Hostel brands eye young budget travelers, make aggressive expansion plans

The concept of hostels as an alternative accommodation is borrowed from the West and is only a decade old in India, but has been gaining popularity

A growing demand from revenge travellers, particularly youngsters keen to explore and experience new destinations at an affordable cost, has prompted hostel brands like Zostel and goSTOPS to chalk out aggressive expansion plans.

By virtue of being part of the shared economy segment, this was one part of the hospitality sector that was hit the hardest. But with travellers — particularly Generation Z - thronging leisure destinations, hostel brands are looking to make the most of the demand.

Zostel, for instance, the largest hostel chain in terms of the presence in the number of destinations, is looking to add over 200 locations, from the current 55 (including 14 homestays), over the next four years.

Similarly, goSTOPS — another start-up — plans to add 60 hostels to its current line-up of 28 by March 2022 and raise $10-12 million. It raised $1 million in April this year.

 Hostels offer budget accommodation —dormitories, as well as private rooms — and are mostly preferred by young, solo backp­ackers or group travellers.  As an alternative accommodation, the concept of hostels is borrowed from the West, and only a decade-old in India, but has been gaining popularity. While charges for dorms vary between Rs 450 and Rs 700 per night (excluding meals and activities like hiking, trekking, etc), depending upon the kind of property and location, private rooms are available for Rs 1,500-3,000 per night. “The past one year has been troublesome. As we speak, we have seen 85 per cent recovery, compared with the pre-pandemic phase,” says Deep Banka, chief operating officer, Zostel. 

The recovery trend, he pointed out, has been destination-specific. While the ones in leisure locations are doing better now than in the pre-pandemic period, hostels in cities are yet to hit the road to recovery.

Others are equally bullish. “Travellers have been gravitating towards branded properties,” says Pankaj Parwanda, co-founder, goSTOPS, a backpacker hostel brand that transforms existing budget hotels and operates them as backpacker hostels.

According to Parwanda, with real estate being available at a lucrative price, it's the best time to be in the hospitality business. Encouraged by the growing potential, goSTOPS has aggressive expansion plans. It plans to have 400 hostels with 20,000 beds by March 2024, expand to Sri Lanka and Nepal by 2022-23, and Southeast Asia by 2023-24. It envisages 75,000 beds and a top line of Rs 1,500 crore in 2026, says Parwanda. “As an industry, we expect the youth hostel business to account for a major share of the domestic hotel and homestay market,” he says.

Leisure locations across the country have been a major savior for the pandemic-ravaged hospitality industry. Anyone in the business of offering accommodation and unique experiences —  budget and luxury hotels — are struggling to meet pent-up demand and adding to the inventory of rooms and beds.

Banka says amid growing competition from hotels, the choice of destinations it offers and the culture of community sets it apart. It, therefore, never had to walk the extra mile to recall customers or retain them.

Zostel guests have taken a deviant shift from first choosing a destination and then deciding upon a property, he claims. “Their approach has been to see where Zostel is available and then plan their trip accordingly. The strong community has helped us to tide over the pandemic,” he says.

The price varies across destinations, depending upon the location and infrastructure. The average price of dorms is Rs 500-700 per night, for private rooms, Rs 2,500-3,000, up 25 per cent in the last three years.

The hostels operate under a combination of models – including franchisee-owned and operated, franchisee-owned and company-operated, and properties taken on long-term contracts and operated by Zostel. It also plans to own properties.