How to Open a Hostel

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Hostels are like a glistening Mecca for broke, often young travelers. These budget-friendly, no-frill accommodations provide a bed and camaraderie for adventurous travelers wishing to spend no more than $50 on lodging. Opening a hostel, however, requires more than enforcing curfew and placing bunk beds in a few rooms.

Find a piece of property for the hostel. Running a hostel is not cheap, especially when the most enticing hostels to travelers are located in the heart of the city where real estate costs are the highest: anticipate spending thousands per month on rent for a decent 4-bedroom, 3-bath space.

Or, write a business plan and get a bank loan to purchase a piece of property. A cost-saving solution is to look for already-established hostels for sale, or fixer uppers. Jim Kennett, owner of Portland Hostel-NW bought a piece of condemned property and saved money by performing the renovations with the help of travelers. During renovations, consider starting a work-exchange program to get free labor in exchange for lodging and meals.

Review your business plan. Based on your property's size, estimate how many beds you can place in it. Add up all anticipated fixed and variable costs, including staff wages, electricity, water, gas, rent, insurance and food. Determine how much you will charge per traveler to determine revenue. From your estimated costs and revenues, calculate your break-even amount and how many travelers per night are necessary to earn a profit. Expect more travelers in busy touristy months. Adjust the amount charged per night if needed. Additionally, charge more money per night during peak tourist months.

Purchase furniture and supplies. Buy beds, linens, towels, sports equipment for rental, couches, chairs, tables, a TV and a few computers, lockers, curtains, patio furniture, toasters and dishes. Buy house maintenance items as well, like brooms, mops and cleaning solutions. Expect to spend at least $10,000 on basic household items necessary to run a hostel.

Design the hostel. Encourage travelers to choose your hostel over the one down the street by creating a welcoming atmosphere. Keep in mind your target audience of college-aged travelers. For example, one of the top rated hostels on hostelworld.com, Rossio Hostel in Lisbon, Portugal, has warm inviting colors in red, bean bag chairs, hard wood floors and an art-deco aesthetic.

Draw inspiration from the city. Hang large posters of the city skyline, place potted plants full of fauna indigenous to the region and choose a color scheme that accentuates the city, like reds and oranges for a Southwest location.

Hire hostel staff members. Seek friendly, multilingual, traveled and educated staff members who are highly familiar with the region. Post the job description on free websites, like Craigslist and on the Hostel Management forums. Make a job description detailing the hard work entailed, such as enforcing quiet hours, washing linens, making light meals and keeping the place clean. To avoid high turnover and re-training costs, explain to job candidates that you desire a three- to six-month commitment. Perform a background check and follow up on personal and professional references.

List your hostel with well-known organizations like Hostel International.