Tuesday, September 26, 2023

Hotel vs. Hostel: Which Business Should You Start?

The hospitality industry is booming – especially when it comes to lodging, which has an astonishing growth rate of 19.1%

If you’re looking to start a business, that number should encourage you to consider starting a hotel or hostel. But they are two very different types of accommodations, and you need to know the difference if you want to succeed.

Are you unsure which one is right for you? Don’t worry, this quick guide will help you settle the hotel vs hostel debate for yourself so that you can make the right choice.

Hotel vs Hostel: What’s the Difference?

First, let’s briefly talk about the difference between hotels and hostels. You need to understand the differences to know which one sounds more appealing to you – and your potential guests.

Generally speaking, hotels offer more privacy than hostels. They’re usually costlier and cater to a wider variety of guests, like families and business travelers. They also usually offer a wider array of amenities. 

Hostels are often geared toward solo travelers or younger travelers – in other words, budget travelers. When a hostel guest books a stay, they are booking a bed, not a room, and that bed may be in a shared room with other guests’ beds. Hostel bathrooms are also usually shared.

Buy or Build?

It shouldn’t surprise you that building a hotel – even a small one, from the ground up, is going to be expensive. Costs vary widely depending on the location, construction costs, number of rooms, required licenses and permits, and much more

Hostels require a lower investment, especially if you can convert an existing property into a hostel. The smaller footprint of a hostel means you may already have a house or small apartment building that could be converted into a sizeable hostel. However, the legality of converting an existing building into a hostel will vary widely from one location to the next, so you would need to consult your local zoning laws. 

Aside from developing a new property, you can always buy and renovate an existing property. But again, the costs for doing this will vary depending on the location and size of the property. 

One advantage of starting a hotel over a hostel is the option for hotel franchises. In exchange for paying franchise fees, you as an owner receive support from corporate, as well as a recognizable branded hotel, like Hilton or Holiday Inn. 

Location Has the Final Say

Finally, determining if you should open a hotel or open a hostel should be decided by the location. You may have the knowledge and the right hospitality marketing to grow your business, but a hotel or hostel in a poor location will struggle.

Many hostel guests do not drive, so they look for hostels that are close to bus stops and train stations. If your hostel is too far out of the way or outside of the city limits, it’s unlikely to get much foot traffic. Likewise, a hotel near an airport can attract business travelers and families, but it may not attract guests who prefer hostels.

Which Business Is Right for You?

So hotel vs hostel, which business is best for you? If you’re in an area attractive to hostel guests and want a lower cost of entry, go with a hostel. However, if you don’t mind a greater upfront investment, or want to buy a franchise, go with a hotel. 

If you found this article useful, check out the rest of our site for similar business articles designed to help you start a business and succeed.