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Sina Niedermaier
Feb 8, 2024

Revenue Management for Hostels: Successful Strategies for Maximum Occupancy

Inventory Management and Product Segmentation

While most hotels "just" have different types of rooms (twin, queen, king, with view, deluxe, executive, suite, etc.) to manage, managing inventory in hostels can be much more complex. Hostels have bunk beds, private rooms, en-suite rooms, and single beds, which impacts inventory management. They may also have shared facilities such as bathrooms and kitchens. In addition, beds in some dormitories may only be sold to women or men.

Each inventory type may have different pricing structures, as guests will usually be willing to pay more for certain preferences. For example, a private room with an en-suite bathroom warrants a premium over a bed in a shared dorm.

Key Performance Indicators (KPI) in hostels

In addition to revenue per available bed (RevPaB), the following key performance indicators are also important in hostels, some of which are quite different from the key performance indicators used in hotels:

  • Number of guests per night
  • Average bed occupancy (number of occupied beds divided by available beds)
  • average bed price
  • TRevPaB (total revenue per available bed: total guest expenditure per overnight stay to available overnight stays)

Guest segmentation or creation of personas

The division of guests into segments or personas is important to be able to address the target groups correctly. When segmenting, the specific behavioral patterns of guests must be taken into account. Hostel guests usually want to pay less for an overnight stay than hotel guests and are therefore usually more price-sensitive. As a rule, they also do not book so far in advance, as this segment wants to be more flexible and often books while on the move.

Additional revenue in hostels

The sale of certain products and services can be an additional source of income for hostels. Creativity is required. What might guests need? What can improve the stay experience? Such products could be toothbrushes, soap, toothpaste, shampoo, or padlocks, for example. It also makes sense to offer additional services that are tailored to hostel guests, such as:

  • Rental of bicycles, surfboards, sports equipment
  • Commission from restaurants recommended to guests
  • Placement of a minibar in the private rooms
  • Placement of vending machines with snacks/drinks/hygiene products,
  • Lockers for rent in the rooms or at the reception desk
  • Vending machines for luggage storage
  • Laundry service
  • Packaged deals (e.g. bed or room plus activities such as surfing lessons)
  • Offering late check-out or early check-in for an additional fee

Selection and integration of systems

Hostels are dependent on several systems. For hostels in particular, a property management system (PMS) must be able to map the special features of bed occupancy and dormitories. This should of course be connected to a revenue management system (RMS) that supports the same functionalities and offers yielding per bed. Many traditional RMSs can struggle to connect effectively and in real time with the PMS, which can lead to data synchronization issues and inefficient management. Hostels tend to attract a tech-savvy and younger segment, so the demands on the technological environment in a hostel can be higher than in a traditional hotel. This can include applications such as digital check-in, communication hubs (management of all guest communication across all channels), mobile payment, mobile keys, etc. When selecting technical systems, it is therefore important to consider whether they are easy to integrate. Are they easy to replace? Are there additional costs for implementation? A PMS with an open interface and many easily integrated partner systems is a good solution here.

Turnover and cost management

Hostels have a higher turnover than hotels because they sell beds, not rooms. Even if a bed is empty, it must be cleaned or checked and prepared for the next guest. Hostels in turn save money because they do not provide as many amenities as hotels (towels, soap, etc.). This calculates sales prices and costs more complicated than in a hotel, where usually only the size of the rooms varies.

Special attention to online presence

Hostels often attract a young and tech-savvy audience. Therefore, the online presence should be strong, with clear information about the offers, appealing images, and a user-friendly booking platform. It is important to focus on many different channels and to show a presence there and sharpen the hostel profile.

Use user-generated content

Hostels often have a unique social atmosphere. Typically, the target group values communal areas and social interaction. This fact can be used to build an engaged community of regular guests. The content produced by the guests can in turn be used for advertising to make the hostel better known and more popular.

Revenue management for hostels therefore requires a somewhat more specific approach. The diverse inventory options make a flexible and dynamic inventory management strategy essential. Through smart product segmentation and consideration of different guest profiles, hostels can optimize their occupancy while taking advantage of flexible pricing structures. The selection and integration of systems, especially property management and revenue management systems, are crucial for efficiency in hostels. The technological environment should meet the specific needs of a younger and technically savvy audience and generate the ideal revenue and profit for hostels.

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The Evolution of Revenue Management in the Hotel Industry: Back in the Day and Today
How many revenue managers do you think will talk about the "good old days"?
Profile picture of Sina Niedermaier
Sina Niedermaier
Jan 24, 2024