Europe: Rising youth travel highlights low hostel supply across major cities

    01 October 2013

    In a study of six European gateway cities Savills finds that there is an undersupply of youth hostel beds relative to the number of young travellers and a remarkably low but growing level of branded supply compared with private, one-off operators. With international youth travel forecast to increase 50% by 2020 the firm suggests there is a window of opportunity for national and international operators.*

    The research examines the current supply of youth hostel beds per 1,000 overseas visitors aged between 16 and 34 years, the typical hostel guest demographic, in Barcelona, Amsterdam, Dublin, London, Berlin and Paris.  The firm’s data shows that Paris and London are particularly undersupplied with the French capital recording just 0.9 hostel beds per 1,000 visitors and London at 2.8 beds, whilst both cities attract almost six million young visitors annually.  At the other end of the spectrum Berlin, with its reputation as a young, affordable city, leads with 13.1 beds.  In contrast Dublin, Amsterdam and Barcelona, that have similar numbers of young visitors as Berlin, have 2.4, 3.0 and 4.6 beds respectively.

    Recent expansion has been largely driven by private equity attracted by the low penetration of branded supply, its low operational costs and the ability to drive revenues through food and beverage and other add on services, according to Savills. For example in London branded operators account for 40% of total hostel bed supply, whereas branded hotel supply accounts for 80% of stock.  Nonetheless, hostel brands such as Generator, Meininger and St Christopher’s Inn are gradually expanding across key European cities to take advantage of the gap in the market.

    Marie Hickey, associate director of research at Savills, says: “The hostel sector is where hotels were 15 years ago, its increasing acceptance as a hotel alternative with the entrance of new operators means that branded supply is set to expand. Whilst dorm beds continue to account for the bulk of bed supply, operators are including an ever increasing number of single, double and family rooms as well as design-led facilities in order to attract a wider clientele which puts hostels increasingly in competition with budget hotels.

    “But the ability of hostel operators to do this requires them to have large sites that give them the critical mass to maintain rates and keep costs low in order to deliver the target returns required by private equity investors”.

    Tim Stoyle, head of hotel valuations at Savills adds: “From a valuation perspective the greater efficiencies offered by hostels in terms of number of beds and guests compared to hotels along with lower operational costs should have positive implications, albeit mitigated by lower average rates compared to the budget hotel market.”

    Savills research highlights that hostels are well suited to the conversion of existing buildings, such as secondary offices, requiring lower capital investment and therefore reduced development risk. Nonetheless branded hostel operators require large sites in city centre/edge of city centre locations in direct competition with other users, not just hotels, for development opportunities.

    Going forward, major openings include Meininger’s Barcelona hostel and Generator’s Paris and Rome hostels all scheduled for 2014.

    Read the full research report

    *Youth travel forecast by Staywyse and UNWTO


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    Tim Stoyle

    Tim Stoyle

    Head of Hotel Valuation

    Head Office London

    +44 (0) 20 7409 8842


    Marie Hickey

    Marie Hickey

    Commercial Research

    Head Office London

    +44 (0) 20 3320 8288