Changing Things---BE A PART OF THIS HOSTEL!

Hi Ryan,

Your enthusiasm about this hostel is GREAT keep up the positivity. I am going to criticize your business but please understand it is meant to be constructive. First off, its sounds like you may want to look into some business education and training. From what you have said you have a lot of ideas but they don't seem to be grounded in a understanding of what it takes for a business to run. Please make sure you completely understand that this is a business undertaking you are starting, yes you want an amazing hostel that caters to its customers BUT it also needs to make money. Money is the life blood of any business without making more money it bleed out and it will die.

HOW? Hmmm well its not so difficult. I want to explore options of offering incentive to help and volunteer, instead of it coming out of peoples pocket. Most organizations need money from you, just to help. I want to create the opposite. Obviously people who travel dont just want to 'help' and waste their precious time doing so. Unless, you can create a reason to do so...offer incentive. Create a reason to go and do this. I want to create a 'volunteer' experience which was something that you wouldnt want to miss out on. Experience is the key! It must be fun, unique, impressionable, and making a clear difference. And also this bonus of getting something yourself in return.

So from this I understand that you want to open a Volunteer hostel that caters to people looking to volunteer. I'm going to call this HOSTEL IDEA A: VOLUNTEER Now within this is sounds like you intend the hostel to become a destination in and of itself. The reason for customers staying at this hostel would be to participate in the volunteer programs run out of the hostel. So what you would be creating is not only a hostel but also a volunteer/not-for-profit company.

I dont just want this 'help' hostel though. I want BIG, and FAMOUS! PARTY hostel! But take advantage of a planned layout to ensure safety, quiet, and security as well. Experience is KEY, and must be the MAJOR focus.

As I understand it you now go on to say that is not just a volunteer hostel it is a party hostel I will call this HOSTEL IDEA B: PARTY so this hostel is also a smashedpackers, with partying being the major focus not as much with the volunteering. Or are volunteer-oriented people also major party people. From my experience this is not the case at all, party-people and volunteer people are very much different.:(

For one, I want to offer a different option for cheap accomodation. Regular beds would be on offer too, 20 euro a night. But also beds for 3 euro.....lol i know crazy but its really very simple. I believe there is more money to be made AFTER they are in the doors, not by the bed price alone. I want to offer both, in the same hostel.

Up until this point to me you made some sense but here is where you lose me. I'm a backpacker at heart but businessman in my head and this part just makes no sense to me. You plan on offering average-cost beds but also underpriced beds? In business, this is called Cannibalization - its when you offer two similar products where the lower-priced one "eats" the sales volume of the other, in essence you are basically becoming your own competition which as I'm sure we all know is a BIG NO-NO. Isn't everyone who stays at your hostel going to want the cheap rate? I call this HOSTEL IDEA: CANNIBALIZATION :eek::eek::eek:

Now I have heard this idea: "get them in cheap, make money after they come through the doors". Carnivals use the idea alot. In business though, we call this a loss-leader meaning you underprice one product and lose money on it so that people come into your business and end up buying other more expensive products. It is most often used by retail outlets, ie grocery stores sell milk for less than they pay for it but place it at teh back of a store so that people have to walk through the entire store to get it. First rule of using a loss-leader DO NOT MAKE YOUR MAIN PRODUCT A LOSS LEADER. What is you main product going to be if not beds? Is it volunteer work, or tours because I don't think you will make as much on that as you think.

As well, who is your true market segment for these lower-priced beds, personally as a backpacker I'd be skeptical of a place with such underpriced beds because I've found it often attracts both homeless locals and backpackers with no money at all (the kind that will steal from other guests). Are you planning on allowing the homeless of the location stay with the backpackers. I guess this works with your volunteerism idea, backpackers can cook and clean for the homeless staying for 3 Euros a night but I don't think many would want to stay with the homeless This I call HOSTEL IDEA: CHEAP :(

SO far I have seen four very different ideas presented here - you basically want to open several different hostels in one place: CHEAP BEDS, LOTS OF PARTIES, VOLUNTEER WORK, each CANNIBALIZING themselves in your business. This is not a good thing at all and it seems to be a very big undertaking to open several different hostels in one place.

For another, advertising would be done very differently, much much more aggressively in terms of stalking the city. Around the world advertising too. Not just through word of mouth and the internet, or handing out flyers at an airport.

So now you talk about promotion. I think you will definitely not need alot of advertising at all if you are offering beds at 3Euros a piece. But about your point, how much money are you planning on spending to get people into your hostel for these 3Euro beds I would suggest no more that a few cents per bed because you must account for your overhead - this business model means you are only making roughly 90Euros/month per bed which I suspect will not even pay for the overhead of running the hostel. How do you make up this money?:confused:

One reason these ideas will succeed is because they are fresh and havent been tryed.

Lastly, although this is a really nice sentiment it is totally and utterly untrue. Many people come up with fresh, new ideas and 70% of the fresh, new businesses they open end up failing. Nothing in this world can guarentee you success in business - Anyone who believes success is inevitable finds failure nipping very closely at their heels.:D

In summary, please keep up the enthusiasm but my advice take it or not is to make sure you have based your business on sound business ideas. You seem to have a lot of up in the air ideas but they just don;t make a whole lot of business sense (I would get rid of your loss-leader beds, nothing is worse for a business that cannibalizing itself with an underpriced product) Also do some reading on business especially look into the basic marketing principles: Product, Price, Promotion and Distribution, Accounting principles: most importantly the equation below:

Profit/Loss (P/L) = REVENUE (R) - EXPENSES (E) so if your revenue is not more than your expenses you have a loss, too many monthly losses indicates your business is on the road to failure.

Good luck with your fresh ideas, I'd say you might be thinking a bit too BIG trying to cater to everyone instead of finding a market and sticking to it.