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4 Potential Threats to Hostels

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Posted by Alex Gaggioli
September 15, 2016

Introduction

Hostels aren’t all they’re cracked up to be, and I mean that in the best way possible. Hostels have received an unfair reputation in the past, but things have quickly changed. Right now, we’re seeing a rising interest in hostel culture that’s influencing how all types of accommodations are planning their futures. With rising interest comes a new onslaught of threats. Here, we’ll walk through the rise of the hostel and explore what existing hostels should look out for.

The Rise of the New Hostel

If you say the word hostel, people will inevitably have mixed feelings. Hostels are often thought of as dirty, cheap, or only for young, thrifty travelers. But, in the United States and around the world, hostels are popping up and gaining more recognition. What people may not know is that there are many different types of hostels, from cheap to luxury, every hostel operates in its own niche.

Hostel culture has been alive and well in Europe and Asia for a long time now, but the United States has been slow to catch on. This is largely due to the fact that large corporate hostel groups in the US do not allow US citizens to stay at their properties. Many of them require an international passport to enter. Traditionally, this has helped keep hostels safe from illegal activity but also deterred Americans from the hostel experience.

While talking to a hostel owner in San Diego, he pointed out the cultural differences between traveling in the United States and in Europe. European teenagers and young people are much more likely to use hostels regularly because it’s relatively easy to travel between countries. Whereas in the United States, it’s relatively hard to travel domestically, let alone internationally when you’re young.

But now, the world is shrinking and the hostel trend has infiltrated the States, which in turn has raised awareness. The rise of posh and luxury hostels have also brought new attention to the space. If anything, boutique, luxury hostels are giving travelers new options when they travel, according to The New York Times.

While luxury properties certainly attract a new travel demographic to stay at hostels, traditional hostels are also benefiting from recent travel trends. More travelers want to live life as a local and less like a tourist. Hostels are all about experiencing a destination for what it is and meeting other travelers who are interested in meeting new people. This, too, has helped fuel the growth of hostels.

Four Potential Threats to Hostels

storm-brewing

With new awareness and popularity, come new threats. In our recent webinar, Why Hostels are No Longer the Little Guys, valid questions were brought up as to who hostels should feel threatened by, if anyone. Let’s take a look at the likely candidates.

Large Hotel Brands

Large hotel brands are changing the way they market to young people. They’re attempting to adapt to changing travel trends such as increasing local experiences and communal experiences. Hotels are putting less focus on large rooms with all the bells and whistles, and more focus on communal areas that increase communication between guests.

Earlier this year, Hilton launched their new Tru brand in early 2016 to target millennials at a budget they can afford. The brand is about saving money while maintaining a stylistic edge and taking out extra costs. Tru’s rooms are smaller and don’t include a desk while offering larger communal areas to hang out.

Hyatt, Marriott, Starwood, and other large hotel brands have created, or plan to create, young, budget-centric brands that impede on the hostel market. While these brands are not hostels themselves, the smaller room types and focus on gathering spaces show a commitment to shifting trends. They’re meeting the consumers where they are, and it’s likely due to the evolution hostel culture.

Hostels have a strong foundation in Europe and Asia where younger people default to shared accommodation. The United States lack a strong hostel culture, so well-known hotel brands have a better shot at grabbing these consumers’ attention.

More Competition

More competition from independent hotel brands and new hostel groups will put pressure on existing hostel groups. When I spoke with a hostel owner in San Diego a few months ago, we discussed the emerging brands that attract the same type of guests as hostels.

Independent properties that offer a fun, chic environment, like Commune Hotels, also pose a similar threat that the large hotel brands do. While they offer a different type of experience, it’s similar in nature to a hostel experience. It’s fun, young, and social. As Commune Hotels preaches on their website, they’re focused on integrating their properties with the local culture while adding to it.

We expect to see an increase in new hostel brands, as well as see existing brands expand. Generator Hostels is a perfect example of a brand that’s quickly expanding. They have more than ten properties open right now and plan to open two more in Rome and Stockholm in 2016.

With an increased interest in hostel culture, a large investment and focus on new properties will not surprise us. Development almost always follows current trends, and this one is just getting started.

Couch Surfers

During our webinar, someone raised a question concerning couch surfer websites like couchsurfing.com. For those unfamiliar, couch surfing websites connect travelers with locals who are willing to lend out their couch or floor for little or no cost. Couchsurfing, in my opinion, definitely follows current experiential travel trends. People want to feel like a local when they travel, and couch surfing offers that experience.

However, I don’t believe couch surfing poses a significant threat to hostels. Couchsurfing is great for those on a budget but lacks common amenities most travelers look for. Safety and accountability are a major concern while traveling, and couch surfing doesn’t offer the same level of trust that hostels or other properties offer.

The Sharing Economy

And we’d be remiss not to mention the sharing economy as a potential threat to hospitality. I say potential because I think the sharing economy is more of an asset than a threat to hostels in general. While sharing economy platforms like Airbnb are filled with non-traditional inventory, hostels are able to take advantage of it as a low-commission online travel agency.

In the same way that couch surfing isn’t the most reliable way to travel, the sharing economy deals with many of the same problems. Airbnb tries their best to control the inventory on their site, but not every listing will meet people’s expectations. Hostels, bed and breakfasts, and other more traditional accommodation types can instill a sense of trust through their websites and existing reviews to increase their credibility. Using their existing assets, they can elevate themselves above the non-traditional inventory. It’s basically a win-win for both sharing economy platforms and hostels.

If you’re interested in reading a more in-depth opinion on the sharing economy, you can check out a previous article here.

Conclusion

We are living through an exciting time in hospitality where an increasing number of accommodation types are gaining popularity. Hostels are reaching the mainstream market and affecting the way existing hotel brands respond to new trends. If hostels can navigate through increasing competition and other alternative accommodations, it could become a major player in far more people’s travel plans.