Upscale Hostels Emerge as Hospitality Landscape Evolves

Hostels have traditionally been shunned by higher-earning travelers, who opt for privacy and amenities and can afford the higher nightly cost of hotels. But the outlook for hostels is changing. Innovative design and amenities have some travelers choosing hostels as their first-pick when traveling to highly desirable and pricey locations.

Hostels are a lodging niche made up primarily of independently owned dormitory-style living arrangements meant to accommodate groups of travelers for a fraction of the cost of traditional hotels. Many young travelers in particular opt for hostels because of this cost savings, claiming that they do not mind sleeping near strangers and sharing bathrooms and showers. Hostels have always been a practical, economic hospitality option, especially in Europe where they first achieved popularity. Now, while still much cheaper than hotels, hostels are getting a glamorous update to stay competitive amidst heightened competition for lodging as short-term rental disruptors gain traction.


Factors Driving Changes in Hostels

The hostel concept takes on elements of both short-term rentals like Airbnb and co-living spaces. Smaller rooms with multiple beds are still the norm, but hostels now increasingly have private rooming options and improved amenities. Now, travelers can expect on-site restaurants serving fresh, local cuisines, pools, on-site bars, and complimentary wifi. These features are making hostels more posh, resulting in the catchy moniker “poshtel” to describe these hybrid lodgings.

What makes a hostel stand out as a “poshtel” from its competition is a combination of build style and amenities. While traditional hotels offer a full range of amenities including room service, luxury hostels maintain essential amenities without an overt focus on catering to the traveler hand-and-foot. Hostels reflect the culture of the cities they’re located in through architecture and interior design, providing travelers with a taste of the local flavor. Additionally, most also incorporate dining and retail that make them destinations and reflect the surrounding communities.

Perhaps more important than the change to existing hostels is how investors and CRE professionals increasingly view hostels as an opportunity instead of an inconsequential private venture. Several major hotel companies are piloting hostel programs to get their feet wet in this budding market. Business professionals and people of all generations are beginning to see hostels as experience-based temporary lodging that is affordable, two factors that appeal greatly to the modern traveler.


Creating a Hostel

When developing hostels, it’s important to consider just how they differ from hotels, which typically have closed-off, smaller rooms and fewer common spaces. Hostels on the other hand require more common spaces, larger sleeping areas, and often a communal kitchens.

The ability to accommodate community activities is important in a hostel, as these experiences are as much part of the stay as the room. Community-focused events foster an atmosphere of comradery among strangers, something that gives hostels their unique charm. As such, both indoor and outdoor common areas are desirable when selecting a location or adaptive reuse project for hostel development.

Location may be the most influential factor in the success of a luxury hostel. Many smaller cities that are not travel destinations will not generate much demand, as they do not appeal to travelers on the merit of location alone and there are plenty of other hospitality options for those who do visit. Densely populated cities that attract travelers for a variety of purposes and are known for their local culture will almost certainly outperform more bland, sparse locations. Still, because people across all demographics are drawn to hostels, it’s hard to go wrong once you identify the right market.


Because of their newfound appeal, hostels are uniquely positioned to grow in profitability as they naturally encapsulate the demands of an experience-based culture. Common areas and shared spaces allow for more interaction with others, making lodging part of the adventure of travel, particularly international travel. These hostels also offer travelers a low-cost option for last-minute accommodations in crowded markets.



For more on hospitality trends, check out The Hospitality Industry is Fighting Back Against the Short-Term Rental Disruptors