How To Run A Successful Crowdfunding Campaign for Hostels

What is crowdfunding?

Crowdfunding is a way of receiving capital or investment for a business or idea, from many people, in exchange for some type of discounted or valuable perk. Crowdfunding can benefit both those starting a business or expanding an established one. It can also be used for a tangible product or a for a service.

For example, someone with an idea for a new watch may use crowdfunding to raise the capital required to put that idea into production. Some of the pain rewards for donating to the campaign would be receiving that watch at a discounted price.

On the other hand, an established business such as a hostel may want to expand. They can use crowdfunding to raise the capital necessary to grow their business. In this case, the rewards may not be a new product but rather discounted services such as bed nights, walking tours, or pub crawls.

In any case, crowdfunding is used for far more than receiving money. The exposure, marketing, and PR that a campaign can create is often just as valuable as the monetary gain and may pay off far longer.

Crowdfunding can be an exceptional tool but, like anything, it takes serious work to get serious results. A few weeks ago Hostel Management had an online panel discussion about crowdfunding which was packed with advice and tips.

The following post is a summation of the most important takeaways, including what *not* to do based on experience. If you are considering crowdfunding, think carefully about the work it takes, make a solid plan, and then go for it!  

Note: The following post is long, as it contains detailed info for anyone wanting to undergo a successful crowdfunding campaign. If nothing else, read these 5 important tips:

• Plan ahead- every day before & during should have an action plan

• Know where 30% of your goal is coming from before you launch

• Have a massive and segmented email list

• Spend money to make money- use targeted ad campaigns

• Stay committed to your campaign from beginning to end

Why Use Crowdfunding

Marketing

Crowdfunding is one of the best ways to get the word out about your product or service because of its viral potential. Even if it doesn’t go viral, it can still have a much further reach than traditional marketing.

In tourism specifically, crowdfunding can help you stand out because using it is still very innovative and different. According to Blaz Jemc of the tourism-based crowdfunding platform TravelStarter, crowdfunding has largely stayed in the technology and product areas, so when it’s used in tourism, it often garners the attention of everyone from bloggers to news outlets.

Testing your idea

Crowdfunding can also be a great way to find out if your idea is actually viable. While it’s not a perfect indicator, as there are so many variables to the success of crowdfunding that have nothing to do with the idea itself, it can give you an idea if you are on the right track. A campaign that is receiving little feedback before you even launch is probably not going to do well once you take it outside your inner circle. It can also show you if the way you present your idea is unclear. Perhaps the product or service is simply not ready to launch in the original.

Easier ability to get investment

Crowdfunding has opened up a whole new level of finance for entrepreneurs. Previously many people got rejected by banks or investors, who wouldn’t even return calls and emails. It’s difficult to convince a bank loan officer with a personal story, but it’s much easier to use that passion and story in a platform like crowdfunding. It not only allows for the initial influx, but personal stories are often what drives viral sharing.

What to Do

In a nutshell: Prepare, otherwise, you will fail. Crowdfunding can be incredibly successful, and can also fail very easily if you don’t plan it properly or maintain the campaign well.  

Creating your campaign

• Know your goal and work out your costs & margins accordingly

  • Often projects get themselves into trouble in the long run by not planning from the beginning

  • Reverse engineer your goal: Figure out in advance how much you think you can get from various channels and set your goal off that

• Know where at least 30% of your funding is coming from before launching

  • Day 1 is most important to get a viral push. You should have at least this 30% pledged the first day.

  • A campaign that is successful off the bat makes people want to pledge. People want to join a moving train, not put the coal in it, and it also makes them feel like they are missing out if they don’t participate.

  • You can always give the money to your family and friends to donate in their name if you have to. This is not unusual, and helps create that first day push.

