A lot of my guests smoke, and a lot of them bond with each other and with my staff over cigarettes on the balcony. We are constantly emptying the ashtrays and cleaning up cigarette butts off the ground.
I prefer not to allow smoking inside, even if there were chambers like the airports have. It might confuse people about when smoking inside is OK and when it’s not. I have enough trouble making people understand that hanging your head out the dorm room window is not the same as going outside to smoke. And for some reason people can’t always understand that the bathroom is still inside the house. Just because there’s a fan doesn’t mean you can smoke there!
I got inspired during a trip to a mall though, because they had an enclosed smoking lounge in the middle of the food court. All of the furniture was really nice and the decorations were fancier than anywhere else in the mall. It turns out that the entire space, including the expensive glass and ventilation systems had been provided and paid for by a cigarette company. Who knows? It might just work in a hostel too. It would be worth contacting them to ask if they would like to sponsor your smoking lounge.
While you’re at it, ask the local beer distributor for some branded furniture and decorations for the rest of your property. I know of one hostel that was going to get a climbing wall installed in their backyard for free because it would have a big beer logo printed across the face of the wall.