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28 Aug 2019

Why are hostels attractive investment properties?

Over the past decade, hostels have become very popular. Hotel booing sites globally, not just in Thailand, hostels have mushroomed and for good reasons.

Daily rentals
Hostel customers are backpacker ‘tourists’ making daily rentals their main business model. Daily rent is typically higher than monthly rent. Proper management of occupancy can offer attractive returns because the main advantage of hostels is maximizing space utilization. Bunk beds are often seen in hostels, enhancing profitability per square meter of space.

When compared to most hotels, hostels offer tourists better deals than many hotels.

 

Los investment capital
Hostels generally require lower investment capital compared to other types of properties because they do not require a lot of space. Many hostels require only 1-3 commercial buildings. Most hostels do not require a parking lot as most tourists staying in hostels are backpackers. This market of consumers also does not require luxury. The popular design is to have a theme or unique design to attract tourists, which saves owners on design cost.

The highlight of hostels is a great ‘location’, easily accessible via public transportation or close proximity to tourist attractions when compared to other types of accommodations. With lower investment costs, profitability is enhanced, and return is the main attraction of real-estate investments.  

 

Easy to manage
Another feature of hostels is that they are fairly easy to manage when compared to other types of properties because hostels are generally self-service. This saves investors on staff costs and headaches. The only staff hired are usually to advise tourists on how to utilize facilities and to prepare amenities for tourists. Food and drinks are often offered via vending machines.

Another interesting nugget is that hostel customers know what to expect. They’re not expecting any services comparable to other types of accommodations, which make customer satisfaction easier to manager. When it comes to management, hostels are probably the easiest investment property to manage.

 

The local allure
A selling point of hostels is its local allure both in design and experience. Customers will have the unique opportunity to interact with one another in shared space, to exchange culture, language, interests, and beliefs. Along with a good location in an urban area in close proximity to tourist attractions, hostels have become the main type of accommodation that tourists look for when looking for a local experience.

 

In terms of investment, hostels are quite interesting. However, there are some pitfalls to hostels. Hostels are catered to a specific target segment which may not be easy to penetrate. With its popularity comes high competition. Nevertheless, if you’re looking to invest in real-estate, you should study the hostel business model.

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