnight usually stay 5-7 nights. Of these, 23 percent stay in hotels, 34 percent rent houses or condominiums, and 33.7 percent stay with friends. No data available on what percent uses the campgrounds. Research suggests that those who come from the far away will tend to spend the night. On average, a visitor will spend $77.16 every day on the beach visit, of which $54.79 goes into San Clemente (King 2001). Only 5.7 percent of visitors come to San Clemente alone. Couples account for 18.4 percent with 16 percent for three people, and 17 percent for groups of four. Groups of 5 to 6 people account for 21.3 percent and for groups of 7 to 9 people account for 14.2 percent of
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