How To Start A Hostel Business: All You Need To Know

As time changes, more and more students are leaving their hometown and moving to a better location to gain higher education. This has increased the demand for hostels and Paying guest facilities globally.

Whether you offer a stay facility with the mess or without mess, either way running a hostel business is one great and lucrative option. But it’s not just that; there are literally hundreds of questions that you first need to sort down before opening the hostel.

So, let us look at the top questions linked to the hostel business and the various steps to be followed to have a successful run.

What sort of guests do you get to stay at the hostel?

This might not look like a very crucial question, but it indeed is. There can be various people in a hostel as guests, including students, working professionals, and sometimes travelers and explorers. Though you can offer the facility to all but their requirements will vary.

Students have strict time in respect of their college and other educational activities. Additionally, many will prefer to have a meal facility. Also, they have comparatively a long duration of stay, say 2-3 years.

On the other hand, working professionals may have different timing needs as per their office hours and peak hours. Additionally, their duration of stay is mainly based upon their job continuity or transfers. And as far as travelers are concerned, they usually look for a few days to a month of stay facility.

So, before opening the hostel business, you need to be assured of the kind of guests you are willing to cater to based on your resources and space availability.

What are the things that are required to set up the hostel business?

Setting up the hostel business is definitely not a simple task but takes time and a lot of energy. For instance, you need to start looking for space first and then move ahead with various resources and marketing facilities to ensure that you have a successful hostel business.

The top things or resources that are required to run a hostel business are as follows:

  • A building with at least ten rooms that can accommodate 15-25 people at a time, along with a hall for recreation, a mess to cook, a cleaning area, open space, and other necessary spaces.
  • Dormitory furniture and supplies like beds, bedding, lockers and storage space, and others for comfort.
  • Washroom supplies include toilets, showers, and all other hygiene-linked equipment.
  • Equipment for standard rooms is mainly linked to decoration, plants, leisure equipment (foosball tables, pinball machines, computers with Wi-Fi), and others.
  • Kitchen equipment includes ovens, fridges, microwaves, utensils, household appliances, and essential space to cook meals.
  • Equipment for the reception area includes a desk, computer stations, printer, pens and paper, card machine, and a proper sitting area for the visitors.
  • Security-related equipment includes doors with access control, video surveillance cameras, and other safety equipment to ensure the safety of the guests.

Is research fundamental before setting up the hostel business?

Indeed, research is fundamental before setting up the hostel business. This will give a rough idea of the competition as well as the expectations of the guests allowing you to offer better and superior facilities.

Also, this will help you to create a budget for all the resources and design packages for the guest that is a must for a successful hostel business.

How much can you charge on a per guest basis?

Typically, the charges that you will levy on the guests will depend upon the facilities and area where your hostel is located. Still, to get the approximate idea, the average charge for travelers is around $45 per night.

At the same time, the average monthly package for the essential facility hostel starts from $450 per month and can go up to around $1000 per month. If you are offering the shared space, the cost will be different, but if the concept is one room with one guest, then the charges will be high.

The best idea is to create a proper mix of all the room facilities to explore the varied market and gain better benefits.

What are the steps to follow to start a hostel business?

Now that you know the basic things you should know before starting the hostel business, here are the broad steps to follow.

1.Develop The Business Plan

Well, when you begin exploring the industry and the numerous types of hostel trends, you will be able to gain a broad idea of what is better. Now all you have to do is outline your strategy, financial requirements, and numerous other facets of the business.

A comprehensive strategy that includes all of the requirements will help you go on with the other areas of the hostel company efficiently.

At this phase, you should establish the brand and its purpose when planning the business. This will make the remainder of the procedure go more easily.

2. Organize The Business Resources

When we talk about arranging resources, we need to look into a variety of areas. Everything from verifying the financial to the legal demands is taken into account when structuring the resources. The following are the procedures in arranging that must be taken for the hostel business:

  • Decide The Business Name

Select a name that makes the guest feel connected. A hostel that offers a warm and home-like feeling is better as compared to gloomy ones. To check the availability of the name, you can check the United States Patent and Trademark Office (USPTO). Add a memorable and elegant slogan to your company name to market your lovely and welcoming hostel.

  • Select The Entity Type

The choice to choose the proper company structure is essential and should not be taken lightly. Common business entities include sole proprietorship, general partnership, limited liability company (LLC), and corporation.

If you’re unsure about what type of business structure to utilize, a business attorney or tax professional can help. You’ll need to register your hostel with the proper federal and state agencies once you’ve settled on your company structure.

  • Design The Logo

Design a logo that is creative yet warm. Keep it simple and avoid adding complex features that make it look confusing. The simpler, the better is the strategy you should focus on when designing the logo for your hostel business.

  • Check The Licensing Needs

You’ll need to be sure you have all of the licenses, permits, and insurance that your local and federal governments require when you start a business. These requirements will vary based on your location, type of business, and organizational structure.

Various state, federal, and municipal business permissions are virtually probably required. Check on the U.S. Small Business Administration website for accurate needs and get the EIN for taxation purposes.

  • Ensure The Financial Needs

After the license and other requirements have been met, it’s time to focus on the company’s financial needs. For tax purposes, it is essential to open a business account.

Simultaneously, you’ll have to deal with finance issues. Examine the many loans and credit options available on the market and choose the most practical and low-interest alternative to save money.

  • Take Proper Insurance

Just like licenses and permits, insurance is necessary for your business to operate safely and lawfully. Business insurance protects your company’s financial health in the event of a covered loss.

It’s an excellent place to start because general liability insurance is the most common coverage required by small companies. Workers’ Compensation Insurance is a well-known insurance policy that is required by a large number of enterprises.

  • Define The Packages, Products, and Listings

Lastly, start with the listing of products and packages. Check the various types of stay facilities that you can offer. Draft a proper contract and ensure to list down all the documents required from the guest while booking.

Define room capacity, facilities, and all aspects, including the advance payment and time to notice to leave clearly.

3. Start Executing by Marketing

When you are ready with the resources, it’s time to take your business to the next level by adequately taking the marketing steps. Offline and word-of-mouth marketing are sure to happen, but for a greater reach, you need an online presence. The broad steps that you need to take at this stage are as follows:

  • Create a website
  • Go on social media platforms
  • Get registered on the renting platforms 
  • Design mobile application, if needed

4. Analyse and Interpret for Continuous Growth

The hostel industry is fiercely competitive. You will be expected to assess and understand company developments to achieve improved results continually. Based on the season and other circumstances, modify the services, company listings, and design to leverage the competition.

All you need for company success is a continual review.


Opening a hostel necessitates a sizable financial commitment. So start with planning your entire course of action and look for the market to ensure that you have the best results.

Ensure to market properly and offer unique services that can help you to stand out of the crowd.

So, if you are ready with your planning, it is time to get started with your hostel business!

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