The first time I slept in a hostel was at the age of 31, and the experience was extremely stressful… not at all what I had expected it would be like. My brother had travelled the world and met many of his closest friends in hostels, so it should have been a very different experience.
We had (stupidly so) decided to implement our property management solution which was built for hotels, in a HOSTEL. The largest hotel we had onboarded at this point was 60 rooms (we only had a total of 5 other hotels live back then), and the hostel we were about to onboard was 450 units.
Having worked in hotels since the age of 19, I had a perception of hostels, which were simply “inferior hotels”, where complete strangers would share rooms in order to get a bargain price. With my experience from Hilton, I believed there couldn’t possibly be a challenge hostels could present us with that we had not already resolved in our existing hotels.
With that attitude we entered this hostel, and started implementing our property management solution. The first signs of trouble appeared during the 2 day training prior to the implementation. During this training it became clear very quickly that hostels had elements of hotels, but were run completely differently. They had much greater expectation from our system than we offered in features.
Some of those early lessons included:
There is no check-out in hostels, guests simply drop the key and leave.
Selling a bed is not equal to selling a room… its 2 dimensional, you can either sell the entire room, or parts of it.
Groups are the bread and butter of a hostel, so you have to enable group bookings, group check-in, group reporting.
RevPar and ADR are irrelevant, hostels run on RevPab, ABR, APR and other statistics.
Staffing levels are significantly lower, so the system has to bring significant automation.
With this knowledge, it was quite clear that our system at that time was seriously inferior to all the requirements set.
However we were lean and agile, so we believed we would be able to build out features at a high enough pace to compensate. The hostel was set to go live the next day, imports, payment gateways and channel managers were set to go, so we pushed ahead. The next 2 nights and days we stayed on site at the hostel to do damage control. At several times we considered pulling out, but instead we kept our head down and continued working.
And somehow we pulled it off. In the next few weeks we built a group module allowing group management, built a batch-check-out, extended our reporting to allow for hostel KPI’s and built a load of custom features. The booking engine had to be customized for allowing beds/rooms/dorms, housekeeping needed a cleaning application, and so on.
A new day, a new market!
Now that the system was “hostel-proof”, it opened a new market for us. We knew our competitors in hotels very well, we were fighting against companies such as Oracle, Infor, Sabre and other dinosaurs, who offered a stable solution with a large number of integrations BUT very limited innovations. We anticipated the same players to be ruling this hostel market too.
This was not the case. We quickly found that technology in this market was very old, it often still runs on DOS (no one provided hostels a good enough reason to migrate to Windows) or cannot handle the sheer complexities of the 2-dimensional room/bed setup.
Hostels had always focused on being cool and social. Their system setup was a thing that came last on their list of priorities. Unfortunately as bookings started coming in via OTA’s and other online channels, they need to innovate. The traditional hotel-PMS companies are so set in their ways and reporting that they lacked all flexibility to adapt to this market. They suggest workaround solutions, but none of them are native hostel systems, built to meet the complex requirements of a modern hostelier.
So we actively started conversations with hostels, and fast forward 2 years, we have been lucky enough to convince some of the worlds largest and most amazing hostels to join us in our quest for innovation. With hostels up to 1000 beds, in locations ranging from Copenhagen, Prague, London, St Petersburg, Munich all the way up to Kyoto.
Another major lesson we learned is that even though hostels may be considered affordable, they are some of the most profitable enterprises in the industry. You are able to sell to significantly more people per square meter and nothing comes for free (towels, sheets, lockers). At the same time, due to the younger generation, hostels see significantly more bookings come direct, leading to lower OTA commissions.
What’s next for hostels?
The next logical step is seeing all hostels upgrade to the cloud, which will allow them to connect with their guests more easily. Hostel travellers are looking for social experiences, and most of those experiences nowadays extend to the internet.
The success of AirBnB lies in its ability to connect modern travellers with locals, create great local experiences, and an amazing smooth online experience. Hostels share a lot of these elements, but lack in technology. If they find a way to upgrade, in our opinion, Hostels could be the future of modern day hotels.
Companies such as Hilton are already creating hostel-like brands, in an attempt to lure the highly tech savvy (and profitable) millennials.
We believe something big is about to happen in this space…
Matthijs Welle - CEO