• Set your goal lower than you actually want

  • This helps ensure you get that 30% on day one

  • If that happens, you are likely to surpass your ‘goal’ for your actual goal

  • Ex. if you want to make $50K, but you only know of $10K in definite donations, then set your goal at $30K. You still have opportunity to reach $50K

Planning & executing your campaign

• Research

  • Talk to others who have done crowdfunding, both successful and not

  • Look at similar projects and take note of what they are doing

  • Read resources and info from groups like Samit’s on Facebook: Crowdfunding Backers: Tips, Tricks, & Traffic

• Plan a proper campaign strategy

  • Build a schedule of what to do and when, for every single day

  • This should all be done well before the campaign launches

  • Figure out your exact goal, product, and message

    • These should be very clear and easy to quickly understand

    • Do not count on the video or lots of text to explain you concept- these should only be offering supporting details

    • Think elevator pitch

• Create a huge mailing (email) list

• A well-curated email list is critical to a successful campaign

• Reach out to previous guests to see who is interested

  • Ex. “We are going to be launching a crowdfunding campaign to expand our awesome hostels. You stayed with us before, why not back us and receive discounted rates to stay with us again!”

  • Separate the emails of those who are interested so you can target them later when you are about to launch

• Segment your mailing list

  • Once you have tons of emails, start separating them into different demographics for more targeted emails.

    • According to Mailchimp, targeted emails increase your open rate by 15% or more.  

  • Have templates for these different segments

    • Do this ahead of time or it will be very stressful to figure it out during the campaign

• Spend money to make money

  • Hire professional help as a worthwhile investment.

    • Samit Patel, a crowdfunding expert, was on our panel and had amazing advice.

    • Ori Gonen, who ran the ILH crowdfunding, said they used a consultant at the end but it was too late. Doing it again he would have hired someone from the beginning

  • Use target marketing like Facebook or Instagram ads

  • You can bootstrap crowdfunding with tools like Facebook groups, forums, etc. but it will be very labor intensive

What Not To Do

• Assume crowdfunding is easy

  • A successful crowdfunding really is a full-time job, both before and during the campaign. Be dedicated, or prepare to fall short of your goal.

• Have a campaign that drags on

  • 1 month or shorter is ideal

  • Since it takes all your time & energy, you can actually get more done in a short amount of time, with less burn out

• Put the campaign up and ignore it

  • You need to be present throughout; it will not market itself. If you are going to go through the effort of doing a campaign, follow through completel.

  • As Blaz said in the panel, “If you aren’t there the first day, you aren’t going to be there the last day”

  • This is especially strong advice to those in tourism who already have a business up and running. It’s easy to ignore the campaign and focus on your guests because

    • You’re busy (of course)

    • If it isn’t successful, you still have your current business

• Offer perks that are only interesting to a small demographic of people

  • Ex. If you only offer bednights, then only potential guests will fund your project (beyond family and friends)

  • Try to find some perks that even those who can’t come to you would be interested in

Tips & Tricks

Use targeted Facebook ads

• Can target geographically plus other factors
  • For ex. people who are more than x # of miles from home (i.e. traveling), and are friends of people who already liked your hostel Facebook (i.e. they may be traveling to your area, or your style of guest)
• Can also target based on your competition
  • Build lists off of people who have liked certain pages, like HostelWorld or your neighboring hostels
• The more you narrow down your ideal target market, the more precise you can be with your advertising dollars

Building an email list- a great suggestion from Blaz at Travelstarter

• Create a quiz with fun questions that are easy to answer
  • Ex. “What is your favorite site in xyz destination?” Or “What do you think is the most popular food in xyz region?”
• Make some questions multiple choice (for ease) and some blank (for info/data)
• Target people who are interested in your destination or project
  • Emails, Facebook ads, etc.
• A quiz is an easy way to gain insight to who your target audience is, what they like, when they plan to travel, demographics (age, gender, etc)
  • You also gain their email + data
  • Allows you to segment your email list easier
• You don’t even have to have a crowdfunding campaign to do this
  • Can be useful data for your hostel in general

So as you can tell, there is a LOT that goes into crowdfunding. However, do not let it stop you from taking advantage of such an incredible tool! If you are willing to put as much time and energy into a campaign as you are your hostel, it can pay off immensely. Best of luck, and thanks again to our panelists Blaz, Samit, and Ori for all the useful info.

If you'd like to see the full hour panel discussion on Crowdfunding for Hostels, you can watch it here.