What Hostels Are and How They Benefit Local Economies

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What Is a Hostel?

Clean 10-bed dormitory at a hostel in Taiwan

A hostel is a type of budget-oriented accommodation, similar to a guesthouse or hotel in many ways, but where at least some of the accommodation is shared. So instead of rooms, a hostel typically rents beds. Many hostels also offer private room accommodation, but to be considered a hostel the property must offer shared accommodation[1].

The difference between a hostel and a hotel or guesthouse is that hostels provide shared accommodation in dorms even if they also provide private rooms.

In a few countries, such as the UK, Ireland, India, and Australia, the word hostel sometimes also refers to establishments providing longer-term accommodation (often to specific classes of clientèle such as nurses, students, drug addicts, court defendants on bail) where the hostels are sometimes run by Housing Associations and charities. In the rest of the world, the word hostel refers only to properties offering accommodation to travellers or backpackers. These types of long-term charity hostels are not related to the hostels for travelers described here.

Features of Hostels

By HostelManagement.com's definition[2] hostels must provide short-term, shared dormitory accommodation for individual travelers. Many hostels also provide private rooms, but properties that don't provide shared accommodation are not considered hostels. Good hostels typically also provide common areas and shared facilities, but there are a few exceptions.

Most hostels typically have these features:

  • accept individual travelers
  • often accept groups
  • short-term stays are allowed
  • common areas for guest interaction
  • communal facilities such as self-catering kitchen (if there is one)
  • bathrooms can be shared or private

Who Stays at Hostels

[This section should give city officials and neighbors an idea of the types of visitors the neighborhood might expect from a new hostel.]

  • Backpackers -- budget independent travelers
  • "Flashpackers" -- typically refers to backpackers with higher budget
  • Individual or group travelers
  • Student or activity groups
  • Bicycle tourers, hikers and other outdoor enthusiasts
  • People needing a temporary place to stay while moving to a new city for work or school
  • (add more here)

Unlike package tourists, who often pay for all-inclusive vacations to companies in their home countries, hostel travelers support local economies by spending their money at local businesses.

Hostels and the Economy

Hostels provide accommodation to large numbers of travelers who spend money in local economies. For example, the HI Boston Hostel brought $12.5 million into the local economy in 2007 which is expected to increase to $16 million per year with the hostel's upcoming move and expansion. The expansion project is also expected to pump up to $33 million into the local economy:

Plans at the new site include a complete structural renovation creating a brand new, state-of-the-art facility whose related costs will infuse between $21 million to $33 million into the local economy, along with 355 to 555 project-supported jobs, with an emphasized preference on local hiring. It will also greatly benefit all local businesses with both guests and staff taking advantage of the neighborhood’s restaurants, business and shops. According to a study by Suffolk University, the youth hostel’s 32,800 guests in 2007 pumped about $12.5 million into the local economy. The expanded capacity is anticipated to increase direct spending from $12 million to $16 million annually in expenditures[3].

Though in the past, hostels have been seen as low-quality accommodation for less wealthy travellers, at least one Australian study has shown that backpackers (who typically stay at hostels) spend more than non-backpackers, due to their longer stays.[4] backpackers make up as much as 10% of international visitors in Australia.[5] In New Zealand, backpackers hostels had a 13.5% share of accommodation guest/nights in 2007.[6][7]

The development of independent backpackers hostels is a strong business model, with some cities reporting a higher average income per room for hostels than hotels. For example, in the city of Honolulu, Hawaii, upscale hotels are reportedly making $141 to $173 per room, while hostel rooms in the same city can bring in as much as $200 per night.[8]. Even during the 2008 economic crisis, many hostels are reporting increased occupancy numbers in a time when hotel bookings are down.[9]

Even as the city’s hotel occupancy rate has fallen to 66 percent in February, from 81 percent in the same month last year, despite steep discounts, many youth hostels are reporting banner business.[10]

Industry growth

The independent hostel industry is growing rapidly in many cities around the world, such as New York, Rome, Buenos Aires and Miami.[11] This is reflected in the development and expansion of dozens of hostel chains worldwide.[12] The recent eruption in independent hostels has been called "probably the single biggest news in the world of low-cost travel".[13]

See Also


  1. Hostel managers discuss the definition of hostel
  2. Definition of Hostel
  3. Boston Hostel moves location
  4. http://www.tra.australia.com/content/documents/Snapshots/2008/BackPacker_07_FINAL.pdf
  5. Backpacker Tourism
  6. http://www.tourismresearch.govt.nz/Documents/Tourism%20Sector%20Profiles/TotalAccommodationSectorMay07.pdf
  7. http://www.tourismresearch.govt.nz/Data--Analysis/Tourism-Sector-Profiles/Accommodation/
  8. starbulletin.com | Business | /2006/07/09/
  9. CNN story
  10. Allen Salkin, In Hostel Basement, Newcomer Sets Sights Far Up the Ladder," New York Times, March 14, 2009. Accessed March 16, 2009.
  11. Suzette Laboy South Beach becoming backpacker hot spot
  12. List of Hostel Chains - Hostel Wiki
  13. Arthur Frommer Online: The eruption of low-cost, private hostels all over the world is among the biggest developments in budget travel