If you’re thinking of starting a hostel, one of the first things you need to know is that the market is very competitive, particularly in tourist hotspots

It’s extremely important to know precisely who your target market is – a hostel for students on a partying holiday will not appeal to slightly older travellers staying for several months to immerse themselves in the local culture.

What is a hostel?

Hostels differ from hotels on a few key points; price is a major differentiator, with hostels many times cheaper than hotels. Although the price for hostel stays varies across the world, a typical range may be between £9 and £20 for a bed in a multi-bed dormitory.

While hotels allow and encourage privacy, hostels are designed to offer sociable accommodation, with bunk beds in dormitories, living rooms with televisions and books, and self-catering facilities. Bathrooms will often be shared, although for a little more money you may be able to rent a private room with en-suite bathroom.

Hostels are also more informal than hotels – there’s much less emphasis on good-quality service because of the cheap prices, although basic cleanliness is expected.

What type of skills will I need?

Good business sense and a head for figures are both essential when starting a hostel – you must ensure your prices remain competitive while you provide as good as an experience as possible for all your visitors.

A passion for travelling will also serve you well, as it helps you understand the mind-set and ideas of your guests. Travellers spend considerable parts of their trip in hostels – understanding the desire for a comfortable, home-away-from-home experience and injecting this passion into the hostel’s operation can really help your hostel stand out from the crowd.

You’ll also need to be on the ball, particularly if your hostel is located in a tourist hotspot where visitors will increase during festivals or special events. Knowing when these events occur, and marketing your ‘hostel experience’ in plenty of time, can help you attract visitors.

Creating a unique selling point (USP)

Generally speaking, the better (and typically busier) hostels are those where the operators are generally interested in the atmosphere, environment and happiness of the guests. While price is a concern for many travellers, there’s often little difference in a certain price bracket, which means other factors – cleanliness, welcome – are considered before a purchase is made.

With the burgeoning hostel market, competition is stiff, which makes it important to stand out from the crowd. Some hostels have ‘themes,’ which are often linked to their location, or offer perks or incentives, such as a particularly sizeable breakfast. Other hostels provide internet access and postal services, which will appeal to those looking to stay connected to home.

Whatever your unique selling point, make sure it’s suitable and appropriate for the location and your target market. Young people may appreciate a bar that stays open later, but you don’t want to annoy all your guests with the noise.

Trying to understand the travelling experience from your target market’s point of view can really help you develop a unique selling point that appeals and attracts.

Cultural differences

Hostels, whether located in the United Kingdom or abroad, will see a wide range of nationalities through their doors. It’s great to get such a diverse mix of people in one place, but you should make sure you are aware of any cultural or religious sensitivities when designing, decorating and operating your hostel to avoid causing offense.

If you open a hostel abroad, you should know the local area well, including customs, subtleties and traditions – be a humble visitor, at least until you and your business are accepted into the region. As always, be a good human being, eager to help, and provide a great service at a reasonable price.

Start-up costs

The price of setting up a hostel varies widely depending on your target market. The biggest cost – rent, building licenses, insurance, beds, etc. – are required for all types of hostel, so it’s unlikely you’ll be able to start-up for under £10,000-£20,000. This will allow you to set up a very basic, no-frills hostel that will appeal almost exclusively to travellers on a budget.

If you want to run a higher-quality establishment, you should probably budget closer to £50,000. There are a huge number of potential costs that you’ll need to consider – here are just a few:

  • Hooks in the showers
  • Small lockers for valuables
  • Large lockers for luggage
  • First aid kits and fire extinguishers
  • Computers for internet access, along with specialised software
  • Pay phone for international calls
  • Flame retardant mattresses
  • Towels
  • Microwave/oven/hob/washing machines
  • Television and bookcases
  • Table football table
  • Sky TV access

Depending on the ‘theme’ and environment of your hostel, there could be other costs to consider. This is why a business plan is essential before you start considering opening a hostel. That way you know who your target audience is, what you’ll need to please them, and how much it will all cost.

Insurance and compliance

The following applies to hostels opened in the United Kingdom. For advice on insurance and compliance if opening a hostel abroad, talk to a specialist.

Public liability insurance and professional indemnity insurance are must-haves. You’ll have a lot of people coming through your doors, from different cultures and with different beliefs, and it’s important you’re financially covered in the result of a disagreement.

If you employ staff, as many hostel owners do (sometimes in exchange for free accommodation), you’ll also need employer’s liability insurance.

Hotels and hostels need licenses before they can operate, depending on what services are provided. Premises licenses will be needed if you serve alcohol, as well as several television licenses (depending on how many screens you have), as well as licenses from the PRS for Music and Phonographic Performance Ltd (PPL) if you play music or screen music videos.

You’ll also need to comply with relevant fire safety legislation – speak to the Health and Safety Executive (HSE) for more information.

Make sure you talk to your Local Authority to find out exactly what is required before you start a hostel.

Umbrella organisations

Trust and reputation are very important when it comes to running a hostel - not only will happy guests let other guests know about your hostel, but some people are naturally dubious about staying in cheaper accommodation, and will want reassurance. Membership of an umbrella organisation, most notable Hostelling International, will help to reassure potential visitors.