Hostels have long been associated as a European way to travel, specifically for young backpackers on a budget. Recently there has been a new trend within the hostel world involving upscale hostels. This new trend has brought on some heavy hitting investors such as AllienceBerstein LP and Invesco LTD, to invest in major hostel chains like Generator. While it might not seem like there is a lot of money in the blow cost travel world, it’s quite the opposite, there is a lot and investors like these are cashing in on this new movement. What makes the new hostels different from the traditional hostels? For starters, the new upscale hostels are just as nice if not nicer than traditional hotels. They offer private rooms along with dorm style accommodations. Guests don’t have to stay in a cramped dorm room, in some cases they can stay in a private room with a private bathroom, basically the same situation as a hotel, but for half the price. At Holiday Jones, we have multiple rooms that are private with private bathrooms.
The Millennials are a big reason for this new demand for high end hostels. They want to travel without breaking the bank, but don’t want to live like they’re still 19 and studying abroad. A report from the CBRE Group Inc, found that the Millennial generation of travelers spent an estimated $220 billion annually on travel. They also stay longer when traveling than any other age group. Not only are hostels making money from booked rooms, but many of these hostels offer food and beverages to their guests. In some cases, guests will spend just as much money on food and drink at the hostel than they did on the actual room. Younger travelers would rather spend their traveling budget on going out and other activities, not a majority of it on place to sleep at night.
The demand is there, someone just needed to capitalize on it. Now that the this trend has proven to to turn a profit, more players are getting into the game. Services like Air BnB have also contributed to this new type of price conscious traveler. We might even see price drops from the regular hotel industry as more and more travelers realize these upscale hostels can be just as nice as traditional hotels, but with cooler more modern vibe and a fraction of the price.
The upscale hostel has started catching on the US as well. Urban Holiday Lofts and Holiday Jones were the first boutique upscale Chicago hostel. Two months ago a new hostel chain from Miami called The Freehand has opened up a new upscale hostel in Chicago. We expect to see similar competition spring up all over the major cities in the US. This new niche market is great for the travel industry and will allow younger people to travel the world on a budget and not have to stay in seedy hostels and motels. It’s a great time to be a traveller.