Hostels: Not just for backpackers anymore

Investors cite a rise in traveler demand for communal living. 

November 10, 2015 |

The common perception of hostels as Spartan living quarters for cash-strapped students and backpackers could be changing. A handful of companies that run hostels are targeting a broader audience that’s simply looking for more of a communal living experience when they travel. Hostelling International lists 4,000 hostels in 90 countries on its website (www.hiusa.org). The HI Nantucket, in Massachusetts, which offers guests fully equipped kitchens, large dining areas, free WiFi and parking, volleyball courts. There are bike paths and the famous Nantucket Whaling Museum is nearby.

Two years ago, The Sydell Group, which owns and manages several boutique hotels, partnered with Yucaipa Companies to launch Freehand (thefreehand.com), its first hostel brand. Sydell has opened a $32 million hostel in Chicago and a second one in Miami, and is planning its third in Los Angeles. Freehand offers private and shared accommodations and a food and beverage program.

Could hostels become what Josh Wyatt calls “the next major asset class in hospitality”? Wyatt, a Partner at the private equity fund Patron Capital, was recently named Chief Strategic Officer for Generator Hostels, the London-based hostel group that Patron acquired in 2007.

Generator operates 10 hostels in nine European cities, and had openings slated for Amsterdam and Rome in spring of 2016. The company made news in September when it acquired nearly all of the 102 units in the Atlantic Princess Condominium in Miami Beach, which Generator intends to convert into a high-end hostel. It’s also scouting locations in other U.S. cities, says Alexis Murray-Merriman, a Generator spokesperson.

“The USA is our next big frontier,” Wyatt told BigHospitality.com in an interview earlier this year.

For the past year or so, U.K.-based Snoozebox Holdings, which specializes in providing portable hotels for events like rock concerts, has been running a 60-room portable hostel at The Eden Project, a garden biodome for an indoor rainforest in Cornwall, England. Jay Shaw, Snoozebox’s Head of Business Development, says his company will run that hostel for another year, at which point the Youth Hostel Association plans to build and maintain a permanent hostel.

 

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