9 years
Hey Oleg,
I am setting up hostels in India at the moment and though I do not have first hand knowledge of the hostel industry in Prague, I have recently completed my business plan and gotten it approved by multiple investors. After going through your plan, here are a few pointers-
- First off, you are right. You should be covering costs at less than 60% occupancy. It is ideal to cover your costs at 40% or less. For a business plan, you should expect your occupancy to be about 65% for the first year, going up to 75% by year 3. (these are very general numbers, but provided you have a relatively popular hostel in a backpacker city like Prague, they are good benchmarks to work with)
- Rent is your biggest expense (almost 40%). This should be proportional to how much you charge per bed because at the end of the day, you are paying a high rent because of your location, and guests expect to pay more for better locations. I checked some prices for hostels in Prague, they charge about 18 euros/night for an 8 bed dorm, so you could think about maybe raising your bed rate a little. Alternatively, you can keep your current pricing for weekdays, and a higher pricing for weekends. OR, charge 18 euro for both the 8 and 6 bed dorms ( but furnish the 8 bed dorm better, or keep it in a nicer room so that the value for guests is the same in both dorms)
- I can't comment on your other expenses because they are location specific but is an advertising budget of 400 euro needed? There are a lot of options to spread the name of your hostel for less. Good website content, great reviews, social media and active participation on travel forums are just a few of them. Also flyers and stickers to post around the city are cheap to print. Consider reducing this budget, or maybe just keeping it as a one off expense instead of spending 400 every month.
- The good news is, you have not factored in any hostel sales and services into your revenue. (water, snacks, beer, coke, towels, added services, bike rentals, tours, etc). This is added revenue for the hostel and it is highly recommended to provide them at the hostel. It makes life convenient for your guests and gives you an additional revenue stream.
All the best!
Dhruv
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