Hostels Photo credit to Helena Lopes, Unsplash

Preparing for a new era in hostels

With Booking.com having made major strides in its partnership with hostels all around the world, Max van der Heijden shares his insights on the segment’s evolution

Historically, hostels were still really catering to backpackers. It was a simple and informal experience frequently offered by people who travelled like that themselves. The hostels were often basic and traditional, catering to the budget end of the market.

But then a move towards premium guest experiences and diversified services found momentum - which, coupled with the surge in private equity funds acquiring existing businesses or investing in new ones such as Generator Hostel, brought new variants to the segment and fuelled international expansions, driving the industry towards professionalisation.

Supply is booming. In 2016, Phocuswright reported a total global property count of 18,200, having grown by almost 16% compared to two years prior. Interest in the segment is similarly strong: a recent Booking.com survey found 33% of global travellers would like to include at least one hostel in their next trip to add a social dimension to their stay. Indeed, global hostel revenue is projected to reach US$6.4 billion by 2020, growing at roughly 5% each year and on pace with the hotel industry.

The hostel experience

This thirst for social experience is one of the driving factors behind the segment’s popularity. Hostels have always been experience-orientated in accommodating guests looking to explore the world, but with the younger demographic dominating this market (roughly two in three hostel guests are aged 18-34) there is an increasing emphasis on embedding experience in the hostel proposition.

Many properties are expanding successfully into this area, away from the traditional perception of bunk beds and basic facilities. Groups such as Selina in LATAM provide diverse experiences at different destinations - yoga, surfing, white-water rafting - giving guests a new adventure wherever they stay. Freehand tried to re-establish the hostel product in a market that was less hostel-friendly, the US, and not only did it manage to do that but it made the experience cool and appealing to locals too. For traditional hostels - which still attract travellers due to their cosy, social vibe - it’s not necessarily about expanding to compete with modern offerings but maintaining authenticity. What are the experiences that reflect your style, location and identity?

Blurred lines

There are a lot of hotel brands looking over their shoulder to say: ‘Hey, this is interesting stuff, can we replicate this vibe in our properties?’. Brands like Hilton or Marriott already have spin-off brands that share hostel-like features such as communal areas or dorm rooms. The lines between hotels and hostels are definitely blurring, and this is partly down to the younger, experience-orientated demographic triggering a need to diversify from classic hospitality.

Just as traditional properties are adopting hostel-like qualities, hostels are integrating hotel-like features such as private rooms. You even see hostels dynamically adapt their offering throughout the year, with rooms that can change in format and setup. By offering private rooms in addition to bunks, hostels are able to attract guests looking for a more premium stay alongside the benefits of the social aspects.

This blurring of lines applies to guests too. Few Booking.com travellers would only travel to properties marked as hostels; it’s really the experience and intent that drives the booking rather than the property type. A customer may be exposed to many different types of property in a search, and while they may have gone in considering a hotel they may realise a hostel is better suited to their needs. Of course, this can happen the other way round but the democratisation of choice is a great thing for the mindset of today’s global travellers.

The Booking.com journey

Hostels have always been on our platform and over the years we tried various experiments but there had never been a full focus until the end of 2017. Quickly expanding to multiple teams working across the platform, we dug into insights from research, data and discussions with partners to develop our understanding and evolve the product towards what was new for the segment.

This led to complex improvements for aspects that were not yet optimised for hostels. Shared room configurations were finessed to help partners input the most accurate information and ensure that guests could find exactly what they were looking for. We reviewed things like naming conventions and room setups, adding clarification around hostel-centric terms while removing more hotel-appropriate content. We also added improved reporting functionalities in the extranet so partners can assess the performance of shared vs. private inventory.

Once these foundations were fixed, we started further investing in customer-facing improvements. From search to booking, the whole experience has been tailored to travellers looking for a hostel - and in doing so improving the opportunities for partners. Things like displaying both shared and private room prices in search results. We are also working on an events module so properties can share more on the experience they offer. To complement these platform improvements and product developments, dedicated marketing campaigns are providing the reach required to capture the next generation of travellers, finding the right guests through the right channels. It’s really a new era for hostels and there is huge potential to be fulfilled.

 

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Hero image: credit to Helena Lopes, Unsplash
Takeaway
  • A recent Booking.com survey found 33% of global travellers would like to include at least one hostel in their next trip to add a social dimension to their stay
  • According to Phocuswright, global hostel revenue is projected to reach US$6.4 billion by 2020
  • Premium guest experiences and diversified services have driven the segment towards a more compelling, professional offering that has attracted interest from investment funds
  • Experience will continue to be a major influence on the segment’s growth, with hostels looking to align themselves with unique yet authentic offerings, which tap into the social vibe that hostels offer so well
  • Booking.com has made a number of investments and optimisations across the platform to support both the partner and guest experience