Start a hostel in San Francisco... crazy?

As a side note for a couple of the regular posters here, I have stayed at the Aboriginal in Budapest...

Hey Chris,

I'm glad to hear that, you just made my day! :)

I know there are already several hostels in San Francisco, but it seems to me there aren't any on the level of the great ones in Europe.

The more good hostels are in a city, it will always increase the demand for that destination. There is always a need for a good hostel anywhere and as a golden rule, you only have to do it better than the others. European hostels has a lot of competition nowadays in almost every major city, which pushes hostels to offer the most as possible but as I can see the hostel fever goes all around the world, so it will be sooner or later but hostels in US will grow very quickly.

To give you an idea of what I mean, my favorite hostel is probably the Kabul in Barcelona. I am not deluding myself into thinking I could (or would want to in this litigious society) run a place as rowdy as the Kabul, but I would want one that is very social.

Well, the social factor is very important indeed. Some say it is hard to make a hostel sociable after a certain size, ie. 50 beds or 90 beds. It is hard but not impossible, but there are limits which make it difficult.

I'd say you can make an atmosphere as long as you remember the name of your guests - it could be a criteria, but how many hostels could pass on that test? So in a bigger circle, I could say as long as you can involve your guests to interact. Activities will help a lot.

Kabul has started as a small hostel and grew to its size by trying the most to keep on the way where they started from.

Staying in hostels previously helps a lot to understand demands but IMHO, you will need to figure out a lot on the background and create an everyday routine. I had work experience before in hostels but when I opened our hostel we had to start from an absolute blank, it is something completely different.

I believe in the "start small and think big" philosophy. As long as you can see through the entire process and able to recognize the problems you may have. If you have a successful business, you will be able to grow anyway. You will need a lot of problem solving skills meanwhile, especially at the beginning.

The location is the only factor you can not change (or at a high risk), so I'd rather choose a good location and a smaller place than a big hostel on a bad location, IMHO. It is especially true in SF where the prices are so high, so I wouldn't buy, rather rent on a long term and negotiate about the necessary facilities ie. ensuite rooms or extra bathrooms. It is a big investment as well, but regardless who pays for it, the investment should be guaranteed. The other important thing is staff. It is hard to start with a lot of strangers, especially if you don't have an experience of being a boss... You may be able to start with friends to help you out, that means the atmosphere can start at a high level because you know each other but if there are some stressful situations, you can lose a friendship, which may not worth the price. Also there is a need to compromise between workload and capacity, as you can't do everything by yourself. You can try but you don't want to burn out too early, right?

I would definitely want to have a bar and hopefully a great rooftop deck to take in the SF sunsets and the generally awesome views.

The main hostel that seems to attract the "party" backpacker type here in SF is the Green Tortoise. From what I understand the Green Tortoise is hard to get a reservation at, i.e., there is room for another player in town. Also I think a hostel could compete with them by being a bit cleaner and having more amenities.

Sounds promising, let us know when you have your hostel open! ;)

As I'm sure you know, SF is extremely expensive. I have saved up quite a bit of money and could probably get a couple other investors, but I still wonder if a hostel could make money here. How much cash do you think I would need to have on hand to get started in an expensive city like SF? I would hope to eventually charge around $30/night (2008 dollars) and make additional money from the bar and maybe selling tours as well.

Am I crazy?

Well, I was checking your future competition, and the winter prices for the better hostels are around 22-26USD a night in a dorm, 24-42USD for a private. The worse ones are around 20USD for a dorm and 12-30USD for a private.

Summer prices are around 26-35USD for a dorm in better hostels, 34-45USD for privates. The 30USD sounds alright during summer, but I guess 25 sounds better during off-season. If you are planning to have private rooms as well, IMHO 30-35USD during off and 40USD during peak seasons would be recommended. Private rooms competition would be motels, good to check what prices, amenities they have as well.

Try to adjust your yearly costs to the half of your estimated yearly revenue and have enough savings to cover extra costs. The costs will be more than planned but hopefully your incomes as well. This number could give you at least an alert to tighten the belt if necessary.

Unfortunately I know nothing about SF property prices nor labor costs, so I can't help with that, but there are several threads on this forum which can give you further hints and advices.

Well, I don't think you are crazy, the conception you posted sounds good and I think you've got the main points for a potentially good hostel in SF. I wish you good luck and keep us informed about your project! Let us know if you have any further questions or PM me if it's private. ;)

I worked at a hostel in the US with a bar. It was a fun place.

It's very risky to serve alcohol to underage people in the USA -- if they get into trouble, you can face prison time too. Example.

There is talk about lowering the drinking age to 18 though. (another article here)

Thanks for the replies everyone! And thanks to "Hostels" (the webmaster) for setting up this website, what a great resource.

Thanks for the feedback...and for joining. :)

I think the way to do it is to issue locker/front door key cards that are color coded, one color under 21 and another color for over 21. When you order at the bar, you just flash your card. I am sure that people that are under 21 will drink, I just don't want it to be the hostel that served them. In California, I do not believe that you have to segregate people from the bar area if they are under 21.

Good luck sorting through the USA's bizarre drinking laws :D
("Texas state law prohibits taking more than three sips of beer at a time while standing....Nebraska state law prohibits bars from selling beer unless they are simultaneously brewing a kettle of soup.")

Maybe they will change the drinking age before you open.

HEY! I take exception to the comment that there are no hostels that can compete with European ones in San Fran. Check out our website and take a look. www.usahostels.com. We're certainly the only hostel in town with our own 50-seat theatre!

Okay, now that i'm off my soapbox, :)

there are 14 hostels in SF. I understand 1 maybe 2 are up for sale. Both not located in ideal places. Buildings are EXTREMELY expensive there and getting a liquor license...well, if the Art school (name escapes me) that owns half of the housing (or so it seems) around downtown can't get a license then your only chance is to get a building that is already permitted. All it takes in the Republic of SF is one neighbor with a bug up his ass to shut that application down.

Don't try to open without a hotel license or violating any codes at all or the certain people at XXXXXXXXX (name removed to keep a hit off me) will sic their city friends on you... really. Oh and don't get me started about the schizophrenic fire department that changes their rules all the time.

Also, most buildings with tourist licenses also have a residential component required by the city. So, you may have 50 rooms but 25% of those may have to be for long term rental. Ah yes, it's FUN to do business in SF.

Well all that aside, it's a lovely city and a growing market, so if you can find the right location, we won't mind a little more competition. :)

But our other hostel neighbors might not be so happy.